the real secret to Wal-Mart's success

Wal-Mart's size is legendary, of course. And so is its ability to control costs. But what does that mean in terms of its logistics operations? In his keynote address at the Warehousing Education and Research Council's annual conference in May, H. Lee Scott, the retail giant's CEO and himself a former logistics executive, offered up some answers.

Take the corporation's freight bill, for instance. Wal-Mart's annual bill for inbound freight services alone reaches $1.8 billion (the equivalent of, say, Amtrak's annual operating budget). Its property tax bills must be staggering too: The megaretailer operates 37 regional DCs, each of which occupies one million square feet of space on average. But other parts of the logistics operation offset some of those costs by generating revenues: Wal-Mart's private fleet, which operates as a for-hire carrier when it's not busy hauling loads from DCs to stores, brings in more than $1 billion a year in backhaul revenue.

Scott insists that size doesn't matter. "The size of our company," he told his audience, "provides us with no value." What does provide value is Wal-Mart's eternal (and successful) quest for lower costs and greater efficiency. Perhaps the most telling story was Scott's disclosure of certain employee travel and expense policies. "Everyone, myself included, shares rooms when traveling, and alcoholic beverage are not a reimbursable expense," he reported, noting that he was thankful to be traveling with his wife on that particular trip. Seems there's more to everyday low prices than efficiency and logistics excellence.