Low Cost Management of WALMART&SOUTHWEST

SOUTHWEST AIRLINES CASE STUDY

CASE STUDY

Southwest Airlines History Founded in Texas in 1971 as a small regional airlineMission Dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual price, and Company Spirit.31 consecutive profitable years and consistently high quality ratingsFewest customer complaints for the 13th straight year in 2003Multiple Triple Crown winner in U.S. DOT rankingsToday Southwest is the largest airline in the United States

How do they manage their costs?Point to point system.Single model fleet of jets.No meals , no first class and no seating arrangements.Less turn around time more air time.Good employee relationshipPoint to point system

Single type of fleet (Boeing 737)

Less ground time and more air timeNo seating arrangement.No meals so no catering service needed.Faster baggage service.Short routes .Highly motivated workforce.Employees have given 10% of company stock.Employee Retention rate is 92.3%.An example showing loyalty of employee toward southwest airline is, after losing a huge amount of business, each of its 32000 employees gave back some of their pay to help company. Employee SatisfactionUnique Planes

History Overview1962: Walten Brothers opened fist Walmart in Arkansas1970: Walmart became public1990: 1st National retailer1991: International Expansion1993: Creation of Great Value2003: Largest corporation in the world2012: 50th Anniversary

Mission Statement, Vision, Goals, & PurposeVision:If we work together, well lower the cost of living for everyonewell give the world an opportunity to see what its like to save and have a better life. Mission Statement: To help people save money so they can live betterGoal:Becoming in an international brandFirms Value Chain

General administrationHuman resource managementTechnology developmentProcurementInbound logisticsOperationsOutbound logisticsMarketing and salesServiceCost Leadership Strategy- How?Efficient supply chain managementEfficient because almost all product data can be tracked to and from the manufacturer, warehouse, and the store shelf. Saves Wal-Mart several million dollars as it can prevent losses from faulty product management. Efficiency in operations and distribution strategiesOpens stores outside of large cities and within 200 miles of existing stores. By bunching stores together in small areas, distribution costs are below average. Seeks to meet different customers needs with four main distinct retail options; these include discount stores, supercenters, Sams Clubs, and neighbourhood markets

Cost Leadership Strategy- How? Contd.Bargaining power Wal-Mart buys its products at rock-bottom prices, exchanges high purchase volumes for low cost while passing the savings onto its customers. The bargaining power of suppliers is weak. Many suppliers even give in to Wal-Mart's pressure because they depend on the discount retailer for the majority of their salesThe bargaining power of buyers is also weak because there is a very broad base of customers and a significant demand for low prices.

Cost Leadership Contd.Extensive use of technologyInformation of quantity orders transmitted via satellite to Wal-Mart HQ or to supplier distribution centers.Constant tracking of inventory by store managers and computerized systems help reduce inventory holding costs.Cross dockingProducts transferred directly from in-bound vehicles to store-bound vehicles, enabling goods to be delivered continuously to warehouses and thus eliminating inventory holding costs at this level.

The company owns a fleet of more than 3,000 trucks and 12,000 trailers. The Wal-Mart Way Cross Docking.

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