Wal-Mart’s Distribution Model

I just spent two days in Bentonville, AR, Wal-Mart’s hometown, giving a speech on BoomtownUSA, focused upon our research on the importance of small towns in the Wal-Mart distribution model. I believe that we are one the few, if only groups, that have done a complete analysis of their distribution model from a locational standpoint. And, it is their distribution and information technology models that have differentiated Wal-Mart from the competition for the past 20 years. In fact, I’ve heard it said by more than one retailing expert that Wal-Mart is an average retailer but the top of class as a supply chain manager and global buyer.

We first started researching the location of Wal-Mart’s DCs when I returned from a NAIOP conference that had focused upon their world class model and how other companies were going to copy what Wal-Mart was doing in the future. I naively raised my hand and asked, “You know I don’t know where all of the Wal-Mart DCs are located, but the ones I know are located in the agurbs®, not in the big cities where everyone else at this conference is from.” I got laughed at, which made me mad so I decided to find everyone of their locations. It wasn’t easy. Wal-Mart considered it a company secret.

We completed our first study when they had 54 DCs, they had 89 when we did the book and today are up to 109. The first study showed the concentration of DCs in towns of a population of from 5,000 to 50,000 and this most recent study has only reinforced that early finding. Of their 109, 76 (or 70%) are in towns of 5,000 to 50,000 with 20 (18%) in towns of less than 5,000.

Stay tuned as other companies learn from the Masters of the Supply Chain. It is happening in the agurbs®, not the big cities.