SCDigest editorial staff

After a successful test, Wal-Mart is saying it is rolling out a new logistics program dubbed “Remix” that is designed to reduce stock outs by improving the flow of fast moving goods from DC to store.

As noted in a recent Wall Street Journal article, the program began to take shape a couple of years ago, and involves utilizing separate “high velocity” distribution centers, or large areas of existing DCs, for extremely fast moving goods such paper products, toothpaste, some food items, and seasonal products. Outbound pallets will be built with store layout in mind, enabling them to be rolled directly onto the floor for rapid shelf replenishment. With all Wal-Mart’s logistics prowess, the traditional model meant fast moving goods were delivered on the same trucks as slower moving items, often forcing store personnel to sort through a lot of other goods to find the items most in need of replenishment.

The move comes of course in the midst of comparative financial challenges for Wal-Mart and certainly challenges for its stock price. Recently, profits have been growing more slowly than sales, reversing the pattern for most of its history.

Wal-Mart has been testing the program at a Florida DC, and will begin a massive rollout this fall, which is expected to be completed by the end 2007.

The program is part of Wal-Mart's strategy of simplifying store operations by altering processes upstream in the supply chain even at the price of adding complexity to distribution center operations

"If we are able to do that successfully we win every time," Rollin Ford, Wal-Mart’s Exec VP of Logistics, recently said, "because the goal is to give stores the merchandise on a silver platter--or silver pallet in this case."

Part of the new DC model also involves increased mechanization, especially in the freezer area. This includes use of more ASRS technology, for example.

“We took the freezer, the harshest environment our people work in where temperatures are a constant 20 below zero, and mechanized it,” Rollins said.

The Remix strategy is similar to a program in place at Target for express distribution of high velocity SKUs. However, the program is more limited in scope than Wal-Mart’s initiative, in part because Target uses third-party distribution for its grocery products, which Wal-Mart took largely in-house after selling McLane in 2003.

While reports of the Remix program have not much focused on RFID, a logical question, being asked in private by some CPG companies, is whether such process improvements will reduce the incremental benefit from RFID tagging. While the Remix program and RFID are undoubtedly synergistic, two of the main drivers of RFID – the potential to reduce out of stocks, and reduction of store labor – are also being addressed by Remix. Almost by definition therefore, Remix’s success reduces the incremental benefit of RFID tagging.

Meanwhile, various message boards used by unions and Wal-Mart associates are saying Remix is also part of Wal-Mart aggressive drive to stop unionization. How? Apparently, to speed flow of goods to the floor, virtually any member of the staff may be tasked with the effort, and most will be placed under the job code of “Remix Associates.“ According to the boards, this will make it harder for a given department to organize, as happened with a group of meat cutters in Texas.

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