September 13, 2005

Walmart Meets Katrina: Responding to Catastrophe

The Insider has been pretty tough on Walmart, and for good reason. In their passionate pursuit of lower costs, they squeeze vendors, they squeeze contractors, they occasionally lock cleaning crews into the buildings at night, and. perhaps most egregiously, they squeeze their own employees to the point where many require public assistance to survive. In his invaluable book, The World is Flat, the brilliant Tom Friedman details the many reasons why Walmart is in the forefront of today's business models. They are really good at a lot of things. Friedman attributes the company's tin ear on issues of worker fairness to their rural Arkansas origins. I suspect that Friedman is implying that they do what they do because they are rednecks. Maybe so, but they are rednecks with dazzling business acumen.

Efficiency
It would be foolish to question the efficiency of the Walmart model. This efficiency came into dramatic play in the days following the disastrous landing of Katrina. No one was better than Walmart at analyzing and delivering the goods that are most needed in the storm-ravaged regions of the south. Whatever we may feel about the impact of Walmart on small town America, there is little question that the world's biggest retailer is uniquely situated to analyze post-hurricane needs and deliver the goods. It would be nice if FEMA could do the same, but they certainly can't under the current inept leadership, and it's hard to imagine any government program matching the efficiency of a Walmart.

Friedman's book, written prior to Katrina, outlines the Walmart scenario for responding to lesser storms:
During hurricanes...Walmart knows that people eat more things like Pop-Tarts -- easy-to-store, nonperishable items -- and that their stores also sell a lot of kid's games that don't require electricity and can substitute for TV. It also knows that when hurricanes are coming, people tend to drink more beer. So the minute Walmart's meteorologists tell headquarters a hurricane is bearing down on Florida, its supply chain automatically adjusts to a hurricane mix in the Florida stores -- more beer early, more Pop-Tarts later.

We read at Investors. com that Walmart has given generously to relief efforts upward of $20 million and was able to take decisive action to ship urgently needed goods to the region.

Communications
Wal-Mart's efficient supply chain and logistics network were durable enough to take the hit and keep on operating. While local and federal groups suffered communications problems and bickered over who was in charge, Wal-Mart sprang into action.

"We are uniquely positioned to aid the community because we have got stores in so many places," said Wal-Mart spokesman Marty Heires. "This is Wal-Mart country." By Thursday, it had shipped more than 2,400 trailer loads of water and other emergency supplies to the region.Over $3 million in supplies were given directly to shelters, providing a lifeline for stranded residents.

"They maintain one of the world's largest (private) communications networks with lots of redundancies," says Bruce Richardson, an analyst with AMR Research. The retailer also maintains massive databases on sales and merchandise, and its trucks are constantly on the road. That let the company find needed goods in inventory and ship them out in record time.

Wal-Mart did this despite already suffering big losses due to closed and damaged stores. Total losses to Wal-Mart could easily hit $500 million, Richardson said.

Ambiguities
I think it is possible to salute Walmart for their hard-earned capacity to deliver in a time of need, and at the same time continue to question the true costs of some of their business practices. Government has a lot to learn from Walmart -- and Walmart has a lot to learn, too. Friedman thinks they are listening to the criticism and may even get better at the things that offend some of us the most. I hope so. In the meantime, let's give credit where it is due. When the winds and waters wreaked havoc in the south, government at all levels simply floundered, while Walmart responded with its legendary efficiency and an inspired generosity.

| 2 Comments

2 Comments

It is great to see the insider give a nod to Tom Friedman's book, "The World is Flat". Friedman's book is a must read for Risk Management professionals who want to stay a head of the game.

The Federal Government has a lot to learn from Wal-Mart's Katrina response. Hopefully the Feds get it right when next natural or man made disaster strikes.

Despite just in time inventory management this retailer was able to not only marshall vital supplies to a disaster region, they were able to bring loss control teams to quickly assure business continuity to thier outlets in the region. They also had model partnerhsips with local fire and police that supported rescue teams while assuring police protection from looting or other continuing damage,

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This page contains a single entry by Jon Coppelman published on September 13, 2005 12:58 PM.

Taking care of the unsung heroes was the previous entry in this blog.

Workers Comp Conundrum: Permanently Disabled but Still Working is the next entry in this blog.

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