The first Wal-Mart was opened in Rogers, Arkansas, in 1962. Founder Sam Walton envisioned a store offering high-quality products and service for low prices.

Today, Wal-Mart employs more than 1.2 million employees and operates 3,118 retail locations in America, and another 1,071 overseas. These outlets range from its Wal-Mart discount stores, Sam's Club warehouse stores, Wal-Mart Super centers combination discount and grocery stores, Neighborhood Markets mid-sized grocery stores, to ASDA grocery stores in the U.K. Wal-Mart is currently the largest retailer in the United States.

A Logistics Leader

Several factors contributed to Wal-Mart's enormous success in the American retail market. Its low prices, vast selection, and superior service all keep the customers coming. One of Wal-Mart's biggest strengths - its logistics - appears only behind the scenes. As the biggest retailer in the United States, Wal-Mart's marketing logistics demands are considerable. The company must coordinate with its more than 85,000 suppliers, manage inventory in its warehouses, and bring that inventory to its 20-feet-tall retail shelves. To streamline these tasks, Wal-Mart set up a "hub-and-spoke" network of distribution centers. Centers are spaced across the country so that no store location is more than a day's drive away. Its ability to effectively manage such a vast network prompted one business writer to declare Wal-Mart "the king of store logistics."

Sam Walton was something of a visionary when it came to logistics. He had the foresight to realize, as early as the 1960s, that the company growth he was striving for required the installation of advanced information systems to manage the volumes of merchandise. In 1966, Walton hired the top graduate of an IBM school and assigned him the task of computerizing Wal-Mart's operations. As a result of this forward-looking move, Wal-Mart grew to be, in the words of another business writer, "the icon of just-in-time inventory control and sophisticated logistics - the ultimate user of information as a competitive advantage." By 1998, Wal-Mart's computer database was second only to the Pentagon's in terms of capacity.

Global Expansion

As Wal-Mart expands into global markets in South America, Asia, and Europe, it relies heavily on its logistics prowess to help it move quickly and support the rapid growth it seeks. At first, the company's system for entering foreign markets needed improvement: Wal-Mart encountered difficulty in certain markets due to the lack of historical data, inexperienced management, and the monumental task of buying and stocking 50,000 to 70,000 items for each international super center. When Wal-Mart opened its first super centers in Brazil before the 1995 holiday season, managers did not anticipate sales quadruple those of comparable U.S. stores and could not keep up. By 1997, the company had made rapid progress. Wal-Mart was opening locations at 20 percent less cost, developing local distribution centers to manage the huge volumes of goods going to the stores, and tailoring the stores to meet local tastes. For example, the company added fresh pasta shops to Wal-Marts in Brazil after customer data revealed heavy pasta consumption in that market.Wal-Mart Moves to the Internet

Wal-Mart capitalized on its logistics expertise when it took to the Internet with Walmart.com in 1996. The Web site borrowed resources like inventory, distribution, and information systems from its parent company. After Wal-Mart expanded the site in 1999, Walmart.com was initially criticized for its sluggishness and poor customer service. In 2000, the company partnered with a Silicon Valley venture capital firm, made Walmart.com a separate company, and retooled the Web site. Among the features added were in-store returns for items purchased on the site and more reliable delivery. In June 2001, Walmart.com debuted its Internet service provider, which offered unlimited Web access for less than $10 a month.

Wal-Mart's dedication to logistics was evidenced by its promotion of H. Lee Scott, the former head of its logistics division, to CEO in 2000. Scott was famous for taking a logistics approach to Wal-Mart stores when he was took charge of merchandising for the company in 1995. He developed a system for giving current merchandise enough shelf space, limited price markdowns, and increased direct-to-store shipments from suppliers. Scott takes over the company at a time of unparalleled success. Wal-Mart's annual sales in 2000 reached $191 billion, a figure that earned the company the number two spot in the Fortune 500 ranking. The company's commitment to logistics played a major role in bringing it to that point, and will doubtless continue to be a large part of the Wal-Mart Way in years to come.

Wal-Mart has been highly successful in the development of logistical systems. What types of developments have been critical to success in this arena?

As the largest retailer in the world, Wal-Mart has seen only modest success overseas. Why is this, given their vaunted marketing abilities? What changes would you make so that Wal-Mart can remain number one?