The UK, the US and China Wal-Mart Chain Supply Management System - Essay Example

UK, U.S. And China Wal-Mart Chain Supply Management System Contents Introduction 3 What is supply chain management? 4 Analysis on Wal-Mart’s Supply Chain Management 4 Implications of Wal-Mart’s Supply Chain Management on Chinese Enterprises 9 Implications of Wal-Mart’s Supply Chain Management on U.S. Enterprises 12 Implications of Wal-Mart’s Supply Chain Management on UK Enterprises 15 Conclusion 18 References 19 19 UK, U.S. And China Wal-Mart Chain Supply Management System Introduction This is an American multinational company that operates several departmental stores. The company was founded by Sam Walton in the year 1962 but it was not incorporated until 1969. Currently, it has its headquareters in Benston with over 11000 outlets in more than 27 countries worldwide. According to statistics by Fortune Global 500 taken in 2014, the company is the largest retailer in the world by revenue. Additionally, it is also the company that has managed to employ more employees in the world. Currently it enjoys proficient manpower from a population of around 2.2million workers worldwide. This company is a family-owned business, the Walton’s family members own around 50% of all shares of the company. Like many other groceries, Wal-Mart stocks privately labelled products for consumer purchase. Some of these major brands are Sam’s Choice: a retail shop owned by Wal-Mart and which specialises in selling food and other hard goods, Great Value: generic brand that sells food stuff belonging to other companies, Equate: this is a brand that has specialised in pharmaceutical, health and beauty products, Mainstays: offers consumers with low alternative of bedding furniture and home décor, Ol’ Roy: a brand the is specialised in dealing with dog’s food, Rd. Thunder: contains collection of soft drinks, Special Kitty: this is a brand that has specialised in cat’s food and products for cats like litter and treats, Parent’s Choice: this is the company’s store specialised for stocking baby products, White Stag: a brand that has specialised in selling women clothes, jewellery and footwear, George: this a general brand for selling clothing for men, children and women clothe and other minor brands like Homelines and Apparel. What is supply chain management? The idea behind supply chain management system is grounded on to fundamental concept. The first ideology is that every product that reaches the targeted consumer from the manufacturer, it must undergo through multiple organisations which are collectively termed as chain supply. The second concept is while the ideology of supply chains is crucial to the success of any business, few firms have paid less attention to this and in turn they have limited this concept to the supply chain that take place within the four corners of their business. Consequently, this has led to disjointed and inefficient supply chains. Supply chain management is therefore the effective management of activities in these supply chains to ensure that the consumer gets the best of a product and attain competitive advantage. These activities include development of the product, sourcing for raw materials, production and logistics and the information system required to run the activities. All the organisations involved in this chain are linked up by physical and information flow. Physical flow is concerned with the transformation, movement and storage of goods and services-the most important flow that can be physically handled. On the other hand, information flows enable partners who are involved in the chain to plan and coordinate on their long-term goals the continuous flow of goods and services within the supply chains. Analysis on Wal-Mart’s Supply Chain Management The evolution of Wal-Marts chains supply management is grounded on several elements that will be discussed below. It has enjoyed a lot of benefits from its efficient supply chain management system. These include saving time, attainment of a cost-effective inventory management system and have facilitated real time forecasting on its product. In the fiscal year that ended in 2014, the company managed to raise $476 billion. This is according information obtained from the Wall Street Journal. A greater percentage of revenue for Wal-Mart comes from the widespread restaurant within the U.S. according to Gartner, a Research and Analyst Company, 81% of Wal-Mart’s revenue, in 2010, came from its 4100 restaurants. This is because its National Federal Retail ranking supposed the expectations of many. This is attributed to its mature supplier collaboration process which is extensively supported by technology. The company began direct interactions with manufactures as early as 1980’s. This operations enable suppliers manage Wal-Mart’s inventory in their warehouses. This led to development and establishment of vendor managed inventory system in the led to smoothening of irregularities in flow of inventory. As a result, the system ensured constant availability of goods and services in Wal-Mart’s warehouses for the benefit of consumers. With addition technology, the company was able to streamline its supply management operations. Currently, Wal-Mart’s inventory management system is well developed. There are point-of-sale stores that relay warehouse information and real time sales to a centralised database. This information is then shared with supplies. Suppliers will then know the appropriate time to ship goods in those warehouses. Infrastructure-wise, the company owns more than 2485 outlets all over the world. This general figure includes 682, 457, 5 and 1007 Supercentres, Sam’s clubs, Wal-Mart neighbourhood markets and Wal-Mart International respectively. According to Chan (2011) the company serves over 100 million customers every week across the globe. All its operations are controlled from the headquarters which undertakes all major operations include taking of orders and delivering them to clients. The entire local stores are required to submit daily report on their operations to headquarters. These local stores ensure that the local consumers are satisfied. The company enjoys a pool of approximately 1035000 associates whose job is to ensure that the daily operational cost of the company is kept as low as possible. For instance by ensuring reduction in paper use, the company saves a lot of dollars which is passed down to consumers as reduced prices on their commodities. Wal-Mart gives opportunity for career development to its employees. Research indicates that approximately 60% present of all managers in the company begins as associates working on hourly rates. These employees are encouraged to work and strive for excellence. By doing so, the come up with innovative ideas that enable the company maintain a good communication channel with consumers. In addition to that, the employees have access to a lot of benefits from the company. This includes medical coverage, competitive wages and comprehensive benefits among others. This motivates them to work hard hence success of the company. Furthermore, when associates are recruited, they are presented with a fundamental rule of the company: the customer is always right and never will they be wrong. By abiding to this rule, they ensure that products delivered to consumers are of high quality for customer’s satisfaction. Technologically, Wal-Mart operations are not entirely reliant on technology. It has an extensive network of around 160 distributing centres which sprawls an area of approximately 120 million square feet. All goods from Wal-Mart passed through this centres. Additionally, the company has a cross-docking system employed in all their warehouses. This system enables inventory to be automatically removed from arriving or departing trucks. In other words, when a truck arrives with goods, they are not offloaded and kept in the warehouse but they are directly packed in another truck and transported to the relevant stores and outlets. In doing so, Wal-Mart is able to cut down on cost associated with storage of inventory, transportation cost is also reduced and the time taken for goods to be transported from manufacturer to consumer is greatly reduced. Moreover, Wal-Mart enjoys benefits from its fleet of truck which are maintained by well experienced drivers. Reliable sources show that Wal-Mart, due to this initiative, has been able to prevent accidents for the past three years. Wal-Mart’s well-organized supply chain does gain competitive superiority for the company. The proportion of inventory supplied by its own warehouse is 85%; whereas for its competitors, is from 50% to 65%. Similarly, the replacement process takes a maximum of 2 days on average, if compared with at least 5 days for others. Furthermore, both of Wal-Mart’s delivery and transport costs are roughly 3%, of the entire costs, whereas for its competitors, 5%. It supply management system however, is different from other system whose main components are purchasing, distribution and integration. Their supply chain begins with a purchases and supply manager. The manager decides which commodity will sell. Thereafter, he does a market research to locate potential customers and then arrange deal with them. The operations percentage of a supply chain centres on demand planning, projecting and management of the inventory management. Predictions approximate consumer demand for a product centred on past data, external factors such as sales and promotions and variations in styles or competition. The purpose of demand planning is to generate precise estimates, a critical step towards effective management of inventory. Estimates are likened to inventory levels to create an assurance that warehouses have adequate, but not too much, inventory to meet demand. Transition of the product from silos or manufacturing plants to outlets and eventually to customers is the supply purpose of the supply chain. Supply chain integration connects the flow of work and information in all links in the supply chain to maximize efficiencies. For Wal-Mart, its supply chain management system enable the company produce sell products a lower cost, better control when customers are selecting merchandise from its stores and final result of affordable prices that can be relayed to customers. Despite the fact that it has a strong supply chain management system, it is faced by some problems. According to Chopra and Meindl (2007), the problem of ensuring that the shelves are stocked has persisted for two years and it is deteriorating day by day, posing danger to Wal-Mart. This problem originates from a resolution made in early 2011, which was to de-clutter stores and with the aim of reducing inventory level in store. Due to this amendment, Wal-Mart decided to suspend carrying about 8,500 products. Nevertheless, the decision appeared to rebound. A larger portion of Wal-Mart’s customers were reverted to rivals because WalMart did not have those products in stock. In addition, when trying to bring back those 8,500 products, Wal-Mart has encountered difficulties with the present inventories for instance sellers fail to get new items into outlets rapidly while remaining the merchandise the customer want is out of stock. This makes leads to empty shelves in the outlets. To improve competence throughout supply chain, collaboration between Wal-Mart and its suppliers is essential. Consequently, additional challenges emanate. Firstly, Wal-Mart owes 100000 suppliers differing from the size of the company and the volume of its sales, to make all the vendors deliver products required at the lowest price, a collaborative is essential. However maintaining a balance of profit margin between diverse parties is problematic. Secondly, because of the Every Day Low Prices promise to customers, Wal-Mart is a strong diplomat when buying items from manufactures. However, the buyers of the company complete obtain process only when they feel customers cannot simply find lower prices for specific items from their competitors. According to Deru, Kozubal, and Norton (2010), there are numerous suppliers being pressed and overstretched by Wal-Mart by means of lowering prices, reducing time for delivery of goods, offering distinctive payments and carrying additional inventories. Implications of Wal-Mart’s Supply Chain Management on Chinese Enterprises China, a nation with a population of around 1.3 billion people is still undergoing major economic development and expansion thus making it a target for many business ventures that want to globalise their businesses. Wal-Mart, in 1994, to a big step into china an incorporated itself as a local investment firm. In 1996, Wal-Mart established its headquarters in Shen-Zen it has exponentially expanded to own 81 stores in 20 different cities around China: 76 supercentres, 3 Sam’s clubs and 2 neighbourhood markets. In order to survive in the industry, Wal-Mart uses an adaptation strategy in which it sources materials from within the nation and standardize them in accordance to U.S. specifications. Their stores also have been modified in accordance to Chinese culture to meet the tastes of consumers. For instance, they have reduced the height of their shelves and layout design of their outlets. On the other hand, Wal-Mart has not yet stabilised. This is because the government of china is not transparent enough in how it establishes its policies. This macro-environment factor poses a threat to Wal-Mart’s future investment plans. In addition to that, Wal-Mart is facing competition from other rivals like Carrefour, Lian-Hua supermarket and China Resource Enterprise. All of these companies have taken deep roots in China’s retailing industry. Though Wal-Mart may have the capacity to compete with these retailing industries, it may lack the ability to apply it superiority in logistics since it is in foreign nation whose policies may not allow it as it is in U.S. Despite the fact that the country has a larger population, this is not a guarantee that market will be readily available. Income disparity in China is a major problem. Statistics show that middle income earners populate between 25-30 million people. In addition that, China culture in china is extremely diverse and may take time for a company to generalise them. However, prospects show that it is a country with attractive markets to invest in. On the other hand, entering into a foreign market has its own challenges. There exist too many retail firms in China to the extent that China retail market is on the verge of exploding. Foreign companies in the market enjoy comparatively strong liquidity and international backing whereas local companies have an advantage in their in-depth understanding of the local market, their quick ability to acclimatize and put into operations wide spread and cheap distribution systems. Moreover, there is local protectionism. Local governments are continuously following instructions given by central government. There appears to be a strong local favouritism against foreign companies and for companies owned by the local state. State guidelines against local owned businesses are hardly ever enforced. Another setback to Wal-Mart will be backward infrastructure - infrastructure is deficient and expensive – roads are still not up to modern standards and are frequently toll-based, delivery from port to terminus by rail is extremely slow and time and again necessitates overnight storages. IT communication, on both speed and connectivity, channels are not well-developed as those in U.S. Regulatory limitations and system of government– at the beginning – demand that any foreign firm should not set up more than 3 stored per city, and only a few cities in southern China. Government had to commend each branch that was set up in China’s soil. Wal-Mart abided to conventions while competitors declined to abide by them. Additionally, China’s mandatory labour union is somewhat more unfriendly towards foreign brands, particularly Wal-Mart. The bodies impose strict restrictions to it making unable to acquire enough human resources for its operations. Wal-Mart’s main competitive strategy is centred on price reduction. However, they may also compete on time and suitability because they offer a wide range of products all under one roof and this enables customers spend less time driving to multiple stores to get what they need. Likewise, they also compete on location and brand name. Nevertheless, as a nation, it’s hard to compete with China on price and win. China is well understood for its low-cost of manufacturing, resulting from low-waged employees; however, its manufacturers are now shifting their attention to quality as a means of increasing their competitive advantage. In order to survive is such an economy, a company should therefore shift its focus competing solely on price and combine several competitive approaches to produce a durable advantage and continue to sell merchandises as they employ technology to raise the bar with each technique. The main mission and objective of Wal-Mart is to provide merchandise at lowest and affordable income. In entering the Chinese market, it has stuck to this strategy and therefore it is currently trying to boost up its local procurements and establish a good relationship with suppliers from china. Furthermore, Wal-Mart has modernised its distribution of merchandize and computerised all its managerial operations. In doing so, they are able to cut down cost and increase efficiently in their operations. All Wal-Mart’s stores in china use high tech bulbs designed to minimise energy loss thus saving a lot of dollars in bills. With such a high saving scheme, it has been able to attain its goal of providing Chinese population with low-priced commodities. The company is also involved in myriads of social welfare projects in china. For instance, it has involved itself with activities for protecting the environment; such activities include uses of 100% renewable energy and producing zero waste materials. Also, Wal-Mart contributes greatly to the well-being of Chinese people by donating food, supporting education activities and in disaster relief. This entire endeavour is meant to lessen the bad image they received from china. Implications of Wal-Mart’s Supply Chain Management on U.S. Enterprises With U.S. being it origin, Wal-Mart has undertaken major steps to ensure that its operations do not have negative impacts to its loyal customers. The company has embarked on an energy efficiency plan to increase energy efficiency. As a result, they have spent more than $500 million to increased efficiency in fuel consumption from its fleet of truck. It doing so, they have managed to reduce the level of greenhouse gas emission by around 20%. Just like in china, the company is being driven by its motto “good stewards of the environment” to come up with projects that will enable it embark of 100% renewable energy and produce zero waste products. Following Michelle Obama’s call to provide high nutritious commodities, the company is planning to embark on supplying consumption commodities of high nutritional value: less sugar and salt content. Furthermore, U.S. has localised regions, otherwise referred to as ‘food deserts’. These are places with no supermarkets. Wal-Mart is currently considering the option of opening up stores in this area so as to ensure that they reach many people as possible. Moreover, the company’s supply chain management is coming up with a program they call ‘Wal-Mart to Go.’ Through this program, customers will have the ability to make order on household’s supplies and groceries from the company’s website. Once they complete their order, the company take the initiative of delivering the commodities to the customer’s house. Supply chain U.S. has been achieved through various stores: Wal-Mart Supercentre, Wal-Mart discount stores, Wal-Mart Neighbourhood Market, Wal-Mart Express and Wal-Mart International. Through Wal-Mart international, it has been able to diversify its merchandize in to other states like Mexico, Canada and South America. The Carbon Disclosure Project (CDP) Wal-Mart partnership, established in September 2007, revealed the US based retail group’s resolution to use CDP’s process to encourage companies in its supply chain to report climate change related information. A preliminary pilot arrangement integrated seven of Wal-Mart’s supply sectors: DVDs, toothpaste, soap, beer, milk, vacuum cleaners and soda products. These sectors were carefully chosen because they are frequently used and profit from high levels of supply engagement (Keegan and Green, 2015). Prior to the partnership, Jim Stanway, Wal-Marts Director, Project Development, accredited how data collected from the CDP’s 2006 questionnaire had provided the company with “valuable understanding” together with the fact that the refrigerants used in grocery stores accounted for a larger proportion of Wal-Mart’s greenhouse gas footprint than its truck fleet. Through that information the company has been able to invest all their focus to strategies for the “refrigerant footprint” within the stores. Wal-Marts supply chain network is made up of more than 60,000 outlets across hundreds of sectors and the worldwide retailer was the first corporation to initiate CDP in order to create an emissions policy for its entire supply chain. Speaking at CDP’s 2007 Global Launch that took place in New York, the Chief Merchandising Officer of Wal-Mart, John Fleming, asserted that New England based Oakhurst Dairy, a milk supplier to this company, had undertaken an investigative analysis to on emission of carbon footprints emanating from their supply chain management activities. According to Fleming, this “series of examinations” indicates “the creation of an incorporated business reaction to climate change engaging all aspects of production." Such sensitivity to environment is important to a company like WalMart whose long-term goal is to embark on 100% energy renewable sources of energy. In recent times, around 2009, Wal-Mart publicly proclaimed the creation of a sustainability index to bring about a more clear supply chain. Wal-Mart will be asking its suppliers to answer 15 questions on the sustainable undertakings of their companies, around four key areas, as well as Energy and Climate. Wal-Mart is conveying a strong message to its suppliers of the benefits in determining and reporting emissions of greenhouse gas. It has also chosen the CDP as the standard classification framework through which suppliers will be reporting their findings. On the other hand, Wal-Mart is facing stiff and escalating competition from other retail shops within and without the country. It is important to understand that WalMart is not the only retail shop that can benefit from profit accruing from the same low offshore manufacturing expenses, other retailers can. The scope of this section will concentrate on Wal-Mart’s North America market and concisely touch on the level of competition in some overseas markets. The main competitors of Wal-Mart’s in North America are department stores like Targets, Kmart, Canada’s The Real Canadian Superstore, and Mexico’s Commercial Mexicana (Pope and Pope, 2012). Wal-Mart’s Sam’s Club division also faces stiff competition from retailers like Costco. Research indicates that numerous smaller retailers, mostly dollar stores, have come up and managed to gain popularity and have consequently gained a portion of the market share and as a result the perfectly and effectively competes against Wal-Mart for home consumer sales. Target is the Wal-Mart’s direct competitor. Target is the second largest retail stores after Wal-Mart. Target has the capability to supply discount goods at a higher value and additionally offer a wide range of product to its customers just like Wal-Mart does. This approach appeals high-income customers and as a result, Target is able to generate a lot of income. Their chief customer base has a typical income of $50,000 per annum compared to Wal-Mart’s $35,000 per year. Target also intends to diversify its merchandise into international markets with its procurement of 200 Canadian Zellers stores. Target isn’t the only one that is gradually eating away at Wal-Mart’s retail lead. On the other hand, Costco is also outdoing Sam’s club by most measures. Statistics show that Costco grew 26.1% from 2008 to 2012; this was almost twice the growth rate of Sam’s Club. Costco is also larger than Sams Club, with $97.06 billion of income generated last year as opposed to $53.8 billion, so its increasing more rapidly from a bigger base. Implications of Wal-Mart’s Supply Chain Management on UK Enterprises In UK, evidence suggests the consumers’ ability and willingness to buy groceries from online stores is growing rapidly. A good example is during the Christmas period 2005 whereby around 1m customers shopped with Tesco.com leading to generation of almost £56.2 million in profit that resulted from annual sales of £1 billion. On the other hand, other retailers like Sainsbury’s and Waitrose have also experienced increases in usage for online shopping and as a result are expanding their provision of home shopping. Maybe the important questions for retailers should be how best to gratify the demand successfully, professionally and cost-effectively, what the size of the consumer’s appetite is and to what degree will online retailing substitute physical retail undertakings (Roberts and Berg, 2012). Multiple grocery retailers might adopt when operating online. ASDA is the second largest supermarket in Britain owing around 368 stores. ASDA has successfully incorporated sustainability as one of its aims and objectives and has put into operations numerous initiatives to save energy, reduce packaging and eliminated unnecessary waste from its stores. ASDA’s finance team plays a fundamental part in making and implementing decision that include planning, testing and roll out of all of their sustainability programmes. These consists of: zero waste to landfill; minimisation of harmful emissions from stores and other production plants; warehouses and transport; accountable store development; minimising costs that result from self-packaging on the company’s products; consistent and continuous improvement of practises related to waste management at store level; cheering up customers and subordinate recycling via ‘bring back’ facilities and ‘green’ transport. Since 2009, this company has embarked on a project entitled LEAN. The main purpose of this project is to build momentum between itself and supplier. Also, the project aims at training workers and paying them reasonable wages. Success to chain management system lies greatly on staff, it they are not treated well; problems will arise along the chain. Moreover, the LEAN project also ensures the production flow is improved and re-engineered, reduction in damage to merchandise produced and it enables ASDA change the way in which partner with, commit to and engage with factories. In the same year though, ASDA was in a tough financial position. It underwent major loses in market share due to the inability to diversify its furniture and carpets merchandise. As a result the company lacked adequate financial power that would enable it pursues Internet retailing activities. Nevertheless in November 2000, ASDA’s online shopping service was launched. Through this service, the company sold a limited range of goods from 32 stores. Apparently this approach was adopted as it was believed that customers preferred to shop offline. In the beginning, picking of goods was carried out within the store by specially qualified staff. In 200, ASDA was compelled to close two of its online operations distribution centres in Croydon and Watford after the system was confronted by technical hitches. Since then it has reverted back to the techniques employed by Tesco.com and supplied customers from their adjacent participating store. Since 2004, ASDA had recorded gradual and consistent online service coverage to around 40% of the UK population and intended to increase coverage to 60% by the end of 2005 through its website ASDA.com home delivery service. The proposed expansion comes in response to losing market share to Tesco.com and Sainsburys. Lack of coverage was cited as the key factor and therefore this initiative was to buoy them up again in the industry. According to Hugos (2003) ASDA has in fact invested more over £7m in developing the online operation as it is perceived to signify a perfect way of expanding ASDAs influence without buying further outlets. Eventually, this will also enable the company cut down on its operation cost as running online retailers in cheaper than running physical stores. Additionally, the online stores will enable quick expansion leading to diversification of merchandise to be sold. Additional services that will result from this expansion will be an online entertainment operation, selling compact discs and DVDs and customer satisfaction (by improving the usability of the service) objectives to improve customer retention rates. In January 2012, ASDA implemented the Sustain and Save Exchange which is an online supplier tool meant to assist new, dormant and frozen suppliers conform to the long-term aims and objectives of the company for a sustainable supply chain management. This program covered a total number of 350 members from more than 250 companies. Currently, the tool has become a significant part in the day to day operations of the business. It has helped suppliers to ASDA improve resource productivity through access to best practice guidance, industry professionals and sharing of information. ASDA faces stiff competition from other major retailers like Tesco, Sainsbury’s and Waitrose. However, due to its Every Day Low Prices messages, it has become a centre of attraction to many consumers in UK. Market sector in UK is not expanding, besides the four giants that offer retailing services, there is rival posing competition. This has given ASDA the opportunity to outsell the other rivals (Wal-Mart Employees, 2001). Moreover, it is able to maintain low prices on its merchandise while to other retailers, maintaining low prices means low profit margin, risk they are not determined to take. As a result, ASDA stocks affordable merchandise for consumer benefit. Finally, the company’s consistent campaign for sustainability enables it to gain more shares in the market. Consumers would always want to associate themselves with a supplier who cares about the environment just like ASDA. Conclusion As to conclusion, Wal-Mart, enjoys economies of scale by being the largest retailer over the world, has held its top position within retail sector for many years. As it has been revealed in this paper, Wal-Mart’s competitive advantages can be mostly accredited to its efficient supply chain management system that ensures in-time delivery of merchandise to relevant stores for consumer’s satisfaction. Through this system, the company has been able to cut down on cost of inventory enabling it stock low-priced merchandise to customers. And IT and communication systems have fully been used to give suppliers real time information about the level of stock in Wal-Mart’s warehouses. The giant store has successfully established its outlets in China and UK. Though this international retails are facing stiff competition, the company’s brand name and its slogan attracts consumers helping it to suffice amidst rival competitors. WalMart has plans to expand into other parts of the world like Kenya and Germany. It is hope that with the current strategies and supply chain management exhibited by the company, it will expand to achieve its goals and aims. References Chan, A. (2011). Wal-Mart in China. Ithaca: ILR Press. Chopra, S. and Meindl, P. (2007). Supply chain management. Upper Saddle River, N.J.: Pearson Prentice Hall. Deru, M., Kozubal, E. and Norton, P. (2010). Wal-Mart experimental store performance stories. [Golden, CO]: National Renewable Energy Laboratory. Hugos, M. (2003). Essentials of supply chain management. Hoboken, N.J.: John Wiley & Sons. Keegan, W. and Green, M. (2015). Global Marketing. Harlow: Pearson Education Limited. Pope, D. and Pope, J. (2012). When Wal-Mart comes to town. Cambridge, Mass.: National Bureau of Economic Research. Roberts, B. and Berg, N. (2012). Wal-Mart. London: Kogan Page. Wal-Mart Employees., (2001). The Wal-Mart Family Cookbook. Apopka, Fla.: Try. Foods International, Inc. Read More