Kellogg Operations Workshop 2006

"Selling to Godzilla: Evidence on the operational and financial impact of being a major supplier to Wal-mart"

Taylor Randall, Michael Lemmon and Perry Solheim

Abstract

Over the past 15 years, Wal-mart has steadily increased its market share and market power. Improved operational efficiency often receives part credit for Wal-mart’s success. Claims in the popular press suggest that the improved efficiency may come at the expense of suppliers. However, recent theory posits that Wal-mart has incentives to share efficiency gains with suppliers. We offer evidence to this discussion by examining the operational and financial performance of publicly traded suppliers to Wal-mart. In this group of suppliers, we examine trends in inventory performance, gross margins, collections, accounting returns and stock market returns.

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