Strategy Supply Chain Management of Wal-Mart - Case Study Example

Table of Contents Introduction 2 Background Information 2 Development of Wal-Mart Supply Chain 3 Supply Chain at Wal-Mart 4 RFID in Wal-Mart 6 Method in which Wal-Mart can improve the supply chain process 8 Challenges faced by Wal-Mart in supply chain 10 Ways to overcome the Challenges 11 Agile Supply Chain 12 Conclusion 12 References 14 Introduction The success of any business is largely dependent on the manner in which the business is able to use its resources so that efficiency can be achieved and services delivered at the optimum cost. This requires that the business integrates different factors and look towards considering the different factors which will determine the long term success of the business. Wal-Mart which is in the retail sector has been able to integrate the supply chain network and ensure regular changes so that they are able to keep pace with the rapid changes that the world is witnessing. This has helped Wal-Mart to grow its business operations over 15 countries and being able to ensure proper integration of the supply chain which has looked into backward integration has developed their business. This report thereby proposes to look at the supply chain network of Wal-Mart by highlighting the manner in which their supply chain operates; the manner in which the chain can be better developed; the difficulties that that business faced in the implementation of the system and the manner they overcame those difficulties. In addition to it the report also presents the agile supply chain fundamentals and the manner in which Wal-Mart has been able to incorporate it in their development plan. Thus, the paper looks towards the entire supply chain and helps to develop the required framework through which the supply chain of Wal-Mart has been developed. Background Information Wal-Mart is the largest retail chain player which has over 6,500 stores all over the world and operates in over 50 states all over the world. The company employs over 1.8 million people and has been able to develop its supply chain network in such a manner that the business has gained efficiency and has ensured that they are able to provide quality services to its customers. The development of the supply chain management by Wal-Mart which has looked towards using “Everyday Low Price” which offers products at low rate has ensured that the business has been able to deliver quality service. Wal-Mart through this method has ensured that they provide product and service to the customers in a timely manner so that they are able to provide better services and ensure maximum customer satisfaction. Development of Wal-Mart Supply Chain Wal-Mart looked towards developing the supply chain since it started business in 1962. The owner at that time looked towards purchasing the product in bulk quantity and then dispatching it to the store from where it was sold directly to the customers. The process adopted in the beginning looked towards removing the middle man and gaining efficiency through this system. The company when it started its business thereby focused on the traditional method as shown in the diagram below (Hugos and Thomas, 2005) Wal-Mart to begin with relied on the traditional method where goods passed through different medium and process before being finally offered to the customers. With increasing demand for discount retailing through low cost retail outlet made Wal-Mart work on this concept and develop their stores by coming out with the concept of warehouse storage which ensured that Wal-Mart was able to develop its supply chain network. Supply Chain at Wal-Mart Wal-Mart ensured that they look towards developing their supply chain network in such a manner that the middle man is eliminated and the company is able to provide services to its customer’s at the most competitive price. This made Wal-Mart bypass all intermediaries and looked towards purchasing products directly from the manufacturers so that the lowest possible rates could be offered. The management ensured that the contract entered between them and the vendor was done only when Wal-Mart was completely sure that the rates offered to them were the lowest rate and no other player in the market could offer a similar rate. This helped Wal-Mart to ensure that they were able to develop long term relationship with the vendor and looked towards using different tools to ensure that the purchasing was correct. This made Wal-Mart have over 40 distribution centers and looked towards supplying over 85% of its inventory to the stores in comparison to the competitors who supplied around 50-65% of their inventory. This gave Wal-Mart the required edge and helped them to develop their supply chain process further (NuThink, 2001). Wal-Mart to develop its supply chain has thereby relied on Vendor Management Inventory system which looks at developing its supply chain management based on it. In this process Wal-Mart looks towards replenishing its inventories when the stock fall down below a certain level and the supplier decides the amount of inventory that has to be replenished. This has helped Wal-Mart to ensure that the supply of raw materials is kept at the minimum required limit and ensures that the supply chain process is further developed (Disney and Towill, 2003). This process has also ensured that the process of maintaining inventory is automatic and not manual. This process aims at generating automatic electronic message which helps to keep track of the current stock position, the forecasted sales and based on it generates the future requirement of inventory which has to be replenshed. This has thereby enabled that the supply chain is better developed and Wal-Mart is able to garner maximum benefit through it. The entire process is shown below (Chopra and Meindl, 2004) The process followed by Wal-Mart looks towards managing the inventory through a process where vendor takes the responsibility to maintain the stock and looks towards supplying the goods on the forecasted demand from the consumers. Wal-Mart has used VMI along with JIT to ensure that the products are delivered on proper time which has ensured that the benefits accrue to both the customer and the organization so that better efficiency can be achieved. Using a mix of VMI & JIT has ensured that Wal-Mart is able to find out a method through which maximum efficiency has been achieved and entire development of supply chain is better developed. This has helped to ensure that Wal-Mart is able to develop the supply chain network through which efficiency has been achieved and the entire process has been able to acheive better efficiency. RFID in Wal-Mart Wal-Mart has also ensured that the supply chain management looks towards using RFID which looks towards using technology where it looks towards using tagged methods to generate radio waves so that information can be transmitted. This has helped Wal-Mart to ensure that the process of supply chain uses silicon chips through which the performance of supply chain operates. The use of RFID has helped Wal-Mart to keep track of the inventories and tracing the products ensures that the inventories are kept within limit. This has helped Wal-Mart to reduce error rates which has reduced the operational cost and has ensured that better operational efficiency can be garnered. This is shown in the chart below (Bhattacharya, Chao-Hsien and Mullen, 2007) The above diagram shows that the implementation of RFID in Wal-Mart has improved visibility of the products and keeping track on the entire system has become easy. Using this process has ensured that the process has become automated which has helped Wal-Mart to manage the inventory in the most efficient manner and has reduced the number of stock running out of inventory (Garfinkel and Rosenberg, 2005). This has helped Wal-Mart to ensure that customers are provided with the correct product and services through which maximum efficiency has been achieved. This has helped Wal-Mart to ensure that the entire supply chain management process is developed and has thereby ensured that the entire system provides maximum efficiency. This has helped Wal-Mart in ensuring better services and has thereby transformed the manner in which the supply chain process works. Method in which Wal-Mart can improve the supply chain process Wal-Mart to ensure better efficiency has to look towards upgrading their supply chain network and has to look towards ensuring that they develop their supply chain by making changes in the manner in which they work. Working on the changes and developing the supply chain will help to increase efficiency and will ensure that the entire process that the inventories are better managed and the cost of having additional inventory is put under control. This will thereby help to develop the entire process and the change in the supply chain management can be accomplished One method which will help Wal-Mart to develop their supply chain process is Collaborative Planning, Forecasting & Replenishment. Under this method all the intermediaries acting in the process of supply chain management will look towards developing relationship among them in such a manner that all information is properly shared and managed through a central process system as shown below (Michael and McCathie, 2005) The entire process is developed where the strategy and planning process aims at collaborating relationship and determining the mix through which Wal-Mart will be better able to develop plans. The demand & supply management cycle will look towards determining the manner in which demand will be created, the shipment date and the manner in which stock will be replenished. The execution process will look towards ensuring that the products are received on time and proper replacement made so that the inventory level doesn’t fall below the danger level. The analysis phase looks towards overlooking the entire process and developing ways through which key performance indicators can be developed and so that proper logical steps can be developed. Wal-Mart thereby has to look towards developing ways through which better CPFR along with collaboration of the supply chain will help to ensure better results. Working on the CPFR and integrating it with the supply chain network which Wal-Mart presently has will help to improve the manner in which services has been rendered. This will help to develop the entire process of supply chain and will ensure that Wal-Mart is able to fetch better results and will thereby have to transform the entire process and ensure that better supply chain management process can be developed. This will help Wal-Mart to ensure that the business is able to deliver better services and ensure that they are able to deliver quality performance on the standards. Challenges faced by Wal-Mart in supply chain Wal-Mart while looking to implement the supply chain strategy had to face difficulty while implementing the process as it created increased difficulty for the management. The major obstacle for Wal-Mart for achieving the high level performances through the development of the supply chain is mainly the problem faced in implementing the process. Since supply chain management requires that Wal-Mart is able to develop a strategy through which operational efficiency can be gained and better measures to manage the inventory can be developed is a problem for the business (Enarsson, 2006). The major challenge for Wal-Mart while looking to upgrade the supply chain network is that the employees and the other intermediaries find it difficult to implement the new method. This is primarily due to the fact that they look towards following the old method and making changes and adopting the new method becomes a problem for the business unit. This has made it difficult for Wal-Mart to implement the new changes as being able to develop ways through which the changes can be made. Another challenge for Wal-Mart while looking to implement the changes is that the new process will require major ramifications and will require that all the intermediaries and people in the supply chain network come together and look towards developing the chain. This will require that all the different personnel are able to share responsibilities and facts with each other. This will thereby help to ensure that the process of supply chain is developed which will help Wal-Mart to ensure better service standards and will help to satisfy the customers better. Ways to overcome the Challenges Wal-Mart has to look towards ensuring that all the intermediaries come together and look towards working in tandem so that the problems which the company is facing while implementing the new system can be resolved. This can be achieved if Wal-Mart looks towards developing a platform where the different intermediaries share their information and looks at compiling the information so that better governance can be developed. This will help Wal-Mart to ensure that they are able to order for inventories when the stock level reduces and will thereby ensure that the investment made is inventories is controlled (Kampstra, Ashayeri and Gattorna, 2006). Wal-Mart also needs to ensure that the staff and others associated with the supply chain management understands the manner in which developing the supply chain will help to improve the manner in which orders are placed. This will help to ensure that inventories are under control and will thereby help to develop the entire process where better efficiency can be achieved. Wal-Mart on this front will require that they look towards working on the different areas through which they will be able to develop the entire process and ensure that they are able to gain operational efficiency. This will help Wal-Mart to control the supply chain and develop the entire process through which better results can be achieved and all the different functionalities can work together (Simchi-Levi, Kaminsky and Simchi-Levi, 2009). Agile Supply Chain Wal-Mart has looked towards developing their strategy where they have looked towards ensuring agility as there is flexibility in the system. Wal-Mart has looked towards ensuring flexibility which has helped the company to streamline its business. This has ensured that Wal-Mart is able to develop its working environment in such a manner that supply chain helps it to deliver superior services. The degree of flexibility that Wal-Mart has been able to maintain in its supply chain has ensured that they are able to develop long term relations with the suppliers and ensure ready supply of materials so that they are able to ensure uninterrupted supply of materials. The supply chain process of Wal-Mart has thereby achieved the status of agile supply chain and is one of the most popular chains due to reduced errors and better delivery of services and products to the customers on a timely manner. This has helped to improve the market reputation and will play a long role in the future as it will enable them to deliver better services in the future. Conclusion The report thereby presents the manner in which Wal-Mart has developed its supply chain and the different areas where it has worked to improve its business. This has helped Wal-Mart to ensure that better customer satisfaction can be achieved and has transformed the manner in which the system works. The overall changes which Wal-Mart has implemented in their supply chain network has faced certain obstacles and working on those and looking towards implementing the Collaborative Planning, Forecasting & Replenishment will further help to improve the supply chain. Wal-Mart along with it has to look towards developing a mechanism through which the problems which they are facing in implementing the system can be removed and efficiency in the supply chain can be established. This will thereby help to ensure that Wal-Mart is able to improve its supply chain and ensure better satisfaction and proper stock management techniques. References Bhattacharya, M., Chao-Hsien, C. and Mullen, T. 2007. RFID Implementation in Retail Industry: Current Status, Issues, and Challenges. Accepted to Decision Science Institute (DSI) Conference, Phoenix AZ, for November 2007 conference. Chopra, S. and Meindl, P. 2004. Supply Chain Management. Upper Saddle River, NJ: Prentice Hall. Disney, S. and Towill, D. 2003. Bullwhip Reduction in Supply Chains: The Impact of VMI International Journal of Operations and Production Management. 23 (6), 625-651. Enarsson, L. 2006. Future Logistics Challenges. Frederiksberg, Denmark: Copenhagen Business School Press. Garfinkel, S. and Rosenberg, B. 2005. RFID Applications, Security and Privacy. Addison-Wesley Professional Hugos, M. and Thomas, C. 2005. Supply Chain Management in the Retail Industry. Wiley. Kampstra , R., Ashayeri, J. and Gattorna, J. 2006. Realities of Supply Chain Collaboration. University of Wollongong, Australia: Centre for Supply Chain Research; and United Kingdom: Cranfield School of Management Michael, K. and McCathie, L. 2005. The Pros and Cons of RFID in Supply Chain Management. Proceedings of the 2005 International Conference on Mobile Business. Sydney, Australia. 623-629 NuThink, Inc. 2001. Improve Profits, Competitiveness & Satisfaction with a high performance Retail Supply Chain. Simchi-Levi, D., Kaminsky, P. and Simchi-Levi, E. 2009. Designing and Managing the Supply Chain, McGraw-Hill Read More