Walmarts Success in Supply Chain Management - Case Study Example

Walmart’s Success in Supply Chain Management Name Institution Professor Date TABLE OF CONTENTS I. Abstract…………………………………………………………………………..……3 II. Introduction……………………………………………………………………………4 III. Literature Review……………………………………………………………………...5 IV. Findings……………………………………………………………………………….7 V. Discussion and Analysis……………………………………………………………..11 a. Sustainability……………………………………………………………………..11 b. Supply Strategy…………………………………………………………………..12 c. Global sourcing…………………………………………………………………..13 VI. Conclusion…………………………………………………………………………...15 References……………………………………………………………………………16 I. Abstract Juggernaut Walmart reported a gross profit of $486 billion at the end of 2016 fiscal year due to the use of supply chain management which has forged over very many decades. This organization generates its income from the United States alone although it is also fed by other sprawling supply chains. This organization uses its famous mammoth kind of purchasing power in shaping the behavior of its suppliers. This purchasing power also helps the organization to drive down its costs (Wisner & Tan, 2000). This organization focuses on the supply chain management which was applied in the traditional era and which have helped many organizations to excel over the past decades. Walmart also continually improves on the traditionally used supply chain management through making more investments into the emerging technologies so as to capture the better elements in the supply chain management that are required in the e-commerce market. Walmart’s supply chain evolution includes elements such as technology, distribution practices and operation of the organization’s fleet of trucks. Supply chain management has helped the organization to save time in most of its operations, manage its inventory in more cost-effective manner and improve the product forecasting (Allan, 2016). The supply chain process of this organization is not entirely based on technology. This organization is based on a sprawling network of more than 160 distribution centers which cover more than 120,000 square feet. Within every 130 miles among the stores it distributes its products; there is a logistic company for consultancy. Supply chain management has helped this organization to lower its inventory costs to an unimaginable level. II. Introduction I have decided to analyze Walmart's supply chain management because the organization has benefited a lot from the process compared to any other organizations around the globe. Walmart has the most improved supply chain management process and it generates the largest returns from the chain compared to any other organization in the United States and the world at large. Walmart has used supply chain since 1989 and it improves on the process every year so as to capture the new technologies introduced in the market (Nathan, 2016). This paper deeply analyzes the theory of supply chain management and the business practices involved in the supply chain management in the light of supply chain management and purchasing literature. It also analyzes how the supply chain is managed through identification of those areas which demonstrate the business competitive advantage as well as improvement requiring aspects. III. Literature Review Supply Chain Management has been defined by very many researchers. Based on the supply chain management literature's recent development, there has been a hot debate about a specific definition of supply chain management. According to Chopra & Meindl, 2001, a supply chain consists of indirectly or directly involved stages in the fulfillment of the customer requests. This means that supply chain management should be designed in such a way that customers are satisfied. According to Mentzer et al., 2001, supply chain refers to a systematic and strategic business functions’ coordination within the chain of supply so as to improve individual companies’ long-term performance and the whole supply chain. This definition brings to light the fact that supply chain management is all about coordination of the functions of a business so as to improve on its long-term performance (Wieland & Handfield, 2016). Past studies also indicate that supply chain management is just a network of various stages in an organization that determines the transformation and flow of services and goods right from the stage of the raw materials. The supply chain is an interaction of those activities which take place in an organization such as the transformation of raw materials into immediate goods and transformation of the immediate goods to the final products and use of distribution system to deliver the final products to the customers. From my point of view, supply chain management’s definition can be defined as a stream of moving goods’ process from the stage which allows the customers to order the products to the raw materials’ stage, production, supply and products’ distribution to the respective customers. All organizations have varying supply chains which depend on the organization’s size and the product type which is manufactured in the organization (Christopher, 2016). Supply chain networks obtain components and supplies of raw materials from other organizations, transforms these raw materials into immediate goods then finished goods and finally distributes the finished goods to the customers' supply chain management is now the management of the events' chain which take place right on the first stage of obtaining raw materials to the final stage which involve the distribution of the finished goods to customers in different geographical areas (Fredendall & Hill, 2016). For supply chain management to be effective, the different pieces of the supply chain should be effectively coordinated so as to avoid losing customer satisfaction qualities while keeping down the costs associated with the various stages which take place in an organization during the production of the various goods and services. The supply chain includes suppliers, manufacturers, warehouses, transporters, customers, and retailers. Therefore, supply chain management deals with the management of all these parties from the manufacturers to the customers themselves. It is now clear from the above analysis that the supply chain management used by most of the organizations plays a very crucial role and therefore it needs attention so as to corporate well its operations (Sullivan, 2005). The above review of the literature clearly shades light on the fact that there is popularity in the research of the things related to this Supply Chain Management. The principle areas that academicians and scholars have publicized and researched on include supply chain framework, supply chain management strategy, challenges, and trends. This paper makes attempts to analyze what various scholars say about the supply chain management that is used by the Walmart organization. Walmart has been using this approach for some decades and it has managed to improve its distribution of final goods to the customers for the last few decades. Walmart has achieved success in the application of this strategy due to the fact that its annual returns increase year by year and it has won the largest customer base in the United States compared to any other organization that produces and distributes similar products. IV. Findings If you want to witness one of the greatest operational and logistical triumphs of history, drop by the Walmart Organization. Walmart is a giant in retail stocks and it operates in more than 70 countries. This organization operates in twenty-seven countries with 11,000 stores and above. It also manages more than $32 billion in each and every inventory. With this huge amount of stores, Walmart has an efficient and effective strategy for Supply Chain Management. Walmart is committed to business models that drive costs out of the supply chains with the aim of enabling customers to live better by saving their money. Within ten years, since 2006, Walmart has managed to become arguably the most powerful and largest retailer in the world with the highest inventory turnover, sales, and profits. In the organization's transformation to the global powerhouse from the regional retailer, Walmart managed to become synonymous due to its success in the supply chain management. Walmart is respected for the supply chain management due to the fact that it does its operations well. Walmart began its journey by providing customers with the goods wherever and whenever they wanted the goods (Taylor, 2003). The organization went ahead and developed an advanced and structured strategy of supply chain management with the aim of exploiting and enhancing a competitive advantage over the other organizations and assuming a leadership position in the world market. Supply chain management has contributed to the success of this organization for many decades. The founder of this organization, Sam Walton, who is also the owner of several franchise stores in the United States, selectively purchased merchandise which was bulk and then he directly transported it to his stores. Supply chain management of this organization began when some links of the chain were removed so as to allow innovation (Taylor, 2003). In the 1980s, the organization started working directly as a manufacturer with the aim of cutting costs so as to manage the chains efficiently. Under the Vendor Management Inventory (VMI) which was the organization’s initiative, manufacturers in different warehouses became responsible managers of the products in their warehouses. With this initiative, Walmart managed to enjoy 100% order fulfillment on the merchandise. In the year 1989, Walmart Organization's success in supply chain management made it be recognized and awarded as the retailer of that decade. In the same year, the estimate of the costs associated with distribution was 1.7% of the costs which were associated with the sales. This record was superior compared to its competitors like Sears (5%) and Kmart (3.5%). Since then, the organization's chain of supply has become more and more effective. Walmart embarks on the strategic sourcing so as to find various products at good prices and ensure that suppliers are in a good position to meet the demand of the goods produced. Walmart has a strategically established partnership with many vendors in the countries it operates and it offers the vendors with long-term potential and purchases of high volume so as to absorb the effect of the lowest prices adopted. Walmart’s supply chain management is made up of relationship and communication networks with its suppliers with the aim of improving lower inventory material flows (Taylor, 2003). Global suppliers’ network together with the network of retail stores and warehouses behaves almost the same way as the single firms. Walmart’s success in supply chain management is based on its ability to collaborate with the various stores in the different countries where it operates. This organization replenishes its inventory efficiently by the use of the logistic process of cross docking. By cross docking, I mean that the organization transfers its outbound and inbound products without the need for extra storage. This is achieved by unloading products from the incoming rail-load cars or semi-trailer trucks and then directly loading the products into outbound trailers, rail cars or trucks without the in-between storage. Suppliers deliver products to the distribution centers of Walmart where cross docking takes place before the products are transported to the organization’s stores (Taylor, 2003). Cross docking helps this organization to keep its costs down, eliminating inefficiencies and reducing the transportation time. The organization’s fleet of trucks delivers goods continuously to the organization distribution centers which are located after every 130 miles from the organization’s store. At the distribution stores, the goods are stored, then repackaged and finally distributed in time hence avoiding their sitting in the inventory stores. Goods cross loading docks in less than 24 hours so as to help save time and reduce storage costs. Cross docking helps in the routing of the products from the warehouses within the shortest time possible. This strategy has helped the organization reduce the significant costs associated with the distribution of goods from the central store to the customers. The organization uses this strategy to set highly competitive customer prices. Walmart’s embracement of technology has enabled it to become a successful innovator hence cutting down the costs associated with the supply of products to the customers (Sullivan, 2005). Technology has played a very crucial role in this organization’s supply chain due to the fact that it serves as supply chain’s foundation. Walmart’s infrastructure of information technology is the largest in the world. Network and technology design’s state of this organization has helped in the prediction and tracking of the inventory levels, forecasting demand, determining efficient routes of transportation and management of customer relationships. Walmart’s success in innovation is contributed by its share of information with the partners in the different parts of the world. The approach of this organization in supply chain management is frequent, corporative and requires less control. This organization’s supply chain management has allowed customers to pull merchandise effectively to the stores rather than letting the company push the goods to its shelves due to the fact that it tracks the customer demand and purchase. The technology used by this organization allows suppliers to handle the organization’s inventory. V. Discussion and Analysis a) Sustainability Walmart has decided to advance towards the use of renewable energy. It has exploited the development of offsite and onsite solar, fuel cells, the wind and other forms of technologies to ensure it accelerates towards the goal of procuring around seven billion kilowatts hour renewable energy come 2020 whereby it will be ultimately be powered by renewable energy. Currently, the company's 26 percent electricity originates from renewable sources. In the year 2014, the company had 3000 gig watt energy from Walmart-driven renewable energy. In the year 2015, the company received 380 projects of renewable energy (Johnson, 2004). Walmart organization has reduced waste creation globally. Each and every day it moves closer to its goal of realizing zero waste creation through sticking to innovative solutions in order to improve on waste data management, diverting or reducing food materials from being waste products. Walmart united states operational waste conversion or diversion reached 82.4 percent in the year 2014. Also internationally it attained an estimated sixty-eight percent diversions across its stores, distribution centers, clubs, and other facilities. In emerging target markets like Brazil, Argentina, Central America, Mexico, and Chile has led to reduced food throwaway by at least 11 percent with Mexico and Central America leading. Sourcing responsibility shows that Walmart is only interested in the sale of the products complying with regulations and safety laws, giving customer trust from what the company sells. In the year 2014, the company expanded its ability to monitor or identify supplier together with product compliance holding suppliers accountable for adhering to the standards set (Sullivan, 2005). Walmart also expects factory management and suppliers to present women and men who will work with the aim of producing the products the customers will cherish and love with a safe and healthy working environment. For instance, the company went to the extent of strengthening the requirements for suppliers subject to the company's audits designating employees who are tied to the factory's compliance with the standards and applicable laws. It developed an auditing approach strategy that tries to allocate more resources to facilities facing higher risks depending on their geographical locality. Through its collaboration with the Environmental Defense Fund, it has dealt with projects that have led to 17.4 metric tons of GHG gas products or simply emissions emanating from the supply chains of the company before the end of 2014. It has enhanced its sustainability by committing itself to improve product category thereby help to feed the growing planet through enhancing food system sustainability. Through working collaboratively, the company announced the key pillars tied to this commitment like improving food affordability for the environment and customers, increased access to food, making that eating healthier easier and improving safety as well as food transparency chain. It launched its Climate Smart Agriculture Platform, aiming to drive improved agricultural production by using water and efficient fertilizer (Chandran, 2003). Before 2015, it had established joint partnerships with almost 17 suppliers, service providers, and cooperatives on a land approximately 23 million acres with the aim of reducing 11 million tons to GHG by 2020. b) Supply strategy The Walmart Company has embraced the new technology through switching their retail industries from push to pull power operations. This gives retailers information about their sales and knows the flow of their products. Wal-Mart company uses retail linked software to share POS data with their suppliers (Chain Reaction, 2006). This helps suppliers who find it difficult to do business with Walmart Company to use the software data to examine the prevailing market situations and get alternative proposes. Training sessions remain available to suppliers in order for them to learn how the system or software is used and this has saved the company the cost of sending purchase orders. The organization is synchronizing marketing data like packaging dimensions, weight, and color with almost 8000 suppliers across two thousand categories and sixty thousand products or items. The system reduces administrative costs by reducing attends and reduces the time required in setting new product information. Walmart trains people in their respective supplier companies. It has partnered Accenture creating 6-12 month program which is examined for four hours and is well known as the Supply Chain Academy (SCA).The program has now expanded 300 cross-divisional and cross-functional employees. Now it can train and hire good people thus it benefits itself and its suppliers. Another core competency part of Walmart Company is the knowledge of transportation. This has encouraged production from mass production to minor lots of specialized items which are produced depending on what is selling which requires an efficient complex transportation system (Bonacich & Khaleelah, 2006). The company has purchased a truck fleet to aid in shipments distribution within supply chains. Stores have expanded around distribution centers. It has new United States campuses of 2.7 million foot square import campus consisting of four distribution centers in Mira Loma. c) Global sourcing Walmart has made efforts in trying to create value through low-cost sourcing, high-quality goods and merchandise in order to ensure sales increment, productivity loop optimization, and efficiency; meaning the purchase of products at low cost and sell them at low cost. Global sourcing for Walmart aims at developing local talents which will facilitate direct merchandise purchase for all retail operations within Walmart. Other teams are working closely with Walmart enterprise units to source globally affordable merchandises for customers ensuring goods are not resold for purposes of internal use (Bergdahl, 2004). Walmart is giving support to local agriculture reducing dependency on imported products creating jobs spurring economic growth and providing customers with food products at low price. VI. Conclusion Supply chain management has helped this organization to gain a competitive advantage by offering products and services at the lowest price possible. Supply chain management has led to reduced carrying costs of the inventory, improved inventory selection and variety and a consumer price that is highly competitive. Through the use of the supply chain management strategy, this organization has managed to become the dominating force in a global market that is competitive (Zhu & Sarkis, 2004). Businesses should apply the inventory operations of this organization so as to achieve success in whatever that they do. No other organization does the operation of moving to the right place the right products at the right time than the Walmart organization. However, there is only one area that the organization should improve: it should increase its coverage to include even the African Countries so as to expand its customer base and increase its annual returns hence improving its products and services’ quality. Walmart has led to improved placement of the right product to the right place at the required time that is making decisions that lead to lower inventories (Vaart & Pieter, 2003). It has improved the accuracy of putting the right employee to the right job. Through its implementation of advanced technological skills has boosted supportive replenishment References Bergdahl, M. (2004). What I learned from Sam Walton: how to compete and thrive in a Wal-Mart world. Hoboken: John Wiley & Sons Bonacich, E. and Khaleelah H. (2006). Wal-Mart and Logistics Revolution: Wal-Mart: The Face of Twenty-First-Century Capitalism. The New York PressBonacich, Edna, and Jake B. Wilson. 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