Walmart Inc. (WMT) Earnings Call Transcript & Summary

Hello, everyone, and welcome to this roundtable. My name is Maria. I'm the Head of Retail at retail -- at Reuters Events. And I'll be the moderator today, and I'm really, really happy and excited to be joined today by these 5 amazing professionals today, with the combined, what did we say, 100 years of experience, a century of experience basically. There's a juicy topic of supply chain continuity and that data-driven decision-making. And I'll begin with a short introduction from the amazing talents. And then we'll dive right into the topic, and we'll get our teeth into it. Everyone, relax, grab your tea, coffee, biscuits, whatever you like, and then we'll get straight into it. Just remember, everyone, you can ask questions in the chat, and then we'll try to -- I'll take some time to answer them as well. So all that being said, I'll start with some short introductions from everyone, and I'll take it in the order of the screen, and I'll start with Prabhu. And so Prabhu, if you could quickly introduce yourself.

Thank you, Maria. My name is Prabhu Chandrasekhar. I work for Advance Auto Parts as the enterprise data analytics lead, focused heavily on the platform technology side but also working with the business -- lines of business, and supply chain is one of them. And definitely, a lot of interesting knowledge, what I can share, and interest to learn more from the panelists as well as the questions that might come from the audience through it.

Perfect. Thank you. And next up is Brian.

I am Brian Hecht, Supply Chain Strategist for Kroger here in the U.S., and my responsibility is to help make sure that we're getting the information we need to make sure that the supply chain runs smoothly.

Wonderful. And Luca, if you'd like to go next.

Hello, guys. Good morning. Luca Suriano, Vice President of Sourcing for Under Armour. My portion of the 1/5 of the 100 years, I've been spending the time in the factories when sourcing was majority facing vendor, facing the back-end supply chain. And I think the interesting thing now is shifting towards more of a front-end supply chain. So I'm really excited to be here with you and share a few things I've learned so far.

Amazing. And we have Nick joining us as well.

Hi, Maria, yes. Thanks. My name is Nick Hunt. I'm Enterprise Account Director for Tradeshift here in the U.K. I look after retail and CPG. So I spent all my days chatting to retail and CPG companies, understand any issues and trying to solve some of those issues for them. So really happy to be speaking to you today.

Wonderful. And last but not least, Bill?

Hey, good morning, everybody. I guess good afternoon and good evening as well. I am Bill Mines, and I look after finance as well as data and analytics for Walmart's U.S. supply chain organization. Been down here in Bentonville, Arkansas with Walmart for 6 years. Prior to that, I had different supply chain and finance roles for a number of different organizations, Diageo, prior to that, Pepsi and before that, Cargill. Looking forward to the conversation, I don't think there's any better time to talk about data than there is right now. We've been through nearly 12 months of pandemic, and certainly in retail, we've seen a big shift towards -- focus on the importance of an omnichannel organization. And having the right data in the right place at the right time is absolutely paramount now in our business, and making sure that we've got the accessibility and the accuracy that we need is just hugely important. So looking forward to the conversation.

Brilliant. So I'd like to mention, Bill, so the discussion today is basically about supply chain continuity in relation to data and how we use that data. And we know data is everything now in supply chain, especially when you want a visible, agile and proactive supply chain. And -- but then the finer points around data collection, integration and collaboration still needs a little bit of refinement when it comes to supply chain.

So I think as a question to start off to all of you, but then Bill, if you can answer first. What are some of the key elements, key kind of challenges that you foresee in relation to data, to supply chain in the coming months and possibly years as well?

Yes. So I think a few things spring to mind. Number one is you've got to have strong foundations, okay? You've got to build a house on a solid platform. So governance for me is extremely important, particularly in retail, and I don't think Walmart's unique in this. We come from an environment where you've got a lot of different platforms, generating a huge amount of data. And one of the challenges where you've got lots of different legacy systems is making sure that, number one, you've got one version of the truth so that when you're having a conversation around data or you're presenting data or you're referring to it, leveraging it, whatever, you've got confidence that it's coming from one source. It's being validated, and the definitions of the data are properly governed so that when folks in different parts of the organization are accessing the data, and for us, in Walmart, these days, that means accessing it from the cloud largely, they've got confidence that it's one version. It's being validated. It's being governed, and they can rely on it and they can access it easily. I think the other thing that I'd point to is speed. So you think about what's happened over the last 12 months and the shift towards or an accelerating shift towards customers wanting to be able to shop online or pick up from store for us, then you're no longer in a world where you can think about data and rely on things or that you couldn't take hours to get all the data. It's got to be accessible within minutes and real time, even in seconds, because we're living in a world where customers want to be able to shop online, get stuff delivered in hours or even 1 to 2 days. So having that data accessible and being able to access it quickly, reliably at speed so that you can make decisions about how am I going to get something delivered to somebody's home or enable them to pick it up in store in a very, very rapid manner is becoming increasingly important.

Great. So you mentioned a few key things here. So speed, real-time visibility, accessibility, getting those foundations done. I think my next question is -- I think those are the main challenges. The next question is how do we exactly achieve all those things. And these are usual kind of supply chain buzzwords, but how exactly do we get to that real-time visibility? Are we even there yet? What are the elements that can get us to have a more speedy kind of data accessibility and making sure we get the data when we need it and in the form we need it in. And this is for all of you. I think probably, Brian, I'm relying on you maybe to kind of provide the technicals on this one as well.

So from my perspective, being able to get the data in real time is a challenge. And I want to agree and reinforce what Bill said. We have a lot of legacy systems as well, and that master authoritative source is definitely a concern. There is a cost of getting that data that we have not had to deal with, I don't think, as an industry. It's easier for us to use labor in many cases. But as things get tighter, we need to get data in a speed that matters as efficiently and cost effectively as possible. And I think as an industry, we're still kind of in that emerging space, where we see where it's going to go, but we're not quite -- haven't been able to quite implement it yet across the board. Prabhu, Bill, would you agree with that?

I'll take it on from there. Thank you, Brian. Definitely resonate with a lot of what Brian said. I do want to add that, I mean, like -- I mean, this retail industry has been, much like what Bill and Brian said, was -- they've been in the legacy world for quite some time. Some of them have actually started moving the needle over the last few years. Though I don't work for them, I could exempt, Walmart is probably the biggest example in that sense who actually embarked on this journey much before everyone else. Take Amazon out of the equation but -- because that started as an IT company. But if you start -- Walmart, they were kind of the evangelists in this. I think a lot of them are trying to mimic or follow the lead of Walmart Labs in that sense to provide that capability. You don't have the same problem and the scale that you have to do for Walmart, or do you think, but net-net, there are issues with the legacy systems. Are they capable of doing real time? What do you need to do to patch -- bridge that gap real time? So that will be technical debt, if I can use that term, along the way when you actually replatform those systems to the newer world. So we have to take those calculated investments and risks, so to say, to get people moving along the direction and get the mindset shifted toward real time. And then the technology can -- once you -- you don't need to take the rug as a whole. Start doing things underneath. And when you take it off, take the covers off, everything seems seamless at that point. That should be a journey. The second part, as what Bill mentioned about the data governance, quality is a big issue in the legacy systems. There was a lot of manual touch points, people keying in data, point-of-sale systems having varieties of issues, the distribution centers having issues. People have their own interpretation of how things have sprung up in the tribal world, if I want to call that. And so collating all this stuff and bringing that central mass data for product inventory, products master or a customer master or anything else is very important. And that is -- goes hand in hand. You cannot -- one cannot go before the other. So these need to happen. So the systems start adopting the mass data, while they start slowly unwinding from the old legacy way of entering -- manually entering information. So it is a journey, and it's not a few-months journey. It's a multiyear journey. And every organization is going through it. The example I've always heard is Best Buy, for example, has a real-time dashboard of their sales on the CEO's desk. Well, I don't know if it's true, but I've heard this. But that's, as they want to say -- everyone wants to get there. But you also need to figure out it's really worth for your own organization or your own industry. That's the lead up to it. Hopefully, I answered that question.

No. Definitely. Is there something that Bill, Luca, Nick, you'd like to add to this then?

Yes. I will chime in here. It's very interesting to look at data and to think about quality of data and structure and governance. And I feel that when we do that, we are in the day -- we are back in the days before COVID. And I actually discovered that in the old days, decision were based on signal that we used to receive, and the delivery of those signal were data, absolutely. And then we can talk about signal stability. And of course, governance and quality were the one -- the 2 lever that we used to have to improve those signal. But I would say that with COVID, we actually discovered that the data quality is not the only issue we have. We have the ambiguity of the signal that come from the outside world. And I would say that today, on top of the used to be the one problem of, I don't know, let's call it, a 10% deviation. One time, it's bullwhip. One time, it's data quality. But I think today, on top of that 10%, actually, there is a greater concern for all of us, and it's the ambiguity of information. And it's almost feels that we are at the turning point that we had to make a decision are we going to invest in having better systems or are we investing to have better processes. Because I think that with increasing the flexibilities on processes, it actually can overcome the fact that we have that data. And I think that we tend to focus on the technology part because this used to be everybody's enemy from the old days. But I think today, we probably are better off start looking a little bit more holistic, end to end and think of -- instead of focusing only on technology, let's focus on shortening that end to end so that we can make that journey faster and then probably bring back technology, which, by the way, I do agree that we are sitting on some very legacy and obsolete platforms. So it probably -- it's really fascinating. The post COVID is going to be a transformation for the entire industry, I believe.

So one thing I just want to bring up as an escape technologist, that technology can't fix process on its own. Technology can be used to augment process and to refine it and to help get good data at the appropriate points within the process, but the business has to understand what the process is and make sure the process is as efficient and flexible as possible.

So I just saw an interesting question on the chat room, which was, "As you go on this journey, have you got the right people?" And I think it's a great question because it does underscore the fact that it's not just about technology. Yes, I agree, process is important as well and all those things. But at the end of the day, if you get it all right, and I think lots of organizations are really almost at that intersection of starting to see a lot of this come right, then the question then becomes, okay, have we got people to leverage it and have we got the right skill sets, the right training. And I think one of the things that we've seen and are very cognizant of is if you go from a world where we rely on enterprise systems and doing a lot of sort of spreadsheet work in Excel to one where you've got cloud-based data and you've got way more sophisticated tools that enable you to access a lot more data a lot more rapidly, then you actually got the people that are going to be able to do that. So I think there's another component of this around making sure that the people that you've got in the organization, you're taking them on that journey with you, providing the right training and the right change management there.

I just want to add on to what Bill said, right? In the organizations that you're inheriting or you're part of, there are a set of process experts, and there are a set of people who are technology experts that are inclined to learning the new technology or people. There could be some process experts who've been doing some technology stuff, but they are more capability and who know in and out of how the system works, not the technology company, but how the process works and how these things come together. They have to focus and continue to be delivering the subject matter expertise in that area. And somebody had asked the question, "How do you bring -- I mean, do you expand -- so -- on getting partners or anyone?" Yes, absolutely. In this journey, you want to get some SIs if you wouldn't think of the right technology. You want to bring the SIs, the system integrators, who will actually do that for you. They can do the fishing for you originally. But now if you go back to the earlier point I mentioned about splitting the technology experts and the process experts, you want the technology experts to be learning how to fish along with the system integrators. And then at some point, they step away, you become -- you learn, you start fishing yourself. That is the journey that you've got to take your organization through. It is not about people losing jobs or people, hey, what do we do with -- that has -- we got to build the psyche around what everyone's input and value-add to the organization as they move forward to the next gen.

I absolutely agree. We are problem solvers. On the technology side, on the business side, it doesn't matter. Our job is to understand problems and solve them. And when you solve problems, you do a good job, you get new problems to solve. You should be constantly working yourself out of the tasks that you're in currently. I -- if anybody hasn't seen The Martian, go watch it. It was written -- Andy Weir, who is a technology architect from what I've read, and you can tell, it's -- you figure out the problem, what's the problem you're trying to solve, and you solve it, and then you move on to the next problem. And once you've solved enough problems, you get to go home. So it's a great movie. Everybody should see it if they haven't.

Yes, you're right, Brian, it's a great film. One of the things I see in Tradeshift when I go out and speak to retailers is, I think, Bill, you said this the other day, that we have so much data, right? It's like what is the important data that we have in the organization and is that data accurate as well. So one of the things we do in Tradeshift when we're speaking to organizations is we talk about data actually coming from source. So when you're collaborating, for example, with your suppliers, why are you updating that information in your ERP system? Why aren't you getting the suppliers to be providing that information? Because they know it best. And the critical thing now is really about that collaboration across the supply chain, so not just you and a retailer on your own but looking and trying to protect and work with that supply chain. And only in that way are you actually going to get the best results. And certainly, through COVID, I think that the retail supply chains have been under an enormous amount of pressure. I mean here in the U.K., we still have a lot of retail organizations that are closed because of COVID, and that affects the whole supply chain. So being able to have the right data, being able to collaborate across that supply chain is really, really important at this moment in time. And I wonder what you guys think of that. Luca, I'm putting it open to you.

Tough question. I think we are at a turning point, and I believe it's very important to have a significant alignment with one running strategy first. And once that alignment happens, we are able to better understand how to cascade. And especially when it comes to speed, I believe that, that is the clarity because when we run projects, I believe that projects, most of the times, have got conflicting priorities. And the alignment on priorities, the alignment on time lines and the alignment on the speed to execute, I think, it's -- they're extremely important. So I would definitely look after for very, very high level direction to start with before entering a journey of change management.

So we've got quite a few questions coming in. And Bill has already answered one of them. So I think I'll take another one because these -- there's loads of them, and they're all quite good. So let's see, which one should I pick? So let's see, "What are the examples of the impact you have seen with the ability to see your supply chain from end to end or the lack thereof?"

Well, let me pick up on something that Luca said, which is from a retailer perspective, obviously, you've got a lot of stakeholders. I mean one is obviously, we've got customers. And the interesting perspective there is not just coming out of COVID, but I think over a period of years now, you're starting to see that the customer has access to more and more information to make their decisions on. Pretty much everybody has got a smartphone, iPhone or whatever. And you can see that people are using that to access information that's available publicly to make decisions about where they shop, how they shop, what prices are out there. So they can pretty much instantaneously compare prices across lots and lots and different retailers, whether it's in-store, online, however, they want to shop. And so one of the challenges that we've got is we got to be prepared for that and cognizant of that and recognize that we're here to service the customer and make the customers' lives easy, and customers generally want to shop with everyday low prices. So one of our missions at Walmart is to service the customer and make lives easier and do it at everyday low prices. And then you think back up the supply chain. To do that, we've got to get to a world where we're sharing more and more data with our upstream stakeholders, whether it's vendors or other interested stakeholders in the supply chain, and then you get into, "Okay, well, what are you going to share? How are you going to share it? What's the sort of medium? How regularly are you going to share it? And how are you going to make it available to vendors to meet their specific needs in a secure manner?" And I think that the last point around security is clearly something that becomes more and more important. I was kind of reflecting this morning on that story that came out in the last couple of days around a hacker that tried to pollute a town's water supply in Florida or in D.C.. Well, that's -- one, that's absolutely terrible. But two, there are people and organizations out there that are constantly trying to think up ways of doing things like that. And so you've got to be one step ahead of the game there and thinking through, "If I do want to share information, and that involves making information and data available, to people, how am I going to do that in a manner that's secure and protects my data, my customers' data and the organization's data?" So I think as you -- as data becomes more widely available, the sort of security aspect and the aspect of how we're going to stay one step ahead of people that purport to abuse that becomes more important as well.

Absolutely. Just to pick up on that, Bill, I think that is really, really important because if you look at the way in which retailers have always like spoken to the supply chain or collaborated, it's been via -- on the one hand, EDI, which is very formulized. It sort of requires quite a big investment, and it's not very flexible. And on the other hand, you have e-mails, and we all know what happens to e-mails when people leave the organization. So it's really hard to collaborate. What you're looking for really is something in the middle, which sort of is security protected but really allows you and your supply chain to see the same version of information, collaboration, collaboration across documents, across orders, et cetera, in the one place but really give you that sort of security that you get with that. And I think organizations are looking more towards that now and maybe moving away a little bit from EDI and that sort of thing.

I think that...

Go ahead.

So thanks, Luca. I think one thing that we also have to realize as part of the end-to-end visibility, the question that popped up, and the COVID kind of disruptions that occurred are bringing up the great toilet paper shortage of 2020, where the -- to Bill's point, the customer was on social media, and hearing that there was a great toilet paper shortage, which made the great toilet paper shortage worse, and -- was there anything that we could have done as an industry to get ahead of that and somehow tap into any reserves or anything we could do to make sure that there was product on the shelfs to alleviate the concern? And with the cycle times, I'm not sure that I have an answer on that yet, but it is something I'm thinking about. And how do we make sure that a just-in-time inventory system upstream from the Walmarts and the Krogers is flexible enough to be able to handle those surges? Because they will happen. They happened once, they'll happen again. And I don't have an answer for it yet, but it's something I think that we need to consider because we have to make sure we have fresh for everyone in our product chain. So...

So just to address that part, Brian, because this gives us an opportunity to go find out new vendors, new people who can help out on this process. And it's a healthy competition to have during the good times, but it also gives you the fallback mechanism during the bad times when people come out of woodworks to help you out. I mean again, a lot of people have capitalized on the COVID situation in terms of -- but that's not -- whether that's ethical or not -- I think that's not our point here. But people have brought -- it's sparked a lot of ideas about how to get out of these situations, so these -- the toilet paper issue or the hand sanitizers. And they just -- people started getting creative at home with ingredients. So I think all these will factor in, and it's probably to harness some of these new ideas. That'll be a good opportunity when COVID finishes. That is the whole cycle that's going to spur and get people ready, how do we harness sources.

I would like to go back to the previous point, talking about visibility and EDI. I think EDI has always been that very strong element to put together information which otherwise they are basically in silo. But I do believe that most -- more often, that EDI conversation has always been left on the side and CDS has been replaced in order to communicate faster if not email, as you were mentioning, Nick. So I would like to imagine that in the future, some clear investment are addressed in order to create that collaborative platform because the thing we were discussing before, we were focusing on the quality of data. But in the end, we know we were actually in a better place by streamlining the process to get data and signal faster for decision-making. This -- basically, the same exact happened in the back end of the supply chain. We have so many parts that are interconnected, but they are basically still having walls among themselves. And I do agree there is a privacy concern when we're looking at the customer, but the same when we're looking at our vendors and our partners. And until we decide what -- if it's not EDI, what else it is? Because it is certainly absolutely needed to start having those conversation. If we foresee that in the near future, we will land on anything closer to blockchain, which is a secure network, but we are not even talking about a network today because it's just not on the -- it's on nobody's agenda. And I think that, that actually has to become a priority because before we can go and start working together collaboratively on sustainability, for instance, one very, very important topic at the moment, how can we do that if we have to basically replicate task between one entity and the other entity and the other entity again. So we're just not going to be able to fulfill our North Star, which is to become transparent and sustainable. It's just not going to work if technology doesn't support that across the entire chain.

I think one of the drivers of collaboration is all about balancing benefits. So historically, if you look at EDI and other things that went before, it was sort of loaded in favor of the retailer, to a certain extent was -- you must follow these guidelines and so on. But I think the benefits of balancing, the benefits across the supply chain are the way forward. And if a supplier has a benefit from collaboration over and above just receiving the data, then they're all going to take part in that. And I think that was what Tradeshift started off with and to this day follows, is trying to balance the benefits through the supply chain so that a supplier can sign up and get it free of charge and a customer also gets the benefits as well. Do you feel that balancing the benefits is the way to successful collaboration?

Yes. I think you need to have a win-win for everybody involved. So we get better data and better information on what's available and what we can provide. Our suppliers get better feedback on what we're going to need and what our road map looks like for -- so they can increase their manufacturing capability or warehousing capability. So I think that collaboration is definitely how we're going to have to go forward.