Global Supply Chain Management: Case of Wal-Mart - Essay Example

? Global Supply Chain Management (Wal-Mart) Table of Contents Company History………………………………………………………3 2. Products and Services………………………………………………….3 3. Supply Chain Practices………………………………………………...4 4. Supply Chain as a critical factor……………………………………....6 5. Collaborative Supply Chain Strategies and its Benefits……………..7 6. Logistics Fulfillment……………………………………………………8 7. E-supply Chain…………………………………………………………8 Company History Wal-Mart is a US-based company. It was found in the year 1962 and was incorporated in 1969, since then it has been serving the US market. Wal-Mart comes under the category of retail stores. It is the largest grocery retailer in the United States. It is an American multinational corporation which is listed publically on the New York Stock Exchange. Wal-Mart runs a chain of discount stores and warehouse stores. Wal-Mart covers the 18th rank of the world’s largest public corporation according to the Forbes Global 2000. It is also the largest public corporation when ranked according to the revenues. The warehouse stores that it owns and operates are named as Sam’s Club retail warehouses. Because Wal-Mart is a retail store so it is obvious that it is a player of the retailing industry. Wal-Mart has approximately 8500 stores in different countries and serves the world market. Wal-Mart’s operations are listed under three divisions, namely Wal-Mart Stores US, Sam’s Club as mentioned before and Wal-Mart International. Wal-Mart’s business model comprises of nine different retail formats that it follows. These retail formats include supercentres, food and drugs, merchandise stores, small markets, cash and carry stores, warehouse clubs, apparel stores, discount stores and restaurants. Products and Services All the products and services that are provided by Wal-Mart lay under the nine different retail formats that it follows. The Wal-Mart Stores in US sells a variety of non-grocery items like generic drugs. At the discount stores, the products that are sold are of the general merchandise category and also a selection of groceries. These stores also comprise of a pharmacy, a bank branch, a tire shop and a fast-food outlet. The Wal-Mart supercentres are like hypermarkets. It consists of a full-service supermarket where everything from meat and poultry to dairy products, from frozen food to garden produce, from fresh seafood to baked goods is sold along with the features offered at discount stores like the pharmacy etc. The Wal-Mart market is chain of grocery stores which offer a variety of products. The variety of products offered include full line of groceries, pharmaceuticals, health and beauty products, photo studio service and also a limited selected items of the general merchandise. Wal-Mart Express is a junior discount store which provides a smaller range of services like simple grocery shopping, check cashing and gasoline. These smaller discount stores are usually located in small towns. Sam’s Club is the chain of warehouse clubs as mentioned before. This chain sells groceries and general merchandise in large quantities. Some of the warehouse clubs also sell gasoline. Wal-Mart also serves the international market following the same retail business model. So mainly, the products offered by Wal-Mart stores comprise of grocery items and the general merchandise items. Supply Chain Practices The supply chain practices followed at Wal-Mart have been quite efficient. It was due to its efficient supply chain that Wal-Mart was able to reduce its cost. It focused more on the customer needs. In a very short time the company was able to offer a wide range of products at the lowest costs and this was due to the result of automation that it introduced into its distribution centers and the computerized inventory system (ICFAI CENTER FOR MANAGEMENT RESEARCH 2003) The supply chain of Wal-Mart starts with the procurement of stock. From the very beginning Wal-Mart has always emphasized on reducing its purchasing costs. The company does not buy goods from any intermediaries; instead it directly buys from the manufacturers (ICFAI CENTER FOR MANAGEMENT RESEARCH 2003) Wal-Mart is very tough when it comes to negotiating prices. It only finalizes the purchase when it is fully assured of that the goods that it is buying are not offered anywhere else at a lower price (ICFAI CENTER FOR MANAGEMENT RESEARCH 2003) Wal-Mart establishes a long-term relationship with its suppliers and vendors. It tries to understand their cost structure and tries to adjust accordingly. The company prefers regional and local suppliers or vendors (ICFAI CENTER FOR MANAGEMENT RESEARCH 2003) Now moving on to the distribution centers, Wal-Mart has its own distribution centers. These distribution centers are stocked with over 80,000 items. Wal-Mart uses its own warehouse stores to supply these distribution centers and 85% of the inventory is supplied this way. This gives an edge to Wal-Mart over the competitors because they could only manage 50-65% of the inventory on their own (ICFAI CENTER FOR MANAGEMENT RESEARCH 2003) Replenishment is a great concern when it comes to the retail industry. On an average Wal-Mart is able to provide replenishment within two days which means that within two days the distribution centers are again fully stocked. For the purpose of replenishment Wal-Mart also links its system with the supply chain system of the manufacturer, so whenever there is an alert, the manufacturer provides with the supplies on time. The distribution centers of Wal-Mart ensure a smooth flow of goods through the supply chain. Wal-Mart uses an automated distribution system which adds to the efficiency of the supply chain. Barcode technology and hand-held computers are used at the distribution centers to manage the inventory and the center. The use of technology provides the employees working at Wal-Mart with the real time information regarding the inventory levels of all the products that are present in the stock. Wal-Mart uses its own logistics to distribute goods further to the retail stores (HARVARD BUSINESS REVIEW 2006) The technology also helps the employees to identify the exact position of where the products have been places and they could use these directions to guide the customers (ICFAI CENTER FOR MANAGEMENT RESEARCH 2003; HARVARD BUSINESS REVIEW 2006) The customer needs are fulfilled this way in a quicker manner. The supply chain ends with serving the direct consumers in an efficient manner. In the supply chain of Wal-Mart there are no production processes or any intermediate products. Following is the supply chain model of Wal-Mart: Supply Chain as a critical factor Supply chain is a critical factor for the businesses because it forms an integral part of the business strategy and is also a costly activity especially in the retail industry (REYNOLDS, J., CUTHBERTSON, C., & BELL, R. 2004) Supply chain basically costs as a percentage of the sales made. So for firms it is important to maintain high sales and to reduce the cost of supply chain. It is seen as a critical factor for the contemporary businesses because competition is no longer between companies; it is between supply chains (HEIZER, J. H., & RENDER, B. 2001; REYNOLDS, J., CUTHBERTSON, C., & BELL, R. 2004) Supply chain decisions affect the strategy. Supply chain needs to be managed in such a way that it builds a chain of suppliers that focuses on the maximization of the value that is provided to the end consumer (HEIZER, J. H., & RENDER, B. 2001) Supply chain helps the companies in achieving competitive advantage. The reasons for supply chain to be such a critical factor is that it helps the firms to increase their competitiveness through customization, cost reductions and speed to the market. Only a smooth and efficient supply chain model can bring in success for the contemporary businesses. Collaborative Supply Chain Strategies and its Benefits Collaborative supply chain refers to teaming up with different suppliers. This is a strategy that businesses follow when they have limited resources and they do not want to waste it on the supply chain management. Under the collaborative supply chain strategy suppliers become partners and they work together for their mutual benefit. Collaborative supply chain strategies result in cost and economic efficiencies (SUPPLY CHAIN MANAGEMENT REVIEW 2010) The benefits of collaborative supply chain strategies go beyond the cost and economic efficiencies. These strategies help all the supply chain members to meet the customer needs, to grow the markets and to increase their market share (SUPPLY CHAIN MANAGEMENT REVIEW 2010) These benefits can be achieved through different collaborative strategies. One of the greatest benefits of the collaborative strategy is that it greatly reduces the operational costs especially when there is a long-term relation between the buyer and the seller. Another benefit of this strategy is that it helps in increasing sales volume from the downstream buyers (SUPPLY CHAIN MANAGEMENT REVIEW 2010) The collaboration can lead to innovation of new products and processes (SUPPLY CHAIN MANAGEMENT REVIEW 2010) Long-term collaborations are the most innovative way to develop processes that both reduce costs and also add value for the partners. Collaborative strategy also leads to the creation of word of mouth because it is most likely that the members of the supply chain will refer each other to anyone they know (SUPPLY CHAIN MANAGEMENT REVIEW 2010) This can further result in the expansion of the business. Both partners share the same pie of profits and it is more likely that under the collaborative strategy the size of the pie increases and also the share of each partner (SUPPLY CHAIN MANAGEMENT REVIEW 2010) So keeping in mind the benefits of the collaborative supply chain strategies, businesses should look into adopting such measure. Logistics Fulfillment Logistics is referred to the transportation system used by a firm to move its goods. In order for the supply chain to be efficient, the logistics infrastructure of the firm should be strong (FRAZELLE, E. 2002) Procurement activities combine with different shipping, warehousing and inventory activities to form a logistics system (HEIZER, J. H., & RENDER, B. 2001) The function of logistics fulfillment is to obtain efficiency of operations throughout the supply chain. Logistics play an important role when the transportation and inventory costs are high. Logistics help in the reduction of the transportation costs and also the time taken to move the goods from one point to another (HUGOS, M. H. 2003) Logistics is a critical factor that affects the efficiency of the supply chain because a bad infrastructure can lead to time lapse and greater costs. This will in turn affect the business practices. Wal-Mart has a very effective and responsive logistics infrastructure. It uses trucking as the distribution system (ICFAI CENTER FOR MANAGEMENT RESEARCH 2003). There are mainly five types of distribution systems that can be counted under logistics. Trucking, railroads, airfreight, waterways and pipelines are the logistics that can be used to move goods (HEIZER, J. H., & RENDER, B. 2001; FRAZELLE, E. 2002) E-supply Chain E-supply chain is a supply chain that is automated by the use of the digital technology. It has now become a common practice that most businesses are in the process of moving to e-business while some of them already have. The e-supply chain links the customers and the suppliers in a seamless manner. With the use of a e-supply chain the flow of information takes less time and the relevant information is instantly available. When shifting to the use of e-supply chain, everything from the procurement to selling to the final customer involves the use of digital technology (NATIONAL ASSOCIATION OF PURCHASING MANAGEMENT. 1999; HEIZER, J. H., & RENDER, B. 2001) E-supply chain lowers the costs and improves the speed of order-to-delivery and also helps firms to gain competitive edge (HEIZER, J. H., & RENDER, B. 2001; DONOVAN, R.M. 2003) Use of e-business is a new way of hunting down customers, connecting to the suppliers, purchasing and selling etc. But there are few risks associated with the use of e-business (RAMACHANDRA, M. 2010) E-business is still in its infancy stage (DONOVAN, R.M. 2003) The businesses need to develop an effective e-chain strategy in order to enjoy the success. There needs to be a proper directional map for the e-chain to work (DONOVAN, R.M. 2003) If the directions are wrong then the company will have to suffer badly. New opportunities are coming up as it is still in its infancy stage, so companies will find it costly to avail every new opportunity. E-business has also led to an increased competition amongst firms. E-business has also helped in the formation of global supply chains and helps to manage it effectively (STEVENSON, W. J. 2005) Wal-Mart does use an e-business model in order to connect with its suppliers or the manufacturers. It is a form of e-procurement. As mentioned before, Wal-Mart has linked its system with that of the big manufacturers like P&G and the whole process is automated (ICFAI CENTER FOR MANAGEMENT RESEARCH 2003; GREAN. M & SHAW, M.J) They share data across their mutual supply chains. Both have formed a channel partnership which has resulted in more efficient and well-coordinated activities and has also increased the customer focus (GREAN. M & SHAW, M.J; QUINN B. 2009) For Wal-Mart there is still a room for improvement. Just like it connects its systems with P&G, it should connect its systems with all of its suppliers. This will further reduce its costs. It should also use the technology to connect with its customers like it connects with its suppliers. References FRAZELLE, E. (2002). Supply chain strategy the logistics of supply chain management. New York, McGraw-Hill. HUGOS, M. H. (2003). Essentials of supply chain management. Hoboken, N.J., John Wiley & Sons. NATIONAL ASSOCIATION OF PURCHASING MANAGEMENT. (1999). The journal of supply chain management. Tempe, Ariz, National Association of Purchasing Management. HEIZER, J. H., & RENDER, B. (2001). Operations management. Upper Saddle River, N.J., Prentice Hall. STEVENSON, W. J. (2005). Operations management. Boston, McGraw-Hill/Irwin. QUINN B. (2009). Walmarts sustainable supply chain. Pollution Engineering. 41. REYNOLDS, J., CUTHBERTSON, C., & BELL, R. (2004). Retail strategy the view from the bridge. Amsterdam, Elsevier Butterworth-Heinemann. GREAN. M & SHAW, M.J. Supply-Chain Integration through Information Sharing: Channel Partnership between Wal-Mart and Procter & Gamble. DONOVAN, R.M. (2003) The E-supply chain is coming…and Fast < SUPPLY CHAIN MANAGEMENT REVIEW (2010). The Many Benefits of Supply Chain Collaboration. HARVARD BUSINESS REVIEW (2006). Supply Chain Management at Wal-Mart ICFAI CENTER FOR MANAGEMENT RESEARCH (2003). Wal-Mart’s Supply Chain Management Practices < http://mohanchandran.files.wordpress.com/2008/01/wal-mart.pdf> RAMACHANDRA, M. (2010). Web-based supply chain management and digital signal processing methods for effective information administration and transmission. Hershey, Pa, IGI Global (701 E. Chocolate Avenue, Hershey, Pennsylvania, 17033, USA). Read More