Background of Wal-Mart Stores
Discuss about the case study of Managing Strategic Resources and Operations of Wal-Mart Stores Inc.
Operations and Supply Chain Management are identified as important factors for the success of any international retail business in the present business scenario. Supply Chain Management is a process of integrating and coordinating the flow of materials, finance and information from the manufacturers to suppliers to wholesalers to vendors and finally to the customers. Hence, it involves the operations of procurement and distribution that are the major activities of the firm (Sehgal, 2011). The paper has been developed to analyse the supply chain management strategy of Wal-Mart, which is a well established retailer business in across 13 countries over the globe. The paper will observe and analyse the Wal-Mart’s Supply Chain system that is used by the company to seek success and grow its businesses on the global platform. He paper will also present various supply chain theories that are applied by the company to carry on its operations in the international market. Furthermore, the sustainable value network used by the company will be analysed and a counter argument will be presented on Wal-Mart’s sustainability regarding its Supply Chain System.
Background of Wal-Mart Stores
Wal-Mart Stores Inc. is one of the leading retailer businesses with its operations in 28 countries across the globe. It has around 11,000 stores across the globe with around 63 banners. According to the Fortune Global reports, Wal-Mart has been identified as the largest retailer company regards to its revenue in the year 2014. The company is a family business that is owned and controlled by Walton family. It employs around 2.2 million people throughout the world. The major markets for Wal-Mart are the US, Canada, Australia and the UK market. According to the market report, it is also the world’s most valuable company with its present revenue of around $480 billion. Wal-Mart is the largest grocery retailer business in the US market. Wal-Mart has number of suppliers and deals with several renowned brands across the globe. Currently, the company has implemented an e-commerce platform to increase its market reach and develop its business model (Khan & Ashta, 2013). Hence, it can be seen that Wal-Mart is the market leader in the global grocery retail industry.Global Retail Industry
The increase spending of the consumers and the falling price of oils has not supported the growth of retail industry due to the rise in competition in the international market. It can be seen that the number of sellers has increased at a higher pace as compared to the number of buyers. On the other hand, people have become more conscious about the quality of products and the services rendered by the international organizations (Jacoby & Economist, 2014). It can be seen that the rate of competition has increased with the introduction of the online platform that has made the entry of retail business in the international market easier. If some examples are considered, it can be seen that websites like eBay, Amazon and others have brought a drastic change in the retail industry (Frazelle, 2012). These companies offered better buying experience with their integrated online technology. Hence, it can be seen that it is important for any international retail organisation to implement the e-commerce business model to fight the growing competition and survive in the current business environment (Colla & Dupuis, 2012). Furthermore, there is a need of sustainable value chain model that will develop the supply chain system used by the organisation. The use of a proper supply chain model is necessary for success Wal-Mart in the current global retail industry.
Development of Wal-Mart’s Supply Chain
The dramatic turnaround of Wal-Mart’s supply chain management has been largely featured significant suppliers, better transportation system, innovative warehouse-style outlets, e-commerce business portal and efficient product distribution channels. Herein, a brief discussion has been presented to show the development of Wal-Mart’s supply chain. The low-cost retail outlets of Wal-Mart have been significantly contributed to reaching the business at the highest position in the market.Supply Chain Strategy and Design
In order to become one of the largest product sellers of the global retail industry, Wal-Mart has identified sustainable logistics management strategies to create a different identity among the target demographics. Meanwhile, promising supply chain management strategy of Wal-Mart includes sustainable resource allocation and energy reduction (Blanchard, Comm, & Mathaisel, 2008). Based on advanced technology and transportation, the retail strategy of Wal-Mart has been executed so that low-priced products can be presented towards the customers. Bulk merchandising product strategy has been utilised by the Wal-Mart stores that can control the demand and supply of products. Meanwhile, effective sales and operational planning and inventory management have contributed to the success of the retail business of Wal-Mart.Procurement and Distribution
By reducing the purchasing costs, Wal-Mart can offer products at the most affordable prices to the customers creating a significant advantage. In business procurement, Wal-Mart purchases goods and products directly from the manufacturers and farmers bypassing the entire intermediates. In logistics management, Wal-Mart follows strict price negotiating rules and prioritises the best deal price (Margulis & Yoshpe, 2014). In such way, the organisation certifies that the products are bought at the most affordable prices so that customers would be benefited. By understanding the cost structure of the suppliers and vendors, Wal-Mart follows a transparent procedure so that manufacturers can negotiate on products. Most importantly, the organisation prefers local vendors so that margin on costs can be reduced.
In the case of the distribution process, Wal-Mart has spent significant finance on distribution centre to control the distribution channels. Meanwhile, the organisation has developed distribution centres at perfect geographical locations to control the efficient distribution of products. For online business platform, the organisation has maintained its own warehouse and supplied almost 85 percent of ordered products from the inventory (Gopalakrishna & Subramanian, 2008). For efficient product distribution channels, the distribution cost of Wal-Mart has been reduced down to mere 3 percent whereas the competitors have to put 5 percent for distribution costs. Also, effective management of distribution system has utilised barcode technology to identify the manufactured date and pricing in the most effective way (Nagurney, 2010).
The fast and highly approachable transportation system of Wal-Mart’s logistic infrastructure has been critically contributed towards the success of supply chain networks. For significant retail stores services, the distribution system has been operated in a scheduled process. The coordination between the management and services has been developed in an efficient manner so that there will be no loss of timing (Chiou, 2009). The loading and unloading services have been maintained by using efficient technology so that scheduling will be perfect in each of the occasion. In order to deliver the best distribution procedure, cross docking logistics system has been maintained so that distributors can directly pick up the manufactured products and goods to the warehouse (Perks, 2014). In the case of online business, the role of the distribution centres and stores are not significant.Retail Strategy
Identifying the market consumers in every possible department, Wal-Mart has promoted best pricing strategy in the retail business creating a significant competitive advantage over other departmental store services such as Coles. By promoting quality products at a low-priced range, Wal-Mart has developed its own retail strategy to become the best portion of available market share. Also, the online discount strategy has been promoted through the advertisements to increase the sales (Clemons, 2012). The efficient logistics ideas and management have provided the chance to reduce the operational costs of retail business. Such efficient retail strategies have been the trademark of business success of Wal-Mart in the local markets.Information Systems
The information system promoted by Wal-Mart is technically efficient to meet all the requirements of the buyer’s community. By understanding the responsibility towards the customers, the organisation has developed systematic store-level information channels so that the purchasers can be updated about the new products and services. In the case of product merchandising, the organisation has developed efficient in-store promotions and information of products. In the distribution centres, the quality of products, manufacturing date and date of expiry have been monitored so that any faults of the suppliers can be overturned. Also, the information about the grocery products and farm items has been maintained efficiently to manage any issues regarding quality (Lacoste, 2016).Human Resources
Human resources of Wal-Mart have highly contributed to the efficient supply chain management of the firm. By promoting encouraging ideas towards the suppliers and distributors, the organisational subordinates help the associates to grow their service facilities and infrastructure. Based on the balanced scorecard of business, the subordinates have readjusted the business layouts to become more competitive (Drake, 2012). Also, efficient feedback from the regular customers has been helpful to improvise the service structure according to the suitability of the purchasers. As Wal-Mart is a multinational retail business, the organisational staffs have to deal with different cultures and language (Gillespie, 2006). Therefore, identifying the most suitable approaches towards the suppliers, distributors and trading partners, Wal-Mart has secured momentous progress in the business.
Sales and operations planning can be identified as one of the key features of the developed supply chain management of Wal-Mart. By identifying the market popularity of any product, the sales team has promoted significant demand-supply analysis to get the maximum benefit out of the product. Also, in the case of managing the sales and organisational operations, significant training and development programmes have been organised for the staff members to deal with the customers in a most suitable way (Ghemawat, 2006). According to the sales and demand, the inventory has been managed using modern technology. In this way, both time and investment can be saved for the organisation.Forecasting
Business forecasting is another vital parameter for the supply chain management of Wal-Mart. By acknowledging the supply and demand of products, the sales team has identified most suitable inventory management procedure suitable for business growth. Herein, the incredible logistics management and supply chain network of Wal-Mart can play a massive role to decrease the inventory reducing the cost of inventory management. Efficient inventory management system and business analysis can be highly admired for the job (Freeman, 2006). Hence, proper sales forecasting within a market has helped the business to minimise additional business costs. Sustainable value networks of the business have also contributed to the business forecasting of the firm.Keeping Sales Growth Higher Than Inventory Growth
In order to succeed in the current business scenario, the Wal-Mart management decided to keep the inventory growth rate slower as compared to the sales growth rate. This strategy will be helpful in increasing the demand in the market and provide the company with a better revenue model. The company decided to eliminate the excess inventory that would reduce the operational costs by around $6 billion. Hence, the strategic move of the management would help the company to reduce the operational expenses and increases the profit ratio (Feinstein & Stefanelli, 2012). Furthermore, the money invested on buying the excessive inventory can be used in developing the e-commerce platform and other business activities of the company.
It can be seen that Wal-Mart invested the money on marketing and promotional activities in place of keeping excessive inventory that increased the sales figure for the company. It is important for any organisation to maintain the Just-In-Time strategy that reduces the operational costs by minimising the procurement expenses and the expenses of maintaining a larger inventory (Ritchie-Dunham & Rabbino, 2011). Hence, it can be seen that the new strategy of Wal-Mart helped the company to increase its revenue by around 22% and became a major factor supporting the survival and growth of business in the global retail industry.
Sustainable Value Networks
Wal-Mart has been developing value added networks of non-profit organisations, government agencies, suppliers and employees to make it supply chain system green. It has been focussing on reducing the economic externalities and environmental issues by improvising new technologies and green strategies. In the past years, Wal-Mart narrowly aimed at improving its operations and supply chain systems, but with increase concerned among the public, the company has shifted its supply chain system into green strategies to improve its status in the international market and seek growth (Rothwell & Kazanas, 2013). The green supply chain policy of the company has been identified as a core competency of the organisation that has allowed Wal-Mart to seek competitive advantage over its rivals. A table has been given below that presents the Wal-Mart’s sustainable value networks and the goals that has implemented by the Wal-Mart management to have a sustainable supply chain system.
Wal-Mart’s Sustainable Value Networks
To supply products by 100% renewable energy
· Alternative Fuels
· Greenhouse Gas Strategy
· Global Logistics
· Energy, Construction, Design & Maintenance
To create zero waste
· Internal Procurement & Operations
To sell goods that sustain our environment and resources
· Chemical Intensive Products
· Food & Agriculture
· Forest & Paper
It can be seen from the above table that Wal-Mart management aims to reduce the waste produced during the operations and sell products that sustain the environment and natural resources. Furthermore, the company aims to supply products using 100% renewable energy (Harris, Watson, & Leopold, 2015). Wal-Mart has implemented necessary strategies to save the environment and follow sustainable approach in its supply chain system.
Wal-Mart has increasingly focused on sustainability initiatives to improve its operations and supply chain system. But, as the history dictates that there is always a reason to worry, there has been much criticism against the green policy of Wal-Mart Supply Chain System. Many people say that Wal-Mart management is not able to sustain the green initiatives implemented by company. The company needs to spend around $550 million to make it supply chain system sustainable and achieve its targeted goals. Hence, it can be seen that the company faces different challenges to carry on its operations according to the sustainable strategy. It faces challenges regards to increased costs, criticism of factory labour conditions and sub-optimal product assortment. Hence, it is important for the company to take these challenges seriously and improvise new strategies to minimise the issues (Hollenbeck, Zinkhan, & Keller, 2006). The company may buy products from new suppliers that would help to reduce the procurement expenses. Furthermore, it can initiate the reduced inventory strategy to minimise the costs. Hence, a new way of supply chain system can be helpful for the company to seek success in the overwhelming competitive market.
Throughout the discussion of the supply chain management of Wal-Mart, one thing is significantly clear that the organisation has selected some of the best picking systems and maintenance technology to manage the supply and inventory of products at the cheapest way. Proper inventory control, barcode technology, transportation system and scheduling have been chosen wisely so that the business hours of stores and distribution channels can be utilised at the highest probability. Furthermore, more than 10,000 retail suppliers of Wal-Mart have been linked to the retail channel to maximise the sales and inventory management. Effective investment and e-commerce system of Wal-Mart has significantly contributed to work out most significant contingency plans supportive for business growth. In order to provide uninterrupted services towards the massive client base, Wal-Mart’s supply chain management and logistic strategies have played massive roles. Meanwhile, it is the supply chain management of the company that binds the stockholders, distributors, customers and suppliers of Wal-Mart.
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