Sustainable of Walmarts Supply Chain - Essay Example

SUSTAINABLE OF WALMART’S SUPPLY CHAIN By Location Sustainable of Walmart’s supply chain The aim of this paper is to analyse the sustainability of Walmart’s supply chain. It begins with the introduction part where Walmart as a company is introduced. At this stage it is deduced that Walmart is the biggest chain of retailer stores globally stores in 27 countries. At the literature review part, information from, literature materials regarding supply chain sustainability is reviewed with the aim of deducing its importance and ways through which business organisations such as retailers can enhance their supply chain sustainability. It is at this point that it is important for a retailer to deal with highly sustainablesuppliers. It is also seen that a retailer should also take care of their own end of the process. For instance, it can be a good idea for a retailer such as Walmart to make sure that their fleet are efficient and drivers trained to reduce fleet idle time. The case analysis part looks at the things that Walmart has done to make sure that their supply chain is sustainable. At this stage their shortcomings are also discussed. However, at the conclusion it is concluded that despite the fact that there are a number of things that Walmart has not done, the sustainability of their supply chain has significantly improved over the past decade. There are a number of recommendations made on how Walmart can further enhance the sustainability of their supply system. Introduction Walmart Inc. is an American multinational company that runs a chain of warehousestore and department stores. The company’s headquarters is in Bentonville, Arkansas. By revenue, Walmart is considered to be the largest company in the world. It is also believed to be among the top private employer in the world with a record of more than 2 million employees. The company has more than 11000 stores in 27 countries. The company uses different names in different countries. In the US the company is known as Walmart. In Mexico it is known as Walmart de México y Centroamérica. In the UK Walmart uses the name Asda, while in Japan and India it uses the names Seiyu and Best Price respectively. Walmart is controlled by the Walton family who own 50% of the company. Walmart is considered to be the largest retailer of grocery products in the US. The operations of Walmart in the US are categorized into retail formats namely: Walmart Supercenter, Walmart Discount Stores, Walmart Neighborhood Market, Supermercado de Walmart, and Walmart Express. Walmart Discount Stores carry general merchandise and various groceries. Many of them also have pharmacies, garden centres, optical centre, tire& Lube express, photo processing labs bank branches, portrait photos, fast-food outlets and cell phone stores.The Walmart Neighbourhood Marketis a chain of grocery stores. Supermercado de Walmart is opened in parts of the US that are occupied by people of the Hispanic group. Walmart Express is smaller discount with just a number of services depending on the location. Given the nature of Walmart supplies makes a veryimportant part of the company. The nature of the supply systems has a very high influence. It is believed that Walmart has one of the most sustainable supply systems globally. Sustainability of Walmart’s supply system is one of the factors that lead to the company’s susses. Project Aims & Identification of the Business Issue In the modern business environment, there has been a significant increase in focus on sustainability of business operations. Supply chains have not been left behind. Many organisationsall over the world have considered incorporating sustainability policies in theirsupply systems. This is a result of the pressure that has been mounting from various stakeholders with regard to sustainability of stakeholders. This is a trend that is highly noticeable in the developed countries as compared to the developing ones. Walmart being a retail store operating the US and other 26 countries is affected by this pressure, especially when their operations in the US and other developed countries are put into consideration. This paper will be aiming at discussing the sustainability of the supply chain that is used by Walmart. Literature Review According to Carter and Liane Easton(2011), the assessment of a company’s supply system is of essence in ensuring that the sustainability of the supply system is enhanced. Such assessments are usually undertaken with regard to social, economic, and environmental sustainability. This implies that business organisations have the responsibility of making sure that their suppliers are involved in sustainability. It will be unfair for a company to expect their suppliers to adapt 100% sustainability. Given the fact that there are a number of factors that might hinder 100% sustainability, most organisations usually expect their suppliers to at least involve themselves in activities that show their commitment to sustainability (Carter & Liane Easton 2011, p. 55). This process should always involve getting to know the practices that suppliers involve in to enhance their sustainability. It should also involve an organisation communicating their expectations so that their suppliers can have some standards to refer to. ­­­ Barney(2012) reveals that the use of recyclable and reusable materials in packaging has been an important factor in the sustainability of supply systems. When packaging is done using recyclable materials there is a very high possibility that there will be a general reduction of the amount of materials that are left after the products are consumed. This is an implication that this practice reduces the amount of waste packaging materials that have to be disposed to the environment (Barney 2012, p. 6). This is a sign that a company’s supply practices and policies can be of influence to the sustainable levels of the organisations. Therefore, any organisation that deals on any kind of packaged products should always consider the suppliers whose products are packaged with materials that are of the least possible arm to the environment. A study carried out by Ji, Gunasekaran and Yang(2014) revealed that there are some fertilizers that can have harmful effectsin the lives of human beings. These fertilizers might have advantages in terms of the nature of the products that they help in producing. However, as long as it has been proved that they cause harmful effect to the health of those who consume products that they are used in producing they should be discouraged. Many stores that sell groceries are always affected by this factor. Some of the products that are produced by such fertilizers are usually the most eye catching while some of them are always economic (Ji, Gunasekaran & Yang 2014, p. 217). However, the problem lies in the fact that they might have a health effect to the consumers. As a result, many grocery selling stores have always been keen on the kind of products that they buy from farmers. Some retailers have even gone as far as confirming the fertilizers that are used in the production of products that they sell and the quantities in which the fertilizers were used during the growing process. Young et al. (2012) asserts that energy efficiency is a very important factor in the sustainability of a supply system. It is required of organisations to make sure that their suppliers adhere to energy efficiency. One notable thing about energy is that most sources of energy usually have some effects to the environment. In fact, most economically viable sources of energy such as petroleum have highly negative effect to the environment. The use of petroleum is one of the leading contributors to the global carbon emission. This means that organisations that limit the use of harmful sources of energy such are petroleum and supplement them with greener sources of energy are in a better position of enhancing their sustainability. Most of these organisations expect their suppliers to follow the same standards of energy efficiency as them. Plambeck(2012) believes that fleet management is an important part of fleet management. This is because a company’s fleet is an important aspect of their supply system. There are a number of ways through which organisations enhance the efficiency of their fleet. This might include going for vehicles with high energy efficiency levels. This would be a way through which an organisation can make sure that they limit the amount of greenhouse gasses that are emitted to the environment as a result of their supply process. The other activities might include time saving through reduction of idle time during supplies so that there is no energy that goes to waste during the process (Plambeck 2012, p. 72). There can also be the issue of using vehicle with higher capacity so that they can reduce the total number of vehicles used for supplies. Such practices are believed to be economically, socially, and environmentally sustainable. Cetinkaya(2010) points out that most organisations usually focus on the economic and environmental sustainability of their supply systems, and pays minimal attention to social sustainability. Cetinkaya’s research reveals that a majority of companies usually pay very little attention on factors such as employee satisfaction at the organisations that handle their supplies. As a result of such ignorance, factors such employee compensation, and working conditions of supplying companies are always given very minimal attention. This is very hypocritical, especially given the fact that same companies will release reports of how much they had done all they could to make sure that their supply systems had high levels of sustainability (Cetinkaya 2010, p. 101). Kane (2013) asserts that for a retailer’s supply system to be sustainable they must source products that produce products with disposal of the waste products in mind. There are companies that do not consider the disposal of waste products to be an important factor in their production. One of the industries that are most affected by the laxity to make sure that their waste product do not cause harm to the environment and the society is the electronics industry. Apparently the fact that these products are consumed in various parts of the world makes it rather challenging for such producers to control whatever their customers do with their products after they are done with them. However, there have been environmental campaigns that are aimed at encouraging electronic producers to use materials that have less harm to the environment in production (Kane 2013, p. 213). A retailer that wishes to make their supply system sustainable can consider sourcing, electronic products from companies that have initiated the use of less harmful material in their production. Analysis of Case Example There are a number of things that Walmart has done to ensure that their supply system is sustainable. Walmart launched their sustainability program in the year 2006. At first they were more concerned on the general sustainability. However, in the year 2012 Walmart introduced an initiative that is known as a supplier sustainability index. This was a program that involved questioning all their suppliers regarding operation so that they would know if their suppliers were involving themselves in sustainable activities. At this point Walmart knew that the sustainability of the operations would be further enhanced if their suppliers were involving themselves in sustainable activities. This is believed to have been the most ambitious of all the sustainability initiatives that have ever been introduced by Walmart. The questions were asked through The Sustainability Consortium, a non-profit coalition involving Arizona State University and University of Arkansas for carrying out scientific researches. In the year 2009 Walmart introduced a sustainable product index that would help them in rating products that they sell in their stores in terms of the social and environmental effects of their production processes. The same year they also introduced a program that was meant to reduce the rate at which their supply system led to carbon emission by 50% by 2015. This was aimed at making sure that their supply system did not contribute to pollution of the environment (Chaabane, Ramudhin & Paquet 2012, p. 48). However, the company also asserted that they will be aiming enhancing their social, environmental, and economic sustainability, as opposed to the thoughts of many people that this initiative was only focusing on environmental sustainability. This is the reason a to why they had to come up with a strategic plan that would take more than five years just to make sure that their broad target was met. In order to make sure that their supply system was sustainable there are a number of issues that Walmart focussed on. One thing that they made sure that their suppliers were cautiousabout was the use of recycled materials. The company took into consideration the fact that using recycled materials reduce the amount of waste products that are disposed to the environment. Furthermore, the company also insisted that their suppliers should consider using recyclable and reusable materials in packaging (O’Rourke 2014, 1126). Walmart made this assertion, having the knowledge that they could not dictate the kind of operations that their suppliers had, but at least they could decide which suppliers they deal with. This made it harder for their suppliers to ignore these demands, especially given the fact that they are considered to be the largest retails in the world. Losing Walmart’s contract as a supplier would be termed as a loss of great business opportunity.Smartphone trade-in program in the U.S that took effect in the year 2013 can be said to be another way through which the company has enhanced their sustainable supply initiatives. Walmart has also been very critical of the amount of fertilizers used in agricultural production. This is something that they have made clear to all their suppliers, especially those who supply agricultural products. Given the fact that their stores sell groceries, this is a stand that has been of benefit to the process of building customer trust. Even the grains that are sold at the stores are also affected by this policy. Given the fact that there have been an increase in concern over the use of fertilizers for agricultural production, Walmart was aiming at using this policy to make sure that they can limit the possible effects that their customers can be subjected to by consuming products that are produced using excessive fertilizers (Young et al. 2012, p. 177). They make sure that their supplies are made by farms and agricultural organisations that have clear records of fertilizer usage. This policy implies that the company will abandon any grocery or grain supplier who fails to adjust to these standards. For some time now Walmart has been working with their suppliers in order to improve energy efficiency. This has led to a significant improvement of Index energy scores since Walmart started working on energy efficiency with their suppliers. The fact that they have been working together with their suppliers on this has been one of the most important factors of the improvement made. Supply is something that can hardly happen without there being the movement of commodities from one point to another. The greener sources of energy for transportation are not economically sustainable. However, there is way that suppliers can make sure that their carbon emitting activities are reduced (Sroufe & Melnyk 2013, p. 210). For instance, the company makes arrangements with their supplier so that they are noticed whenever the supplies are coming so that they can be ready for them by the time they come so that the period that the vehicles spend at the parking lots is reduced. Walmart has always been efficient when it comes management of their truck fleet. From the year 2005 Walmart has been working on ways through which they would be able to reduce their fuel footprint. One of the ways through which they have been able to achieve this is by doubling their fleet efficiency. In between 2005 and 2014 Walmart has been increasing the efficiency of their fleet by 84%. Walmart has been able to achieve these standards by improving their routing and truck loading. They have taken their drivers through training programs that are aimed at making sure that they are able to minimize idle time and use progressive shifting so that they can be able to minimize the amount of fuel consumed (Grant, Trautrims& Wong 2013, p. 145). They have also acquired some equipment to help them in improving their fleet efficiency. A good example of such equipment is truck aerodynamics fuel-efficient tires. The company has also bought more trucks that use of compressed natural gas. One thing that Walmart has put much emphasis on as a way of enhancing the sustainability of their supply system is sourcing more sustainable products. For example , in the year 2007 the company announced their intention to start selling detergents with smaller and more concentrated packages. This was a way through which they could make sure that whatever product they bought was good for flight efficiency. When packages are smaller and concentrated Walmart trucks can always carry more units (Linton, Klassen& Jayaraman, 2007, p. 1079). This is also good for waste management because it makes sure that the volume of waste is reduced. In their quest for a sustainable supply system, Walmart has also focused on the products that their customers like. The company found that the best way through which they can make a huge impact on the sustainability of their supply system is making sure that the products that were bought in quantities and in a high frequency were supplied by suppliers who had very high levels of sustainability. This is because they wanted to make sure that they can use the most bought products to boost the sustainability of their supply system. Therefore, suppliers supplying such products were keenly scrutinized with the aim of finding out whether or not they were adhering to the expected levels of sustainability (Pullman & Sauter 2012, p. 172). If in any case any of their suppliers were not adhering to these products they were given a chance to enhance their sustainability, failure to which they would be dropped for more sustainable suppliers. Walmart has also been keen on integration of sustainability of buying and selling sustainable merchandise. This implies that the company was only interested in buying products from companies that were keen in making sure that their products are of less effect to the environment and society. For instance, the company has been very keen on the types of toys that they buy. Walmart insists on buying toys that do not have any harmful chemicals. Furthermore, they also make sure that they know exactly the process that made the merchandize and the effect that they might have been to the environment (Laínez-Aguirre & Puigjaner 2014, p. 203). One of the things that they focus on is the kind of working environment that their suppliers subject their employees to. This is aimed at making sure that apart from being environmentally sustainable; their suppliers are also socially sustainable. As a result, they are able to make sure that their suppliers maintain high levels of sustainability. Despite the fact that there are allot of things that Walmart has done to make sure that their levels of sustainability are high, there are still a number of ways through which they can be able to improve the supply system. Walmart’s failure comes from the fact that they are always demanding for lower prices from their suppliers. This might be understandable given the high levels of competition. The products that are highly affected by this nature of the Walmart supply system include Clothing, appliances, and electronics. At the end of the day the products that results from such demands are products that might be sustainabledeveloped, but are of low quality thus cannot last for a long period of time. This means that the cheap products are increasing the amount of waste products that have to go to the landfills (Boone, Ganeshan & Jayaraman 2011, p. 199). This especially applies to those products that have wastes that are not biodegradable. Over the last five years there has been a significant growth in the sales of groceries by Walmart. In fact, they control over 50% of sales in almost 30 metro markets. This has led to merging of various producers in the grocery supplies sectors. The sectors that are affected include dairies, meat packers, and other food processors. Despite the fact that Walmart have always claimed to support sustainable agricultural activities, it has been observed that they have been using their market dominance to support large-scale food system that is more industrialized. This has led to the squeezing of farmers with farmers seeing their share of the food dollardecreases drastically. On the other hand, Walmart and other retailers saw a significant increase in their shares as a result of these changes. Sustainability is not just about environmental and social sustainability, but economic sustainability (Palevich 2012, p. 123). What Walmart is doing in this case is taking advantage of their dominance to exploit the organisations that supply groceries and agricultural products to them. According to Walmart theyincreas the amount of locally produced food products that they sell. However, the company’s distribution model is in favour of the use of very few large suppliers, instead of the small farms, most consumers imagine about when they want to buy local produce. This can prove that Walmart’s goal is not to increase the quantity of local products sold in each of their stores, but across all stores. This means that stores already located in major agricultural states like California, Florida or Texas can be able to make up for the absence of same-state is produced in other states. This means that this system might not be balanced to favour areas with small units of food production. This might not be necessarily encouraging to the spirit of consumption of local product since the areas with larger quantities of production can be able to get their way at the expense of the other areas. As a result of its spreading to many parts of the US, they have been promisingto bring food to those areas where they are not available in large quantities. This is given in relation to the fact that they promise to avail these products are affordable prices. However, affordable prices mean that their suppliers have to supply at lower costs. Walmart does not pay much attention to the compensation that their suppliers give employees, as many people would imagine. This means that their affordable prices are indirectly leads to poor compensation of workers somewhere. With employees being left in the equation of enhancing sustainability, it can be said that these endeavours might be leading to an increase in poverty levels (Morana 2013, p. 202). What makes the situation even worse is the fact that they are doing so to increase their sales volume and thus their profits. Conclusions Given the details that have been given herein, regarding the sustainability of the supply system used by Walmart, it can be said that they have made significant steps towards sustainable supply over the past decade. This can be seen in the actions they have taken towards ensuring that their supply system have minimal effect to the society and the environment. One factor that has led to this success is the fact that they have been working with their suppliers onimproving of their supply system. Working with their suppliers might mean that they do not force the policies on them, but working with them together so that whatever policies they settle upon are those that are implementable and not those that will only affect to the society and environment. One thing that should not be forgotten is that Walmart and their suppliers are all in business. The main aim of business involvement is to make profits. Therefore, any sustainability policy that a company formulate should be realistic in the sense of profitability. Otherwise, a company can be suitable and have a sustainable supply chain, but only exist for a while after that because of accumulated losses. One thing that is noticeable about the strategy used by Walmart in achievement of supply chain sustainability is that they involved proper planning. None of the changes were implemented instantly. Every time the company came up with a policy to enhance the sustainability of their supply system they gave themselves a certain period of time to achieve their target. For instance, Walmart planed in the year 2005 that they will improve the efficiency of their fleet by 100% by the year 2015. By the year 2014 they had already achieved 84%. This shows that improving sustainability of a supply chain is something that cannot be done in a single day. This is something that takes strategizing because there are many factors that are involved, including profitability of the business. If Walmart would have rushed the process of enhancing the efficiency of their fleet then there is a high possibility that they might not have existed by the time they got to 2015. This is because apart from sustainability the profitability of a supply chain is of high importance to a retailer such as Walmart. Looking at the information given herein, it can be noted that there are a number of shortcomings that the supply chain at Walmart have. For instance, some of the information presented in their reports seems to be conflicting with the actual activities that they involve themselves. It has been seen that in a number of occasions Walmart has dealt with suppliers without paying much attention to the kind of treatment that these organisations subject their employees to. In most cases it is always observed that such suppliers are those that offer the best prices, thus the need to cut their cost of production. There is also the issue of the use of local food products. The fact that the company uses a system that encourages dealing with specific producer, it has been observed to be a challengewhen it comes to individual stores buying food and agricultural product from the locality. If they consider sourcing groceries from the local producers then there will emerge issues relating to uniformity and difference in qualities. There might also be a difference in prices as some food products might cost more from certain states as compared to others. Recommendations It is evident that Walmart has made significant steps toward achievement of sustainable supply chain. However, there are a number of things that they can do to make sure that their supply chain becomes more sustainable. One of the things that they can do is rate and award their suppliers in accordance to their sustainability. This will not only show their commitment towards a sustainable supply chain, but will encourage their suppliers to engage in more sustainable activity. Walmart can take advantage of the fact that they are the leading retailers in the US to encourage their suppliers towards being more sustainable. Many suppliers will always want to do all they can so that they can maintain good relationships with retailers such as Walmart because of the fact that they know that they have the assurance of supplies in large quantities once they have a good relationship with a big retailer such as Walmart. It is for the same reason that many of their suppliers will be willing to do all that is in a position so that they might be regarded as sustainable by Walmart. Walmart can consider making more adjustments in their fleet so that they go for products on a day when they are sure that they will be able to use a single vehicle to the maximum. The first way through which this can be possible is making arrangements with their suppliers in priorities such as the products the products are loaded immediately the vehicle gets to the premises of their suppliers. This will help with reducing the amount of time spent on their suppliers’ premises. Such arrangements will not only help in saving time, but will also ensure that the company reduces the idle time for their fleet. The end result will be that the company will be able to significantly reduce their carbon emission meaning that they will be reducing the effect of their supply activities to the environment and society. Such arrangements will also help with the suppliers who deliver products to them because it will also save the time and reduce idle time. When products are sourced from close producer there is less need for transportation. This implies that the amount of energy required, will be less. Walmart can use this fact to change their supply policy to encourage sourcing of products from producers that are closer to the stores. However, there are a number of factors that can hinder the applicability of this policy. The first reason is that it might mean that individual stores will have to take care of their supplies individually. The other reason is that the applicability will depend on the cost of products from the local producers as compared to the cost of the same products from other areas. A product might be highly costly in certain parts of the country because of factors such as cost of production. Therefore, this implies that Walmart will have to undertake an analysis and decide whether or not it will be viable to source them locally or from other areas. Bibliography Barney, JB 2012, “Purchasing, supply chain management and sustained competitive advantage: The relevance of resource‐based theory” Journal of Supply Chain Management, 48(2), 3-6. Boone, T, Ganeshan, R & Jayaraman, V 2011, Sustainable Supply Chains: Models, Methods, and Public Policy Implications, Springer New York, New York, NY. Carter, CR & Liane Easton, P 2011, “Sustainable supply chain management: evolution and future directions” International Journal of Physical Distribution & Logistics Management, 41(1), 46-62. Cetinkaya, B 2010, Sustainable supply chain management: practical ideas for moving towards best practice, Springer, Berlin. Chaabane, A, Ramudhin, A & Paquet, M 2012, “Design of sustainable supply chains under the emission trading scheme” International Journal of Production Economics, 135(1), 37-49. Grant, DB, Trautrims, A & Wong, CY 2013, Sustainable logistics and supply chain management. Ji, G, Gunasekaran, A & Yang, G 2014, “Constructing sustainable supply chain under double environmental medium regulations” International Journal of Production Economics, 147, 211-219. Kane, G 2013, Building a sustainable supply chain, Dō Sustainability, Oxford. http://public.eblib.com/choice/publicfullrecord.aspx?p=1507843. Laínez-Aguirre, JM & Puigjaner, L 2014, Advances in integrated and sustainable supply chain planning: concepts, methods, tools and solution approaches toward a platform for industrial practice. http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=883332. Linton, JD, Klassen, R & Jayaraman, V 2007, “Sustainable supply chains: An introduction” Journal of Operations Management, 25(6), 1075-1082. Morana, J 2013, Sustainable Supply Chain Management. Wiley-ISTE. http://site.ebrary.com/id/10700373. O’Rourke, D 2014, The science of sustainable supply chains. Science, 344(6188), 1124-1127. Palevich, R 2012, The lean sustainable supply chain: how to create a green infrastructure with lean technologies, FT Press, Upper Saddle River, N.J. Plambeck, EL 2012, “Reducing greenhouse gas emissions through operations and supply chain management” Energy Economics, 34, S64-S74. Pullman, M & Sauter, M 2012, Sustainability delivered designing socially and environmentally responsible supply chains, Business Expert Press, New York. http://www.igpublish.com/bep-ebooks/Book.nsp?cid_BOOKCODE=DEMOBEPB0000123&cid_BOOKPAGE=1. Sroufe, RP & Melnyk, SA 2013, Developing sustainable supply chains to drive value: management issues, insights, concepts, and tools. Young et al. 2012, Designing sustainable supply chains. CHEMICAL ENGINEERING, 29. Read More