Logistics and Operations Management in Walmart Stores - Case Study Example

Logistics and Operations Management Contents Contents 2 Introduction 3 Analysis 4 Practical and theoretical issues involved in quality management andquality control 4 Critical analysis of the characteristics of quality management and quality control 8 Identification and evaluation of the model and analytical tools used for Wal-Mart 11 Case Study – Wal-Mart Stores 15 Conclusion 19 References 21 Introduction Quality management is an integral topic within the domain of logistics and operations management. Quality management and control is a significant concept that has assumed a more critical role in the background of the continuously evolving global business scenario. Quality can be measured from a number of dimensions depending on the type and scope of the organization. These dimensions may include customer satisfaction levels, goodwill of the organization, and a subjective attribute for the organization and “fitness for purpose”. Since, the number of organizations and the expectations of the customers are increasing on a continuous basis; therefore, it has become necessary for every company to ensure the delivery of high quality products and services in a consistent manner. Effective quality control and quality management are recognized as critical components for creating competitive advantage for businesses across all industries. This report aims at evaluating and discussing the quality management and quality control processes followed in Wal-Mart which is a leading retail company. It is a globally recognized multinational company which conducts its operations in more than 220 countries in the world. Wal-Mart is renowned for its advanced logistics and operations process and has been a pioneer in this domain since years. Quality can be ideally defined as the conformance to the necessities in the different functions and deliverables of an organization. Also, the main way of achieving quality is not appraisal or rectification but prevention or minimization of errors. The assurance of high quality in an organization can be created only through the facilitation of a highly streamlined and effective logistics and operations process. Quality management and quality control are processes through which an organization tries to ensure that the quality of the product and services produced by them are maintained and improved. These processes also encompass the reduction or elimination of manufacturing errors and defects. Quality control is a process that has many requirements for practical implementation and integration. One of these is the creation of a business environment in which both the employees and the managers of the organization contribute to quality and aim at perfection. Quality management can be done through the implementation of useful concepts like Six Sigma, Total Quality Management (TQM), Ishikawa model and waste management as well as through the use of certain business activities like training of the employees, developing standards for product quality and maintaining and reviewing of the quality of products and services on a regular basis. Total Quality Management (TQM) is a significant concept included in almost all businesses and organizations operating in the modern business environment. TQM includes the organization wide efforts that are given to create and maintain an environment in which the business is able to continuously improve upon its ability to offer high quality of products and services to the customers. TQM is a significant part of quality control approaches of a company and usually draws upon the techniques and tools of traditional quality control. Analysis Practical and theoretical issues involved in quality management and quality control Quality management includes both quality planning as well as quality control. Quality management is a continuous process and should be developed as a culture in the organizations to be able to extract the maximum benefits of the quality management process. The lack of quality management can lead to dire consequences for an organization. Compromise in quality of products and services may cause loss of reputation, attract negative publicity, decrease customer attractiveness and lead to an increased number of dissatisfied customers (Oakland, 2003). The number of businesses in every industry is increasing at an accelerated rate. Also, the existing and potential threat of competition has become very high for both local and global businesses. In this situation, companies cannot afford to compromise on quality issues. This is because if any major defect is found in any product or services of a company, it may lead to a loss of the brand image which may take years to be restored. Total Quality Management (TQM) is a concept commonly used in quality management and quality control. It is aimed at improving the quality of products and services of a company by ensuring operations improvement, quality maintenance, recovery and failure prevention through the use of the philosophy of quality management and quality improvement. TQM is a comparatively new concept developed from the traditional approaches of quality like quality control and quality checks. TQM is a logistics and operations management approach which has significant impacts on the operations of a business. Figure 1 (Source: Motwani, 2001). The main issue associated with TQM has been the implementation of the principles of TQM in the practical business situations (Kujala and Lillrank, 2004). The concepts of TQM are easy to devise. However, the practical implementations of these concepts are much difficult. Many initiative related to TQM are known to lose their effectiveness and go off track due to an unsuccessful implementation. The key implementation issues that can be associated with TQM are discussed as follows: The operations managers should focus on TQM as a long term approach for ensuring quality. They should recognize that TQM is not meant to act as a quick solution. The implementation of TQM processes as immediate solutions are likely to bear minimal or no results at all, whereas if a long term approach is used for TQM, there are heightened chances of quality and productivity improvement in the organization. The involvement and commitment of top-level management is mandatory for the success of TQM implementation in a company. This is because the TQM as a concept involves all levels of the organization. The TQM initiative needs to be supported by every level and unit of the organization without which the successful implementation of the process cannot be guaranteed. A high level and fully functional steering committee is often useful in making the implementation of TQM successful. TQM is commonly seen as a management tool. However, TQM is not a quick-fix management tool but it is a continuous and consistent process which needs a number of supporting activities within the organization. It should involve all the employees and the management of an organization and calls for a proactive participation by all levels of employees. The implementation of TQM also needs well trained and well informed employees. Therefore, it is necessary to train the employees formally as well as informally to ensure active and contributory participation in the implementation process. This would help in the achievement of better results from the process. TQM is a long term programme that should be reviewed from time to time. Without continuous monitoring and periodic reviewing, the programme may lose its importance within the organizational processes. The lack of attention of all entities of the organizations towards maintaining appropriate quality level is considered as a main hindrance in the way of implementation of this process. Apart from this, the lack of motivation of the employees and absence of employee empowerment are other factors that act as major barriers to the beneficial use of TQM approaches. The presentation of quality awards in an organization is identified as an important strategy to ensure that TQM is practiced by all the employees as well as the management of the organization. The quality awards encourage the organizations to evaluate the existing quality systems and practices and introduce new quality practices and procedures in order to improve the quality management of the organization. The quality awards are considered to be useful for TQM because they create the frameworks that can be used to assess quality levels, create motivation among the employees to pursue the TQM approaches and improve quality, create the incentives for improving quality and also provide adequate recognition for contributing to the quality management processes of the organization (Gotzamani and Tsiotras, 2002). Critical analysis of the characteristics of quality management and quality control Quality management is a wide term in logistics and operations management. Quality management is constituted of quality assurance and quality control. Quality assurance includes the systematic and planned activities that are performed within a quality system in order to fulfil the quality requirements of a product or a service. Quality control includes the observation and review techniques that can be used to evaluate the quality of products and services and fulfil the basic requirements of quality maintenance in the operations processes (Vokurka, Stading and Brazeal, 2000). Quality control is given much importance in the modern day organization. This is because the cost of rectification of a problem in quality is much more than the cost of maintaining quality. Quality is one of the most fundamental components for driving customer satisfaction. Also, it is the most visible and measurable part of an operations process. The customers as well as the employees can judge products and services by the perceived and deliver quality of these products and services. Quality is the most noticeable decider of customer satisfaction or dissatisfaction. Quality control as a component of logistics and operations management has huge impacts on both the external as well as internal environment of an organization. An effective quality control can ensure customer satisfaction in the external environment as well as efficient production and steady internal processes within the organization. There are mainly two types of quality ideologies among the customers. These are perceived quality and expected quality (Pfeifer, 2002). The perceived quality is the perception of the customers from the product or the service while the expected quality is the expectation of the customers from the products or services of an organization. When the expectations of the customers are higher than the perception of the customers, it leads to low perceived quality of products. When the expectations of the customers are at the same level as the perceptions of the customers this leads to the creation of acceptable perception quality. If the perceptions of the customers exceed their expectations regarding a product or a service, then the perceived quality is considered to be good. All the organizations employ quality management processes in order to deliver products with high perceived quality. This concept is represented in Figure 2. Figure 2 (Source: Schonsleben, 2007). Total quality management is based on continuous improvement. The traditional quality control aspects are based on the assumption that enhancing the quality will lead to unavoidable losses in production. In contrast, the TQM is based on the assumption that ensuring continuous quality maintenance will lead to improvements in the overall production and operations processes. Therefore, it can established that TQM is an integrated approach in which all the processes and functions of an organization are combined and streamlined with the objective of achieving a steady improvement in the quality of products and services produced by the operational functions and processes. The goal of employing TQM functions is to achieve greater customer satisfaction, improvement in market share, reduced service requirements, minimized complaints and defects, higher productivity, the ability to set higher prices as well as increased stock prices of the company. All these factors can be combined to achieve one single factor necessary for operating in the current business environment which is sustainable competitive advantage (Tamimi and Sebastianelli, 2008). Identification and evaluation of the model and analytical tools used for Wal-Mart Three main models are used for evaluating the quality management and quality control processes in Wal-Mart. These are the 5S model of waste management, the cause and effect model and the Six Sigma model. These models are critically evaluated before implementing them to analyse the case company. The 5S model of Waste Management is a key model that may be used for ensuring quality maintenance and quality improvement in an organization (Hoyle, 2007). The creation of unmanaged waste leads to compromises in quality and as such leads to unsatisfied customers. There may be seven types of waste caused in the operations of an organization that may lead to creation of non-value added factors for the customers. These are over production, transporting waste, waiting time waste, inappropriate waste, inventory waste, wastes caused by defects and motion related wastes. The 5S model may be used to eliminate waste in an operation activity. The 5S of waste management includes the following: Seiri (Sort) - This principle aims at eliminating the unnecessary components and retaining the necessary components in an operation. Seiso (Shine) - This principle indicates that the work area should be kept tidy and clean and all dirt and refuses should ebb removed from the same in regular intervals. Shitsuke (Sustain) - This principle states that the organization should drive a development of pride and commitment in maintaining the standards of quality. This should be established as a part of the overall organizational culture. Seiton (Straighten) - This principle aims a positioning the things used in an operational process in a manner such that they can be easily accessed during the work. Seiketsu (Standardize) - This principle aims at creating order and cleanliness in the whole operations process. The main aim is to develop and maintain perpetual neatness. The cause-effect diagram or Pareto analysis chart is a popular model used in various organizations to identify the causes and the effects of different functionalities of the organization. The cause-effect model is extensively used in the quality management processes of organizations. The model was originally developed by Kaoru Ishikawa in the year 1968 with the goal of being used as a quality control tool. Therefore, it is also commonly known as Ishikawa diagram. It is recognized as one of the 7 key tools of quality control. The cause effect diagram is especially useful in quality defect prevention. The cause and effect model can be used to identify relationships among multiple variables and the possible reasons for the process behaviour. This can help the operations manager to gain a deeper insight into the entire operations process. Figure 3 (Source: Tague, 2004).  Six Sigma is an approach that is used for process improvement. It helps to improve quality level through elimination of defects or errors and reducing variability in overall business process. Organizations that implement Six Sigma approaches have some specific steps to be followed and possess realistic targets. These targets can be stated as achieving customer satisfaction, increasing profit level, reducing cycle time of process, reducing cost and pollution. The doctrine of Six Sigma model states that it is important for an organization to enforce continuous efforts in relation to achieving predictable and stable process results so as to be successful. This model even highlights that commitment of top level management is essential to facilitate quality control throughout the system. The characteristics that are possessed by Walmart can be effectively analyzed, improved, measured and controlled. Deming’s Plan-Do-Check-Act Cycle is the tool that governs this approach. However there is another methodology that defines Six Sigma Principle based on Deming’s theoretical concept. Figure 4 precisely describes Six Sigma Model. Figure 4: Six Sigma Practices (Source: Silva, 2005) DMAIC methodology is used for those organizations that focus on controlling quality throughout the system. There are majorly five phases in this methodology such as defining the system, measuring key aspects, analyzing data, improving current process and controlling overall process before any deviation arises in the future. The aim of the model is to enhance level of quality in the system. All possible measures need to be taken by a company to eliminate any form of failures and enhance productivity. Measuring standards are set by the organization so that performance level of the company is not lowered and is able to meet expectations of customers. Cause and effect analysis forms an integral part of the model as negative consequence needs to be eliminated so as to maintain high quality standards in the organization. Case Study – Wal-Mart Stores Wal-Mart Stores Inc. is one of the top retailers across the globe in terms of revenue margins. The company was incorporated in the year 1969 by Samuel Walton. Its position in the retail industry is as a mass merchandiser. The organization has set a unique business strategy which states “everyday low prices” for all its services and goods. Corporate culture, supply chain management and organizational operations are all aligned with the business strategy. The company aims at offering best prices or lowest prices in the market so as to acquire maximum markets share. However to maintain such low prices the company has to adjust its overall costs in relation to operations, infrastructure, etc., so that cost is not higher then revenue (Ayers and Odegaard, 2007). Transportation costs are a vital component for any organization in the retail industry and this cost is managed by Wal-Mart through dealing in huge volumes in order to achieve economies of scale. The company form effective partnership with suppliers so as to achieve price reduction and its overall savings is then passed on to the end customers in the form of low prices. High demand in the consumer market requires continuous supply of goods so that a company do not lose customers in the highly competitive market (Chopra and Meindl, 2007). This factor is taken into consideration by Wal-Mart as it manages its inventory appropriately in order to supply goods to all its retail outlets. However in inventory management, forming long-term relationship with suppliers, just in time delivery or effective transportation system requires one thing in common and that is total quality management (Mitra, 2012). Wal-Mart believes that offering low prices to customers should not be the only goal as a retailer but maintaining high quality should also be one of the prime objectives. This factor of quality control has been properly embedded in the operational system. The company takes active participation to measure whether desired quality level is being maintained throughout the process from procurement to delivery to end customers. Quality control techniques or methods are applied in operation management of Wal-Mart. The company presently utilize attribute control technique in order to analyze whether there is any defect or flaw in its items. Major objective behind such method is to identify the total percentage of flaws as attribute measures for a specific item sample. This kind of flaw detection enables the company to deliver quality products to its customers and even help to build a strong position in the industry. The kind of attribute measure which the company focus on is overall defect percentage in items delivered by suppliers (Chorafas, 2012). There are suppliers of Wal-Mart who possess supplier certification and this indicates that goods being offered by them can be used by end customers without any need for inspection process. The company enters into an agreement with all its suppliers which states that they are the ones who would be hold responsible for any type of issue related to security and safety of purchased merchandise of the company. There even exist high quality controls with its overall chain of suppliers where they are bound to disclose their manufactories and must possess inspection of transportation security. To enhance further quality control the company even engages a third party into the inspection process. The standards of factory security and self assessment audit of suppliers are encouraged by Wal-Mart so as to maintain its high quality standards. Quality control is a major aspect in logistics and operation management. Efficiency level of the overall operation or process can be determined only on the basis of quality. Quality control charts is also used by the company in order to identify the percentage of flaws in supply chain process. Sample percentage needs to be within the set limit or else the entire process gets disrupted. When the company witness that limit is been exceeded by the sample percentage the entire process is stopped and thorough analysis is conducted so as to identify the possible reasons behind such flaws. Quality control mechanism is not only maintained by the organization but it appears to be an integral part of Wal-Mart’s suppliers. The company to some extent do not rely blindly on its suppliers as its major goal is to deliver quality at affordable prices to its customers. Hence apart from self inspection the company even incorporates third party organizations so that a fair inspection can be carried out to determine any flaws and its probable causes (Fishman, 2006). Continuous improvement is one of the pillars of the company that has enabled this retail chain to be successfully in the industry. All its innovative strategies are based on the concept of continuous improvement. Cause-and-Effect analysis is performed by the company in order to judge any problem occurring in the system. The company has widespread operations and in such a scenario to connect all the operational elements seem to be impossible by the management. This form of diagrammatic analysis enables the company to solve such issue and outline all those problems which has no connection with one another. Problems may even arise due to any kind of inexperience possessed by suppliers or any defect in their materials (Soderquist, 2005). This analytical tool is utilized by the company in order to divide the problems on basis of their causes so that proper decision can be taken to resolve such problems. Six Sigma model is a technique that is implemented so as to improve the overall operational procedure of an organization. The smooth functioning of Wal-Mart’s process is due to its structural design and also due to incorporation of specific tools that has made the company establish high standards in the industry. Six Sigma approach is used by the company over the years to facilitate its continuous improvement and it forms the major reason behind the company being a successful name in history of retail industry. This approach is utilized in each of the retail stores of the company across the world. Store supervisors are trained by the company in terms of which data to undertake in order to carry out analysis, measuring tools needed to measure the overall performance and methods to be implemented in order to enhance improvement in the system. This exercise is carried on the stores in repeated time interval so that any sort of failures may not disrupt the company’s image. The most important component of Wal-Mart’s business strategy is to achieve customer satisfaction. Since the company offers low prices to its consumer market it is always primary concern of buyers that quality of products should be good. This factor is taken into consideration by the company. The top management even believes that high quality can only be enforced into the system if the company maintains proper waste management facilities. 5S model which deals with management of waste which does not add any value to customers has been implemented by Wal-Mart in its system and this even forms one of the most vital element in its success and growth. This model encompasses all those elements which facilitate driving waste out of the system. The company has been able to effectively eliminate delays in delivery by coordinating well with all its suppliers (Chan and Lee, 2005). It has even reduced buying marginal cost products and is aligned towards bulk purchase. The company has reduced all those methodologies from the system which causes negative impact on the environment. Wal-Mart aims at improving quality at each step and incorporates the concept of green supply chain into its system. The next S of the model denotes straighten and the company has allocated all its resources in such a fashion that there is no wastage of time and energy throughout the system. Culture of the organization is such that it demands cleanliness from all its employees. It has standardized this factor throughout the system where performing as per required standards is considered to be equivalent to promoting neatness. The company is a global image and it maintains commitment towards reducing waste and keeping up with the set quality standards (Kumar, 2007). Hence these factors sums up to increasing customer satisfaction and overall growth of the company. It can be stated such theoretical models forms the backbone of many large and small organizations in terms of setting high standards or maintaining quality. Quality control tools have been incorporated within the system of Wal-Mart right from its initial stage of operations. As per Sam Walton customers can only be retained by a business when it is able to provide value for money to its customer base. This factor though appears to be small but forms the basis of the future of a company. Quality control is a mechanism that is integrated not only in the retail stores of Wal-Mart but it starts right from supplier selection (Leeman, 2010). Apart from all the above mentioned techniques there is one more approach that has been implemented by the company which is collecting feedback from its customers. This enables the company to analyze whether it is being able to meet quality standards or not. The areas where the customers feel that the company is lacking is mentioned in the feedback process which is then focused on by the firm for further improvement. Conclusion There is a large scope in the retail industry and in order to grab opportunities all that are needed by a company is to strike a balance between demand and supply. Retail chains need to possess a flexible supply chain network so that it is able to accommodate the rising or falling demand in the consumer market. However maintaining effective supply chains is not the key issue as customer satisfaction can only be achieved through maintaining quality standards. Wal-Mart is a renowned company in the retail industry and it has been able to sustain its market position throughout the years by giving importance towards quality. Quality management or control is a critical aspect in every industry. There are various tools and techniques that are associated with quality control and some of the methods have also been implemented by Wal-Mart to enhance its operational improvement. Six Sigma approach is one of quality control tools that the company utilizes to identify flaws, measure performance and incorporate necessary changes into the system. The other method that the company uses is cause and effect analysis and the major reason behind such approach is to determine reasons behind any problem occurring in the system. Since the company follows a wide set of operations spread across the globe it becomes essential for the company to analyze well the cause behind specific problems. This tool helps the company to separate its cause and effects. Through this quality control tool Wal-Mart is able frame proper strategy to resolve problems that is occurring in the system. It has quality inspection methods which enable suppliers of the company to maintain quality standards and in order to avoid any form of mistake both on the part of company’s representatives or suppliers it even involves a third party organization who can carry out the process of inspection effectively. TQM or total quality management is an approach that focuses on improving quality level of an organization. It brings forth all the aspects that result into quality issues which disrupts the image of the company in the industry. In logistic and operations management this theoretical concept holds a lot of significance as this factor is being addressed by every other firm. The intense competition in the market place has enforced organizations to build an infrastructure that ensures high quality to all its customers. 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