The Walmart Sustainability Value Chain

I watched a Walmart television commercial recently that linked its ongoing efforts to transport goods more efficiently with its private fleet to its efforts to benefit the environment, lower its operational costs, and improve its ability to offer lower prices to consumers (its price rollback program). 

I couldn’t find this commercial on YouTube or on Walmart’s web site, but I did find other ads and videos, with the same theme, that were even better.

My favorite video begins with Linda Hefner, EVP, Merchandising at Sam’s Club, explaining how sustainability fits into the company’s merchandising strategy and how “lifecycle thinking is helping Sam’s Club Members save money and live better.” It’s a good video, but a bit long, so I’ll summarize the main takeaways here.

Merchandising’s job is to make the best product choices for Sam’s Club members. The company attempts to select relevant and unique products with a superior value proposition. This value proposition combines quality, price, brand, package size, sustainability, and service. 

But in selecting products, Walmart thinks about the whole value chain. The company’s goal is to reduce costs by carefully analyzing the end-to-end supply chain. 

After her opening remarks, Linda turns the podium over to her key “home efficiency” merchandising manager, Joel.  The home efficiency aisle includes things like energy efficient florescent light bulbs and water efficient shower heads. These products are both good for the environment and save the customer money. This aisle in the store has many products in green packages and they have ENERGY STAR or WaterSense logos from the U.S. Environmental Protection Agency. Key products have placards next to them explaining to customers how buying a green product can help the environment and save them money.

As an aside, when I look at most products, such as soaps, I see a plethora of products with little differentiation. It might actually be easier for a big retailer to help a manufacturer differentiate its products based on clever positioning at the product category level. “Home efficiency” as a category is a perfect example. This is another reason why it is so important for manufacturers to become category captains. 

Joel walks viewers through the toilet value chain, from product selection all the way to the consumer. I’m going to restrain myself and not make any low brow jokes in explaining Walmart’s lifecycle approach to this product.    

Walmart selected a dual flush toilet from Quality Craft. Dual flush toilets, fairly common in Europe but relatively new in the US, have two flush buttons: one for disposing of liquid waste, one for solid wastes.  The solid waste button offers superior flushing. But even so, the average customer can save 16,500 gallons of water and $33 per year. Nineteen states that are actively trying to reduce water consumption provide rebates. On average, Walmart claims that someone who buys this toilet can pay for it in savings over three years.

Walmart’s goal was to sell this toilet at the same price as regular toilets. Quality Craft manufactures them in China and Walmart buys them in bulk. Walmart and Quality Craft collaborated on packaging.  They moved from rectangular cardboard boxes to trapezoid boxes with 16 percent more fiber that made the boxes 300 percent stronger.  This is important because Sam’s Club forklift grippers need to pick the boxes up without damaging them.  The packaging design meant that 50 percent more boxes could fit on a pallet, which led to a 15 percent savings on transportation costs. 

What were the results of this end-to-end approach? A win for Walmart and Quality Craft (the product is selling well), and a win for the consumer and the environment. In Springfield, Missouri, for example, where Walmart sold 722 of these toilets in 9 months, 11.9 million fewer gallons of water were needed by households. And this was 11.9 million fewer gallons of water that had to be processed at the sewage facilities, which saved this town of 150,000 people about $23,000. 

There are other videos on the website worth watching. My second favorite is “The Secret Life of Sour Cream.” 

As a supply chain guy, I love this strategy. The supply chain is being linked to both brand improvement (a better image for Walmart as a caring company) and a competitive advantage (lower costs if customers shop at Walmart).

Comments

  1. Just for the record, the dual flush toilet was invented in Autralia. It amazes me that the US is only now looking at dual flush toilets. For a number of years it has been law that all new toilets in Australia are dual flush.

    The following is from an Australian Government web site on innovation.

    Dual flush toilet
    1982
    toilet with two flush-volumes

    In 1956 Charles Rothauser, a Hungarian immigrant, renamed his plastics company “Caroma” and began manufacturing bathroom products, including the world’s first one-piece plastic toilet cistern (the cistern is the water tank above the toilet that stores the flush).

    A traditional Australian way of saving water in a drought is to drop a housebrick into the cistern to reduce the volume of water in it. But in some cases you need that extra big flush!

    In 1980, with $130 000 government assistance, Bruce Thompson of Caroma developed a cistern with two buttons and flush volumes (11.0 litres and 5.5 litres). This wasn’t easy because the toilet bowl had to be redesigned to make sure less water could still remove the waste.

    Thompson’s Duoset cistern saved 32 000 litres of water a year per household when it was trialled in a small South Australian town. Caroma’s success led to legislation in every state but NSW to make dual volume toilets compulsory in new buildings.

    In 1994 the company completely redesigned the toilet in stylish porcelain in a modern ‘organic shape’. Its 6 and 3 litre dual flush cistern and matching bowl halved the amount of water normally flushed away.

    This combination of style and environmental awareness attracted attention in the tough European sanitaryware market and exports began soon after. The product is now shipped to more than 30 countries worldwide.