The Wal-Mart Factor

UntitledThe Wal-Mart factor first took root in 1962 and is still with us today. It refers to the phenomenon arising from the emergence of a huge retail organisation and the effects of its massive purchasing power upon industry, farming and the resultant demise of many smaller retail store competitors.

This so called Wal-Mart factor was to play a significant part in the realisation of the benefits that both OEE and CMMS could bring to bear on the manufacturing industry in particular. It still does.

The ongoing downturn in the global economy is exerting more and more pressure on manufacturers creating a huge buyers market in which buyers make matters still worse by seeking keener and keener prices. This is the ongoing legacy of the Wal-Mart factor.

The problem for manufacturers is that if they are to lower prices, they must also reduce costs otherwise their margins will reduce until business becomes totally non-viable. Most manufacturers have already pruned back labour to the bare minimum, so further cutbacks are impossible without reducing output. The next progressive step would be to apply OEE.

What is OEE (Overall Equipment Effectiveness)?

OEE, such as the Idhammar OEE Software System, is a tool for promoting lean manufacturing: continuous manufacturing at the cheapest cost and with the absolute minimum of waste. It is based on 3 fundamentals:

  • Identifying the client and listening to his demands
  • Focussing on Kaizen (the Japanese business philosophy of continuous improvement)
  • Recognising and eliminating waste from the production cycle.

Using OEE to Combat the Wal-Mart Factor

The Wal-Mart factor seeks to do 2 things:

  • To reduce the prices at which it buys
  • To inflict mortal damage on its competitors

OEE can account for the Wal-Mart factor by:

  • Lowering production costs and waste
  • Making the manufacturer more viable

Successfully implementing OEE requires thorough planning and execution but the costs are outweighed by the benefits of better utilising existing plant and streamlining manufacturing processes

How CMMS can also Combat the Wal-Mart Factor

Another effect of the Wal-Mart factor is the compliance, with regard to health and safety measures,  management of licences and plant maintenance records, which manufacturers are forced to adopt by large and powerful buyers that if not met can result in the imposition of heavy fines

CMMS, such as the Idhammar Computerised Maintenance Management System, benefits a manufacturer on two levels relating to the Wal-Mart factor.

  • CMMS improves the efficiency of the manufacturing plant and drives down-time to an absolute minimum, thereby reducing operating costs.
  • CMMS regulates and optimises maintenance routines and automatically documents equipment safety checks and PM inspections.

OEE and CMMS combine to Offset the Wal-Mart Factor

In the manufacturing sector, where the effects of the Wal-Mart factor are still being felt, OEE and CMMS can help manufacturers to effectively deal with and compensate for these pressures thereby helping to stabilise manufacturing businesses and improve their ROI.

For more information on how Idhammar OEE and CMMS Software can alleviate the effects of the Wal-Mart factor for your business, contact us today for a free demonstration.