How systems and processes deployed within the organization are aligned with organizations objectives - Assignment Example

? Business Table of Contents Introduction 3 Critical analysis of how systems and processes deployed within the organization are aligned with organizations objectives 3 The Supply Chain Operator at Walmart 4 Retail Strategy of Walmart 7 Information Systems in Walmart 9 Suggestions for improvement of processes for delivering organizational objectives 11 Reference 14 Bibliography 15 Introduction The project seeks to analyse the operations in Walmart, which is a leading multinational retailer corporation organization running chains of warehouse and departmental stores across the world. Ranked as the 18th largest public corporations in the world according to the Forbes Global 2000, it also holds one of the top positions in terms of revenue. Employing a huge workforce of over 2 million, it accounts for one of the largest retailers in the world. The company works through a number of operations divisions, namely, Walmart Sores US, Walmart International and Sam’s Club. The purpose of the project is to analyse and identify how effectively the above systems and processes work in the organization and how they are aligned to deliver the performance objectives and goals of the organization. In this context the main operations activities, their interactions with people and system processes are identified along with the identification of the major problem areas. However, the analysis is provided in the context of theories and practices in operations management at the workplace. Finally suggestions are provided on how the process can be managed better in order to attain organizational objectives. Critical analysis of how systems and processes deployed within the organization are aligned with organizations objectives The key to the company’s business operation is the fact that it keeps changing itself with the ever changing world that it exists in. The company undertakes successful business process reengineering which is objected to provide solutions to the three main factors in business, namely, customer, change and competition. BPR accounts for one of the main operations strategy of Walmart for achieving radical improvement in contemporary and critical measures of performances such quality, costs, services and speed (Joseph, 2006, p.342). The strategy focuses on re-examining its basic roots and aiming to undertake complete reinvention. BPR activities have been particularly employed in Walmart for attaining scale of operations and reducing costs so as to attain a competitive edge in the market. Following is a typical BPR process undertaken in Walmart involving cross functional cooperation and changes, identifying expectations of customers and also identifying where the process is falling short of meeting those expectations (Muthu, Whitman & Cheragi, 1999, p.3). Figure 1: Activities in Business Process Reengineering (Source: Muthu, Whitman & Cheragi, 1999, p.3) The Supply Chain Operator at Walmart The supply chain operator in Walmart seeks to enhance efficiency to such a level such as to attain low price leadership among other retailers in the market (Haag, Cummings & McCubbrey, 2004, p.101). Because of this high efficiency the company has been able to attain low margins as compared to other retailers. As commented by Pete Abell, the research director at AMR Research Inc. at Boston, cost of goods of Walmart is at least low by 5% to 10% from that of its competitors. The retail giant was effective in becoming the best supply chain operator of all times in terms of undertaking two fundamental strategies. Firstly, it has leveraged its scale in numerous ways for the creation of operational efficiencies consequently driving significant competitive advantage. Secondly, it has used its scale for creating competitive advantage through best execution and investment in supply chain (Dorado, 2006, p.1). Globally the retailer has around 9000 number of suppliers which includes Nestle, P&G, Unilever and even Kraft. The company also exercises tremendous power and control over its suppliers. For negotiating with suppliers Walmart insists on single invoice prices and also does not make payments for cooperative advertising, distribution or discounting (Johnson, 2006, p.4). Payments are accepted entirely on the company’s terms and conditions. Starting from the sharing of information right from the point of purchase of raw materials, it controls with who the suppliers speak, where and how do suppliers sell their products, and even encourages them to support the company in its political fights. The place of manufacturing of goods, ways of designing the company’s products, deciding how raw materials are to be used for making the products are all controlled and monitored through the company’s supply chain operations (Li, 2007, p.45). The company’s store locations are influenced by the distribution strategy of the company. It began with the ‘hub and spoke’ design of distribution strategy gaining scale economies in many regions. This distribution strategy of the retail giant has been particularly successful and even been imitated by competitors. It led to the expansion of numerous US retail stores across America in numerous regions. Opening stores at low rents, in suburban areas and near the highways constitute main component of the firms’ distribution strategy (Johnson, 2006, p.5). By the time the rest of the market began to take note of Walmart the retail giant had already spread itself across a wide network and had established an efficient logistics network. The 75,000 person logistics division of the company and the information systems division include the largest private truck navy employee base of any organization accounting for 7,800 numbers of drivers who were responsible for delivering majority of the merchandise sold at the stores. The company’s distribution centres across the US consisting of 114 stores accounts for a mix of general merchandise products, food and clothing distribution centres, processing more than 5 billion cases in a single year across its entire network. The products are picked up at the supplier warehouses by Wal-Mart’s in-house trucking divisions and then shifted to the company’s distribution centres (Leeman, 2010, p.138). Shipments are either cross-docked or transferred directly to the outbound trailers without any extra storage. In order to ensure efficient movement of goods across distribution centres Walmart has successfully standardized its labelling and case sizes. It keeps the average distance between its distribution centres and store locations at 130 miles. The profiling of the distribution centres is done in a store-friendly way in which similar products are collectively stacked together. The merchandize which are purchased directly from manufacturers which are located offshore like India and China are developed in the coastal distribution centres before they are shipped to the stores in US. Moving back from the stores, Walmart created ‘back-haul’ revenue through movement of the unsold merchandise via the trucks which would otherwise be empty (Johnson, 2006, p.5). The black-haul revenue of the company, i.e. its private fleet which operated like a ‘hire carrier’ when it was not carrying merchandise from the distribution centres to the location stores accounts for more than US$1 billion per year (Johnson, 2006, p.5). Because of the fact that its trucking employees are unionized and are completely in-house, the retailer has been effective in implementing and improving on its delivery processes, coordination and deployment of the complete fleet as required. Uniform and standardized operating standards ensured that there were least miscommunication between the coordinators of traffic, the store level employees and even truckers (Johnson, 2006, p.5). Retail Strategy of Walmart Unlike competitors the retail giant implemented EDLP, i.e., everyday low price policy. The idea was to keep the products at steady prices and not discounting them regularly. In this environment the demand could be smoothened and ‘bullwhip effect’ could be reduced substantially. Also because of this particular policy Walmart did not have to make frequent investment in advertisements like its competitors and could easily channel its savings into price reductions. With the purpose of generating additional volumes, the company also worked with its suppliers on price rollback operations. Price rollbacks lasting for three months used to be refunded by the suppliers with the purpose of enhancing sales of products by 200 to 500 percent. It is seen that customers particularly appreciated the product prices at Walmart which was at least less 8% to 27% from that of its competitors (Johnson, 2006, p.6). The company also ensured that its store level operations were as much efficient as its logistics operations. Stores were kept furnished simply using standard materials. Continuous efforts were provided in reducing operations costs. For example, the entire temperature and light settings at the American stores were under control from Bentonville. Since the distribution centres at Walmart had real time information on every in-stock level of the stores, all merchandise could be pushed easily to the stores automatically. In addition to this the store level information system also allowed the retailer to take notice of its manufacturer when a particular product was purchased. Forecasting demand changes for particular products associates retained the power to input orders or even override the impending deliveries. On the contrary, retail competitors of Walmart did not bestow the merchandising responsibilities to its lower level and new employees, rather merchandising templates were sent to them which they were required to following precision. In order to keep the employees up-to-date, the management used to share detailed information regarding weekly or monthly store sales during the ten minute long standing meetings with them. There is storewide display of merchandise templates which indicates the layout of each department of Walmart (Sinha, 2009, p.289). This was mainly created by the merchandising department of Walmart for analysing the store sales and traits in the community. Every store in Walmart seeks to become the store of the community presenting the product mix towards the community which is best suited to its tastes and trends. Therefore two stores located at a small distance from one another could be potentially used for stocking different merchandise. On the contrary, competitive retailers in the community were seen to make purchasing decisions at the regional or district level (Johnson, 2006, p.6). For the purpose of harnessing the knowledge of key suppliers, known as category captains were introduced for providing inputs to the shelf space allocation. One major advantage of using the category captain scheme was that major producers like Palmolive and Colgate could be used for working collectively and intensively with firms which used to compete with it. This could be used for finding a product mix which would allow Walmart to earn its maximum shelf space. In case Walmart found out that a particular supplier promoted its own products at the cost of the revenue of Walmart, it would immediately name some new captain in place of it (Johnson, 2006, p.6). Information Systems in Walmart Walmart invests in a central database and a point of sale system at the store level and a satellite network. The company implements the UPC bar codes; it collects store-level information instantaneously and uses them for analysis. The sales data thus collected is combined with external information such as weather forecasts and the analysis is thus used for providing additional support towards the buyers with the aim of improving the precision of the purchasing forecasts of the company (Johnson, 2006, p.7). The Retail Link was developed by Walmart at the early 1990s which is considered to be one of the largest civilian databases across the world. Estimated at 570 terabytes it accounts for one of the largest of all fixed pages on the Internet. The Retail Link contains the data on each and every sale undertaken in the company during the two decade period. This access to the database was given to the Walmart suppliers on their supply of products, including the individual stock keeping products at the store level (Johnson, 2006, p.7). By providing suppliers access to this database Walmart expects them to proactively monitor their products and also replenish them continuously. In 1990, the retail giant became on the early adopters of collaborative planning, forecasting and replenishing (CPFR). CPRF is an integrated approach towards planning and forecasting. This is done by sharing the crucial supply chain information and also data for promotions, daily sales and inventory levels in the company. It also implements the VMI program, i.e. the vendor managed inventory program. This is required by the company’s suppliers for managing inventory levels in the company at their distribution centres which is based on the agree service levels. This program began with the Proctor and Gamble diapers in the 1980s and by 2006 it was able to include many more suppliers and SKUs. In some of the situations, particularly in case of the grocery products, the suppliers had ownership of the Walmart stores just till the point that the sales were scanned at the checkout (Johnson, 2006, p.7). With the aim to support the efforts to this inventory management, supplier analysts of the company worked in close association with the Walmart supply chain personnel for coordinating product flows from the company’s factories. Also they seek to resolve issues arising in supply chain including routine issues like ensuring readiness of products before their pickups by Walmart trucks, making arrangements for return of products which were defective, and problems arising at the last moment like sudden shoot up of demand for particular popular products. During the visits between Walmart’s buyers of products with suppliers’ sales teams the two most crucial topics that were reviewed were the rates at which suppliers’ stocks went out of stock and the level of inventory in Walmart (Stair, Reynolds & Reynolds, 2008, p.27). These two reviews were primarily meant to indicate the extent and effectiveness at which replenishments were handled within the company. Targets were provided to the suppliers on inventory levels and rates at which stocks were out of stocks. Apart from the management of short term inventory levels and analysing product trends, Walmart worked in close association with suppliers regarding medium and long term supply chain strategies, which includes planning factory locations, generating cooperation with the downstream suppliers of raw materials and forecasting product volumes too (Johnson, 2006, p.7). Moreover the satellite network in Walmart received and transmitted data at point of sale which helped the senior management to broadcast video messages and signals to the store locations. Despite the fact that majority of the senior management level employees were located and worked in Bentonville and Arkansas, frequent broadcasts of videos kept employees at the store locations completely informed about the latest and the recent developments across the firm. This effort was highly successful in Walmart which several competitors tried to emulate. With an attempt to emulate the Walmart’s efforts, its competitors tried to undertake other strategies. They tried to rely on a system which was somewhat similar to that of Retail Link for sharing information with their suppliers. Agentrics LLC, which was a provider of software services, developed in collaboration with numerous global retailers a software platform which was called Retail Interface. This software platform was meant to store data such as sales data which could be shared with all suppliers. Customer base of the company Agentrics LLC consisted of some of the top retailers in the world such as Tesco, Metro, Carrefour, Kroger, Cotsco, and Walgreen. These retailers also made investments in Agentrics (Johnson, 2006, p.8). Suggestions for improvement of processes for delivering organizational objectives It is seen that most senior level management employees in Walmart resides at Bentonville while the stores in Walmart are distributed across the world in numerous locations and regions. This could be a hindrance in the supply chain management of the company as it would be difficult to manage handling of activities present in the chain from a distant location. It is suggested that for the sake of improving the SCM process or removing or avoiding hurdles in the process, a certain extent of authority must be distributed to the location centres of Walmart. Each centre must have a certain level of authority to undertake decisions best suited for the location. In the increasingly changing global business environment, business conditions differ across locations and thus planning and strategies must also differ consequently (Johnson, 2006, p.9). One of the key factors that Walmart has enjoyed is low operating costs because of the fact that its workforce was not unionized. Without having to go through awkward labour agreements the management could easily use their technology in lowering labour costs and undertake operational changes quickly and easily. However, being non-unionised did pose a few drawbacks for the company (Johnson, 2006, p.9). Its numerous store networks had intruded into a number of unionised organizations, groceries, United Food, Commercial Workers’ Union became highly aggressive in their efforts to undertake anti-Walmart campaigns. Non unionization of Walmart helped these associations stronger in their efforts to undermine expansion of the retailer. Thus it is suggested that unionization of the workforce would be useful in handling or confronting with these organizations successfully. Moreover, it would also help to reduce resistance or opposition from these unionised organizations and rather gain their support in its expansion strategies (Johnson, 2006, p.9). Walmart could reduce its percentage of out-of-stock merchandise at its stores by redesigning its network distribution centres. It was seen that as soon as the company increased its line up of grocery products, the fact became apparent that when employees worked their way to sort out arriving merchandise in trucks in order to the fastest selling products or items, it resulted in delays in restocking of the shelves. The model of having particular distribution centres to serve many different store locations needs to be changed. Some of the fast moving merchandise like toilet papers, paper towels, toothpastes, and seasonal items has to be moved with great speed from the distribution centres to the store locations (Johnson, 2006, p.9). Moreover, food distribution centres would have to be different from the merchandise distribution centres, in terms of their sizes, temperature controls or even automations. Thus distribution centres must be equipped to needs to the products they were distributing. It shows that customizing the conditions in the distribution centres would be effective in improving the channel distributions effectively and consequently increase the speed with which items travelled between locations. Doing things different cold be effective in improving efficiencies of the supply chain activities of the firm substantially (Johnson, 2006, p.9). Improving on its technology usage for tracking inventory for increasing in-stock rates in the stores has a chance of improving business performance of Walmart. The company must try and enhance its visibility as to the place where stocks were, so that would be replenished promptly and without any hindrances. This could be attained through improvement and betterment of existing technologies deployed by the firm (Bjerre, 2005, p.144). Reference Bjerre, M. (2005). Retailing in a SCM-perspective. Copenhagen Business School Press DK. Dorado. (2006). The WalMart Model. [Pdf]. Available at: http://www.dorado.com/pdf/WALMART_10.06.pdf. [Accessed on February 21, 2012]. Haag, S., Cummings, M. & McCubbrey, D. J. (2004). Management information systems for the information age. Pennsylvania State University. Johnson, P. F. (2006). Supply chain management at wal-mart. [Pdf]. Available at: http://www.ekof.bg.ac.rs/nastava/strategijski_m/2010/eseji/Lanac%20snabdevanja%20-%20Wal%20Mart.pdf. [Accessed on February 21, 2012]. Joseph, P. T. (2006). E-Commerce: An Indian Perspective 2Nd Ed. PHI Learning Pvt. Ltd. Leeman, J. J. A. (2010). Supply Chain Management. BoD – Books on Demand. Li, L. (2007). Supply chain management: concepts, techniques and practices enhancing the value through collaboration. 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John Wiley & Sons. Sinha, A. (2012). Supply Chain Management. Tata McGraw-Hill Education. Read More