Retailer Energy Alliance Supplier Summit Webinar—Walmart Presentation (Text Version)
Below is the text version of the Walmart presentation from the Retailer Energy Alliance (REA) Supplier Summit Webinar, presented on June 5, 2008. Jim McClendon from Walmart was the presenter. You can also view the slides for this presentation (PDF 3.1 MB). Download Adobe Reader.
(Slide 1)
Doug Brookman:
So our first presenter is Jim McClendon, and he's engineering director, prototype and new format development, for Walmart stores.
Jim McClendon:
Thank you. Thank you, and welcome again to everyone. This is pretty exciting for us. This is a history-making event. We're setting a precedent here. I think we did it the first time in February at the roundtable or the kickoff — many of the retailers here attended that, but from anyone's recollection, I think that was the first time in history you had a collection of retailers together openly sharing information. And this is the next step up because it's the retailers sharing information, and sharing information with suppliers in the intent for an open partnership. And many of you supply many of us, so it's really just setting a precedent. It's pretty exciting.
The formats for the presenters are somewhat similar, and we've done that on purpose, because as the initial slide showed, this is opening a dialogue for an opportunity for sharing, okay? So in order to do that, we want to deliver as much information about our business and our profiles as possible. We all have stories where we've missed opportunities. Either the retailer did not accurately identify a need or a supplier didn't accurately identify a need, and we had a missed opportunity. So here's an opportunity for us all to share information, understand our profiles, and partner together with the opportunity and scale of the REA to make an impact to bring new technology to the market.
So first thing I have up here, this 20/12, 25/09, and 100, what is that? Well, for Walmart, we have some specific goals. We have a goal to reduce our existing building footprint 20% — energy 20% by 2012. We have a second goal to produce a new prototype 25% more efficient by 2009, and we have a goal of achieving 100% renewable energy. Now the first two goals, we're very well on our way. The third one is a grand goal, and that's where we certainly are going to have to look for major partnerships, and it's going to be a collective goal and a collective success of retailers, suppliers, industry, DOE, and society.
(Slide 2)
So who's Walmart? What do we look like? Well, around the globe, these are many of the banners that Walmart flies under around the world.
(Slide 3)
What does our footprint look like? Well, we operate currently in 15 countries, a little over 7,300 stores, $375 billion last year. That's about 800 million square feet of a footprint, about 2 million associates, over 70,000 suppliers like you. Over 170 million customers a week come through the doors.
(Slide 4)
I like this slide because it identifies several key things. First and foremost, it's why we're all here: The competition for resources continues to increase, and we're all in that market. And whether we're operating in one country or 15 countries, we're all operating in a global economy right now, and we have to recognize that.
We see the curve of the BRICs going up, and we see the G6 starting to flatten out, and that's very similar to what our growth projection looks like if you take G6 as domestic for us. And then if you take that intersection and you shift it back this way to about 2007, that's what our growth looks like. Last year was the first year in history for Walmart that international growth exceeded domestic growth, and our projections forward is for that to continue.
(Slide 5)
What kind of growth expectations are we looking at? Well, again, it's internationally driven, and if Walmart was a country, we'd be in the top 20 GDP, globally.
(Slide 6)
What do our formats look like? Well, they range considerably from simple, single small outlets in South America to
(Slide 7)
multilevel urban environments to
(Slide8)
coastal multilevels in Europe to
(Slide 9)
South America rural to
(Slide 10)
more multilevel in Asia.
(Slide 11)
Below-grade in Asia.
(Slide 12)
More Europe
(Slide 13)
and the typical suburbia Walmart we see here in the United States, so quite a diversity in format and opportunity of applications.
(Slide 14)
This is a pretty simple slide. It's just meant to illustrate mainly our key operating areas, which obviously is Walmart U.S., Sam's Club, and Walmart International. But more importantly, Walmart realty, which is the area I represent and my team represents. Design, construction, realty procurement, and GIS, a really key piece because GIS stands for global indirect sourcing and it's one of the — it's an area that part of the REA will be focusing towards, how to capitalize more on global indirect sourcing and applying scale opportunities and identifying common denominators. The key with Walmart realty is, although from an organizational standpoint we fall under Walmart U.S., we are a key supporter to all three operating areas.
(Slide 15)
So manage and design of construction, how does it work within Walmart? Well, there's a couple of key areas: prototype and new format development, responsible for developing, managing, maintaining the prototype library. We look at one-offs and special projects, multilevels and so forth, and do get involved in very specific projects in that area, but primarily maintaining that — developing and maintaining that prototype. Then it shifts to the project floor for site adapts, and this is a floor of design managers and consultant base and real estate managers. And we look at the site conditions, constraints, market demands, and so forth, and those prototypes adjust or flex slightly as needed to fit the model for that location.
Currently we build about 40 to 50 million square feet a year new construction in domestic. GIS, again, is a key part of that — global indirect sourcing. Sourcing those design specifications. Again, a parallel path of where we see the REA having value is collectively identifying common denominators and looking at scale opportunities.
But because of that prototype library, because of the need to do site adapt and adjust, technology applications really have to have program opportunity, so incentive-based rebates, shared programs are a tough fit for us. We can look at those from priority of implementation perhaps, but technology applications initiatives have to be driven on their own merits, on their energy-savings merits, or avoided operation and maintenance costs.
(Slide 16)
I'm going to go through a few slides just as an example of how Walmart puts together profiles, but it's very similar, and most of the retailers have same or similar type of profiles. And it's just to illustrate that we have information that we can share and help support combined opportunities or shared opportunities for success.
This is the Walmart climate map where we — what we use for design purposes for all our simulation models. The pins represent actual stores, and this is just an exercise in calibration, so in this particular sample case, there's about 125 actual sites we looked at within particular climate zones. Actual electric and gas usage for those sites. And, again, these are sites of the same prototype within three to five years of age of each other, so very similar.
This is the opportunity that retail has that many other building sectors don't, is we build the same building over and over and over in all these different locations. So from a modeling and a calibration standpoint, and understanding the profile, therefore understanding where the opportunities are for energy efficiency, we have a pretty good advantage there.
(Slide 17)
Taking each of those climate zones we looked at, looking at the main value of actual energy use, and then running the simulations for those, you can see we have reasonable agreement on our model base. And then if you aggregate that down into a single representative zone, we have very good agreement, so we have high confidence in our model performance, therefore high confidence in where our energy uses are, and therefore where our opportunities are.
(Slide 18)
And that yields the typical graphs most of you are familiar with, and this is a baseline graph, 2005 baseline, for where our goals were based: our 20% reduction in existing footprint, and 25% more efficient prototype.
(Slide 19)
We learned a few things here, some unexpected results, but these results are the basis of what drives new format development and what drives initiatives for retrofit.
(Slide 20)
Different ways of looking at the same data.
(Slide 21)
This is a representative — Louisville, Kentucky, actually is a pretty close fit for our average weighted 2005 footprint. So if you look at the number of stores, where they're at, in the different climate zones, yadda, yadda, yadda, it comes very close to a 195 prototype in Louisville, Kentucky.
(Slide 22)
One of the numbers that pops out that might be a little unexpected is 25% on lighting. That seems low. One would've expected that to be higher. But this prototype, this 2005 baseline, incorporates daylight harvesting, and the daylight harvesting for Walmart can represent as much as 70% reduction in lighting impact during those daylight hours. It also shifts the percentages a little bit, and now what normally would've been a much smaller sliver, and probably not given as much recognition, is small equipment, small power, or plug load. Now it's 18%. That's a pretty reasonable target to go after.
(Slide 23)
Again, different metrics you can look at just to evaluate — kW per square foot.
(Slide 24)
Interesting radar graph, taking that same model database and now applying it to about — I think it's about 45 or 50 cities around the world, and creating a radar graph that lets us look and see, well, we've got similar opportunities in Winnipeg as we do in Casper, and in Guatemala as we do in Sacramento, say. So being able to do that allows us to say, okay, here's some common technologies that have opportunity around the world, back to global indirect sourcing, back to an opportunity or a lesson that the REA is trying to pull in as well. What if we did a radar graph like this of all the retail members and looked at common denominators for technology or for energy efficiency opportunity? And that's one of our goals.
(Slide 25)
Another metric, globally — and this is a little skewed because it's simply an energy metric. It doesn't consider utilization of the space, so the U.K. is getting kind of unfairly weighted here. Heavy usage on the buildings, so their energy intensity is high. But just some of the tools to use to better identify where opportunities are between the manufacturers and the retailers.
(Slide 26)
Our global footprint, and the key I wanted to point to this slide — and Dru made reference to it earlier — this is our 2005 global CO2 footprint. 80% of it's building energy; 90% of it is building systems, the difference between building energy and building systems being refrigerant footprint. Big opportunities. Our refrigerant footprint is bigger than our truck fleet carbon footprint, and that's a truck fleet of over 7,000 trucks. So, huge opportunity for those of you in industry and refrigeration.
(Slide 27)
So what's the goal, what's the limit? Well, taking all that information and looking at our actual base — and this is that average value of actual stores, the model base, and there's within 8% difference there, and that 8% could be argued — is that model air or is that opportunity in the existing footprint of better-tuned and better-controlled buildings?
25%, a goal for new construction. We did some exercises where we tried to remove irreversibilities in the systems aspect. We just looked at a simple heat model, if you will, of a space versus an ambient condition of an 8760 to theorize what would be the reasonable theoretical limit of efficiency in our building? Ends up being about 77%. Well, that's pretty far-reaching. You'll never get that. That's theoretical, that's true. But our HE-6 prototype, climate-specific prototype, model projections already have it at 50%, so there's some pretty amazing things that can happen if we identify the opportunity correctly and we integrate the design and integrate the solutions.
(Slide 28)
So what are some of the EEMs in place? And I'm going to start going through this pretty quick now 'cause it's going to be hit several times, and, again, all this information will be on the website in PDF. The new prototypes, how we get in some of those efficiencies. Integrated design approach, first and foremost. You'll hear that over and over again. Water-based systems. We have to reclaim 100% of our fridge energy, integrated design. It's no longer an isolated, siloed system. We want to use it in the building. Radiant floors. Use all the elements of the building as many times as you can. Indirect evaporative processes, LED case lighting, and in the retrofits, you can see it. These are things most people are doing, most people recognize, the type of the iceberg.
(Slide 29)
The opportunity is the business case. So I talked about Walmart's footprint. We're the largest private energy user in the U.S., but even at that, we're still less than 1%. It's about $2 billion a year in utility costs, about half a billion feet U.S. The REA — Dru said earlier we're pushing 2 billion. We'll exceed 3 billion feet in the REA alone, so you start doing the math and looking at the opportunity, there are hundreds of millions of dollars of opportunity in energy savings and business opportunities available.
And retail, as Dru mentioned, is the strategic point of injection. It's the place to start, because we're proto-based. We have quick penetration into the market, quick penetration of technologies. We can scale the bridge between technology and commercialization, and we're a natural migration path to those other building sectors as well. So new industry and new business opportunities are emerging. They will continue to emerge. We can lead that and be a part of it or, as they say, "Lead, follow, or get the hell out of the way."
(Slide 30)
Inhibitors. We're not mutually exclusive. We're no longer looking at systems that way. Back to integrated design. "I do HVAC. I don't really care about the rest of the building." "I do refrigeration; I keep product cold. I don't really care about what else is going on." Integrated design is where the REA is looking towards the future. You keep product cold? Yeah, big deal, so what, great, you're expected to do that. What else do you do to complement the total performance of the building? How do we utilize the elements of your system to enhance the total operability of the system, the building system?
So understanding and acknowledging the business case is first and foremost. Has to be a line of sight towards return-on-investment. We're willing to make premium investments for technologies that have a path that we can see that, that have a cost curve that's clear and defendable. And energy operation and maintenance have to be pulled into the VOE. We recognize that as lifecycle cost analysis and veritable operating expenses have to consider O&M as part of energy. Energy, by the way, is the second highest operating expense for Walmart, and I'm sure that's the case for most retailers.
So what we ask? Collectively, let's do our homework. Let's ID, identify, the right application. Does it address the need and does it work? As I said when I started, we all have war stories of missed opportunities, missed experiences. Identify the energy savings budget, best-case, worst-case. We want to look at the economic case with real sensitivities applied, collectively build a strawman of what that development path looks like, and then collectively, in partnership, identify what market transformation strategy looks like.
(Slide 31)
Energy use by technology area. You're going to see something, again, over and over here: integrated design, first and foremost, at the top. And at the bottom, what can you do as a supplier? Identify the need. We need to do that as a partnership.
Now we're focusing heavily on LED solutions. You've heard that before; you'll hear that again. We're currently working with some LED solutions, but direction forward certainly incorporates solid-state lighting systems.
(Slide 32)
HVAC, integrated design. The EER concept is outdated. We all realize it's a piece we live with, but it's not part of our evaluation any longer as far as who has a better unit. We're looking at 8760 analysis as it relates to our simulation models, and as it relates to our business economic models. Integrate and embed control functionality into the design and the fabrication. The manufacturer of that piece of equipment is the best entity to understand the optimum way to control that. Build a piece of equipment and shove it off to somebody else's responsibility to control it optimally.
Current technologies. Yes, we're unitary package-based, and direction forward is to continue that way because it offers prefab, high reliability, modular flexibility, and so forth. Again, ID the need.
(Slide 33)
Refrigeration, same message: integrated design. No longer a siloed industry. Integrated, embedded control functionality, and you can see the technologies that we currently employ and, again, the need to identify the correct need.
(Slide 34)
And water. Dru made a great point: water is absolutely critical. We're shifting to water-based technologies, water-based systems. We have to have water solutions. Our goal is to be net-net on the building to achieve water efficiency within the building use to offset water consumption from HVAC refrigeration so we are net-net. But, regionally, we're much farther ahead from a water consumption standpoint.
(Slide 35)
And all I'm going to say on envelope is we're a 5-to-1 ratio, roof to walls, and that's just looking at raw footage. Most of those perimeter walls are buffered with temperate zones and semi-conditioned spaces and so forth, so it's probably more like 5-to-0.5. You can identify where the opportunity is there.
(Slide 36)
O&M. It's got to be a maintenance-free battery solution. We have a diminishing skill set in the resource base and O&M industry-wide, globally. We have to be smarter. We have to design our buildings, our systems, and our products towards minimal maintenance requirement.
(Slide 37)
So to prioritize, I'm repeating issues we've already covered. We're not mutually exclusive any longer in our systems approach. We have to understand the business case. We have to do our homework, but the last point I added here is, what the REA is offering is a partnership opportunity. Establish the dialogue, open the dialogues today, establish a partnership opportunity for strategy point, leveraging point, and scale point, for successful technologies.
(Slide 38)
Right on time. Thanks.
Doug Brookman:
We have time for a few questions. So you're beginning to get a sense of the scale of the content you're about to receive, which, to reinforce one time, these slides will all be available online via the website in PDF format. And you can take as many notes as you wish, but that'll be there for you. Time for a quick question or two before his time expires. Somebody — don't be shy — step up to the microphones if you have a quick question or two. And unless someone moves quickly, we'll move on.
Male:
Yeah, I have a question.
Doug Brookman:
Yes, please do. And say your name and organizational affiliation.
Male:
My name's Steve Perkins, and I'm — I have the Steve Perkins Agency, and supply ABS plastic pipe, propylene glycol pumps and insulation for this integrated water source solution, both for secondary loop refrigeration and condenser loops. The question I have is, you talk about suppliers being responsible for turnkey obligations. Is there a chance that the pipes, pumps, insulation, and fluid may be broken out of a turnkey offering in future stores?
Jim McClendon:
When you say "turnkey," turnkey responsibility for the performance of the equipment you provide. That's what we're stating. Integrated solution, where we're proposing and supporting that both the designers, the retailers, and the suppliers work together for an integrated solution. It doesn't mean you're taking responsibility for total building performance as a supplier of one component. Am I understanding correct?
Male:
Yeah. The exact question would be: Are you, at Walmart, thinking about breaking out the different components of an integrated — as you integrate the system, you begin to make these systems interdependent upon one another. And then buying them in the marketplace is kind of a problem, because then the different manufacturers have to come and try to sell their individual products. So is your organization prepared to accept quotations from suppliers in the industry for each of these components that make up this integrated system?
Jim McClendon:
That complete structure from sourcing — some of that is still being determined for a new prototype. It's certainly going to be entertained to look at, obviously, component by component, but where there's opportunity to integrate multiple components into a integrated package, that will be looked at and valued as well. And I'm not sure I'm answering your question.
Male:
That's good. Thank you.
Doug Brookman:
Okay. One more question? Okay, yes, please, right up there. Right square into the microphone, your name and organizational affiliation.
Male:
Yes, I'm Paul McConocha with Macy's Corporate Services, Cincinnati, Ohio. How did you get your arms around the carbon footprint slide? I mean, that was very interesting. Do you use ?? resources to be able to figure that out?
Jim McClendon:
Yes —
Male:
And also, where did you draw the line with regard to the supply chain? Thank you.
Jim McClendon:
The line was pretty clear in direct, indirect, so that carbon footprint is the direct, and direct meaning it's electrical consumption; on-site combustion; fuel usage in cars, trucks, airplanes, and refrigerant. So that's the definition from Walmart for direct carbon footprint. And we used a third-party audit group that provided the initial information and provides an annual carbon audit for us as part of our annual report.
Male:
Thank you.
Doug Brookman:
Thank you. Thanks again. To Scott.
[End of Audio]