Supply Chain Management in Wal-Mart - Case Study Example

?Supply Chain Management in Wal-Mart College: Supply Chain Management in Wal-Mart Supply chain management refers to the mechanisms that a company employs to move its products from the point of production to the point of consumption where target customers are located. The success of a company is determined by its ability to roll out its products to the customers through push or pull mechanisms. The preliminary design of an effective supply chain is complex and requires an understanding of the market forces and policies that affect the free flow of goods. Large organizations such as Wal-Mart owe their success from effective product distribution path design that has enabled them to make autonomous sales and to maintain loyalty from its esteemed customers. An effective distribution path ensures that products are available to the customers and that they are easy to access at any given time. Wal-Mart has put a great emphasis on supply chain management to beat the competition that exists within the global markets to maintain its dominance in the business environment. This article seeks to evaluate how Wal-Mart has managed to utilize supply chain management to maintain its relevance in the competitive business market. Wal-Mart is one of the famous retail multinational organizations based in America that has maintained high profits through effective product management and supply. The company has maintained an upward growth its entry into the business market in the year 1969, when it was locally based in America (Stentoft, 2010). Today it has managed to hit the international market and has remained one of the dominant sellers of grocery and food products. Today, this company owns 8500 stores in 15 different countries where it is known by different business names. As Traub (2012) points out, Wal-Mart success emanates from its ability to maintain a smooth path for the flow of its goods and today the company enjoys the privilege of being associated with the most effective channel design strategies in the global market. In essence, Wal-Mart has remained swift and dynamic in adjusting to the changes in market environment as a strategy to infiltrate into the competitive market environment. At its foundation, Wal-Mart started with the objective of providing the public with the goods they need, at the specific time they need them and at the most convenient form for utilization. In this regard, the company had to study the market environment to establish the demand of the people before arriving to the idea of purchasing, processing and supplying food and grocery products in various forms. Their primary goal was to control its entire operations by maintaining efficient production, transportation, product storage and its distribution, and selling in its product outlets (Bonacich & Wilson, 2005). Consequently, the management applied an integrative approach to coordinate all the processes from the time the raw products were obtained to the time they were sold to the user in the market environment. Apart from cost strategies, management of this company has employed numerous business strategies to coordinate the supply chain to their advantage. One of the strategies that Wal-Mart management has employed to remain competitive in its dominant countries is the use of pricing strategies to ensure that it is capable of supplying its products to distant markets at lower prices than its competitors. Often, the cost of moving products from the point of production to the point of consumption places cost overheads on the final product cost resulting to high priced goods (Stentoft, 2010). The ability of an organization to reduce the transport cost overheads makes it possible for it to reduce the selling cost without having to sacrifice the quality of the product. Wal-Mart maintained low supply cost by eliminating the role of middlemen in the product path. Although middle men play a key role in supplying raw materials and supplying ready products to the customer, they impose a large overhead cost that often increases the final product cost. Wal-Mart has managed to eliminate high transport cost overheads on its transport path by creating a direct link between the company and the customers. One place where this company has managed to cut out the middle man is in China, one of its major markets that have hit double profit figures in the recent past. In this country, the company has launched a direct farm program which seeks to create a direct link between farmers and the organization. In this program, the company aims at engaging over one million farmers to supply fresh products to the organization. The success of their project emanates from the mutual relationship that benefits both the farmers and the organization in the long run. Through this purchase chain, the farmers benefit by obtaining better prices for their goods and the organization benefits by reducing the middle man cost and by receiving more fresh products that help to improve the quality of products in this organization. According to Erica & Lyn (2011), the direct purchase method has helped Wal-Mart to achieve double figure profits in this organization as well as boosting the confidence of farmers in the market. Wal-Mart has integrated technology into its supply path to help push products to their target customers in various countries. Morakhia (2013) points out that information technology is a key element of business trade in the 21st century and its adoption has a lot of benefits to an organization. Wal-Mart has taken advantage of the information technology to model business operations and to co-ordinate its activities in its various branches in the market. Traub (2012) points out that Wal-Mart was the first to promote adopt the Bar Code technology to maintain its database accurate and to monitor the sold products. This database is used to store a record of all operations of the company and its branches all over the world. The Radio frequency identifier (RFID) technology was applied at this company to monitor its fleets of transport cars and during product packaging to reduce the expense of manual product and fleet inspection. The adoption of technology has resulted to automation of basic organizational operations that has greatly impacted on the price and efficiency of product flow (Millsap, 2012). Therefore, the ability of Wal-Mart to remain a leader in the contemporary market has to large extent been influenced by its ability to remain innovative through technological development. Another logistic that the company has adopted to enhance their supply chain management is by increasing their commitment to environmentally sustainable products. The green strategy has been widely adopted due to its long term sustainability goals that seek to promote ecology-friendly products. In 2006, Wal-Mart made a verbal commitment to farmers to buy their organic cotton for a period of five years in a moved geared towards the promotion of natural products. After this commitment, the farmers have been guaranteed a market to sell their organic products and hence do not have to resort to short term farming of non-organic products which is unfriendly to the environment. In addition, the addition of this technology has attracted consumers who have a preferential taste for natural products for their consumption. Erica and Lyn (2011) have recognized the move toward green as the strategy that has helped Wal-Mart to shape its product flow in the business environment. In the implementation of its effective supply chain management, Wal-Mart has faced a lot of business challenges relating to the government laws and policies in regulating market environment. Its endeavor to penetrate the international market has often been frustrated by strict policies and accusations of irregularities in its operations. One country where this company has suffered a blow is in China, where its success has been derailed and has only regained over the last few years. The company lost a big fortune after the Chongqing municipal government accused the organization for selling ordinary pork as organic pork without the conscience of this council. The company suffered a great loss after 13 of its stores in this country were closed down for 13 years and the chief executive officer had to be suspended for over five years after this incidence. Although the company in 2007 designed new strategies to achieve high profits in this country, it had suffered a great deal to the extent of having to readjust its optimistic goals in this country (Shah & Sanjeev, 2012). Since the occurrence of this incidence, the government of this state has maintained a close eye to this company to ensure that it remains within the market policies. One of the key logistic that Wal-Mart has used to gain the leader position in the global market is the use of cost-reduction strategies to provide highly discounted retail products. To achieve this, the company has resorted in wage-reduction policies to help cut down the wage overheads in their endeavor to attract consumers with low priced goods. Although this strategy has been quite successful in this company, it has been unappreciated in some countries. Rosenfeld (2007) has given associated the withdrawal of Wal-Mart in Germany to the government policies that have set up minimum laborer prices in the employment sector. In Germany, the workers are unionized and have refused to succumb to the low wages that this company offers to its employees, hence exposing the organization to the risk of facing price competition in this country. To a great extent, the company’s efforts to expand in this country have been suppressed by the wage policies and eventually the organization has had to quit. From this perspective, the organization has had to reshape its supply chain logistics due to challenging government laws and policies. A deep analysis of the success of Wal-Mart seems to originate from its initial development goals embedded in its slogan to “supply the people with the products they need, at the right time they need them and in the most convenient way possible” (National Employment Law Project, 2011). The implication of this slogan is that the company strategies are geared towards the satisfaction of a demand that already exists in the business environment. To achieve this objective the organization has had to strategize on efficient product development mechanisms right from the purchase of raw products to the processing stage, product transportation and finally consumer supply stage. The cumulative effect of reducing expenses at all these stages has allowed the organizations to minimize its production cost and hence be able to reduce the retail prices of its products. Adoption of technology and its integration in the organizational processes has allowed the organization to centralize and automate its business operations. Resultantly, the organization has had better control of its business operations, and hence reducing the cost of administration. In short, the strength of this organization emanates from its ability to model an effective product supply chain, and its ability to capitalize on available demand opportunities. However, the company has faced numerous challenges in its efforts to implement pricing strategies to increase its market dominance each year. The slogan ‘better than the last’ was used to reflect the decrease in the production budget every fiscal year. The organization has been criticized for disregarding the welfare of its employees by reducing their wages and providing an unhealthy employee environment in its greed to maintain leadership position in the market. This has been perceived as one of its weaknesses in the implementation of its organizational policies especially in international markets. As Rosenfeld (2007) points out the company has had to give up business in some countries such as Germany where policies uphold minimum wage policies that every foreign investor has to comply with. In addition, the organization has faced various industrious actions as its employees quest for their wage rights or salary increment. In this view, the weakness of this organization comes from its over ambitiousness to achieve higher profits by trimming the employee wages. In conclusion, Wal-Mart has remained a top leader in the international market through proper supply chain management that has allowed the free flow of goods from their production sites to their retail markets. The superiority of its distribution channel design strategy results from innovation, dynamism and resilience that have remained core to this company. Through history, the organization has employed technology to enhance channel control, eliminated middlemen to reduce cost and the green policies to encourage farmers to provide quality organic products. However, it has received criticism for reducing wages and neglecting employees working environment as part of reducing its cost of production. As a matter of fact, the organization has suffered losses in countries such as China and Germany where government policies and laws have laws against over exploitation of its public. However, the company's deterministic supply chain management has kept this company abreast to become the economic leader in the world retail market. References Erica, P. & Lyn, D., (2011). Supply Chain management: The Greening of Wal-Mart’s Supply Chain Management Revisited.Framington: Peerless Media. Retrieved from: < http://search.proquest.com/docview/903785104?accountid=45049 > Millsap, D., (2012). Wal-Mart’s Use of RFID in Global Supply Chain Management. Retrieved from: < http://www.danielmillsap.com/research/rfid-in-wal-mart- global-supply-chain- management.html> Morakhia, S., (2013). Wal-Mart Supply Chain Management. Retrieved from: < http://www.slideshare.net/sagarc1990/walmart-supply-chain-management> National Employment Law Project, (2011). Chain of Greed: How Wal-Mart’s Domestic Outsourcing Produces Everyday Low Wages and Poor Working Conditions for Warehouse workers. Retrieved from: < http://www.discountfoundation.org/report /walmart_chain_of_greed> Rosenfeld, H., (2007). Challenging Wal-Mart, Supply-Chain Dominance and Sweatshop Labour. Retrieved from :< http://www.globalresearch.ca/challenging-wal-mart/5073> Shah, J., & Sanjeev, S., (2012). Channel Coordination in Green Supply Chain Management: The Case of Package Size and Shelf-Space allocation. Retrieved from: < http://media.proquest.com/media/pq /classic/doc/2788485621/fmt.pdf> Stentoft, J., (2010). Supply Chain Management. New York: Academica. Traub, T., (2012). Wal-Mart used Technology to Become Supply Chain Leader. Retrieved from: < http://www.arkansasbusiness.com/article/85508/wal-mart-used-technology-to-become- supply-chain-leader?page=all> Read More