Wal-Mart's Operations Management - Waste Management, Logistics, and Supply Chain - Case Study Example

Operations Management Introduction: To date there has been a certain amount of confusion on the things that do and do not constitute and operations strategy.  There have been those that have tried to identify the generic building blocks of this strategy-but even they assume that these could also be part of a tactical, operational management approach.   One of the more oft repeated and accepted definitions come from Slack and Lewis. They suggest that there are four basic operations strategy perspectives (Lewis and Slack, 2003): 1. A top-down reflection of what the whole business wants to do 2. a bottom-up activity whereby operations strategy improvements build business strategy 3. A translation of market requirements into operational decisions and 4. Exploitation of the capabilities of operational resources into chosen markets. One would have to agree to a certain degree each operations strategy is unique and individual to the firm. Furthermore, research seems to suggest that many of these operations strategies utilize similar building blocks. One would have to even then have to understand the fact that operation strategy for any given firm in order to be effective would have to employs unique strategies.   In the core traditional sense of the term, operations management has been concerned with the management of costs, but this focus has recently changed to the management of value. The concept builds on the premise that organizations needed ideally to compete either on low cost or by providing differentiated products in order to be profitable and yo avoid being stuck in the middle (Lamming and Brown, 2000). The term itself in wide in terms of the scope of its responsibilities and draws upon a range of functions within the organization and cannot be limited to a specific department. An innate and clear understanding of the nuances of strategic operations management is essential to the organization if it has to compete in the market.   Major decisions about and strategic management of core competencies, capabilities and processes, technologies, resources and key tactical activities necessary in the function or chain of functions that create and deliver product and service combinations and the value demanded by the consumer could be identified as the functional strategy aspect of the operations strategy variable  The wider value delivery aspect of the strategy on the other hand would automatically be inclusive of the major decisions that have to be made about and strategic management of the core competencies, capabilities and processes, technologies, resources and key tactical activities necessary bin any supply chain network, in order to create and deliver product and service combinations and the value demanded by a customer. The strategic role also involves the blending of these various building blocks into one or more unique, organizational specific, strategic architectures.   Operations Management: Logistics and supply chain To begin with the very fact that operations needs to be seen as a strategic factor is a problem for some firms whose overall strategy may be governed by a few people at the top of the hierarchy who might have very little to no knowledge about the factors of productions and operations management. As a result, the rationale behind, and the measurement of success of business decisions may be driven almost entirely by short-term financial criteria. Such an approach, may often rob the firm of vital investment to support and sustain key operational areas such a technology, plant modernizations and ongoing training. Keeping this fundamental design of the strategic management operations in mind, the following analysis will bring out the various facets that are involved in strategic operations management-their related issues and the things that a business would have to keep in mind.  Logistics and distribution occupy a position of supreme importance in all businesses across the world most of all in retail. A successful and well managed logistics and distribution operations are the basic keys behind a business that hopes to thrive and do well. Logistics and distribution management experts manage the transportation and distribution of goods, materials, labor and other commodities right from the source to the market. Computer software, communications networks and other technologies are used to bring the distribution process to order.   If one was to understand the concept of logistics and distribution in the management of the company, one has to basically follow a process that starts at the source, or at the place where the company gets its raw material, to the manufacturing unit, to the warehouse, the distributing units and finally to the retail space. Logistics and in turn distribution are the departments that are supposed to be take care of the efficient movement and storage of the product from the source i.e. Its initiation till the time its gets to the  access point for customers.   Logistics are in essence the activity of transport, which is basically a second order activity i.e. It is generated by other economic activities. As such the demand for logistics and distribution depends heavily on the overall growth of the economy. Modern commerce requires a better arrangement and management of the logistics and distribution system of the organization because of the fact that most businesses are now working on production units that are more centralized. Manufacturing units are set up, the world over keeping in mind costs of production that seem to be escalating now more than ever. Supply Chain Despite the popularity of the term, supply chain management there remains considerable confusion with respect to its meaning. There are those that defines the term in the context of its operational meaning like the flow of materials and products (Tyndall, Gopal, Partsch and Kamauff, 1998); yet others view it as management philosophy while the rest view its in terms of its being a management process (La Londe, 1999). One of the best ways of discussing the concept of supply chain management is to break the outlook into three basic elements: those of supply, supply chain, and supply chain management. Supply could be understood to be the measure of goods obtainable for utilization in terms of actual, or planned, replacement of a product. A Supply Chain on the other hand is defined as a set of three or more companies (of a company, an immediate supplier and an immediate customer) directly linked by one or more of the upstream and downstream flows of products, services, finances and information from a source to a customer (Mentzer, 2001). Supply Chain Management (SCM) is the systematic, strategic coordination of the traditional business functions within a particular company and across business within the supply chain, for the purposes of improving the long term performance of the individual companies and the supply chain as a whole. Green Supply Chain Management: One of the primary innovations on the existing norms of the supply chain management process has been that of the Green Supply Chain Management (GSCM)-it has emerged mostly as a key approach that aids enterprises seeking to make their businesses environmentally friendly (Emmet and Sood, 2010). The idea essentially implies the insertion of the environmental criteria within the decision-making context of the traditional process of supply chain management. GSCM has become a key strategic issue for organizational of all sizes and types rather than just a talking point for lobbyists and hobbyist do-gooders, given the fact that the notion of CSR is now one of the few ideas that now find complete and total integration within the concept of the GSCM. It also needs to be understood that green supply chain management is important in the case of most enterprises that are looking to work towards the achievement of being environmentally sustainable (Gunther, 2005). Green Supply chain refer to the buyer companies requiring a certain level of environmental responsibility in core business practice of their suppliers and vendors. GSCM concepts are useful in the management of environmental impacts where their occur, ideally before they occur (Basu and Wright, 2008). These are also inclusive of the government, regulatory bodies, non-profit and also the consumers. The principles of GSCM are similar to lifecycle of product. Waste Management Plan: Application of RFID According to recent researches it has been suggested by logistics literature that RFID technology increases the agility of supply chain systems and gives companies a competitive advantage. RFID tags are analogues to barcodes that wirelessly transmit their serial number to in-store scanning machines (Kinsella, 2003). The automatic self identification process is a great improvement over traditional bar codes, which would typically require employees or physically scan each item (Vance, 2005). RFID chips add a nominal cost to each item but enable supply chain information systems to easily scan items throughout the supply chain, potentially enabling managers to visualize exactly how much inventory exists in the supply chain, and therefore know much more inventory is to be purchased or produced. The discussion on the RFID debate put forward the claim that the technology can potentially enable supply chain managers to overcome problems caused by imperfect or insufficient information inherent in current inventory management systems. Compostable packaging: One of the new methods of packaging that seems to be environment friendly over the use of plastic is the use of compostable Packaging-it already has its applications in the UK supermarket industry with chains such as Sainsbury already having certified its usage in the packaging of almost 500 of its private product ranges. The best part of the material used is that it is as user friendly as plastic is but is bio-degradable. In the context of Woolworths it would compliment the existing strategy of phasing out the use of the plastic. Hybrid trucks The use of hybrid trucks has to continue and increase in terms of scale and volumes of usage. One of the best methods of going about this plan is to take use of a professional agency such as RMI, so that the company is able to find aid with the procurement and the usage of trucks that are bio-friendly. The international supermarket supply chain management experience has already witnessed efficiency revolutions in terms of the hybrid diesel-electric trucks and refrigerated trucks that have been used by Wal-Mart’s (Jorgensen, 2005). These feature small power unit for cooling so the engine could be turned off when the truck is stopped. The use these trucks has seen an increase fuel efficiency of roughly 25 per cent. The Wal-Mart’s story Wal-Mart’s tremendous success in the 1990s and into the 2000s was influenced by four factors, the biggest one of them being the excellent system of supply chain management adopted by the retailing giant. Unlike most retailers in the 1980s and early 1990s, Wal-Mart’s was willing to invest in information technology to support its supply chain collaboration vision. Wal-Mart’s earlier efforts at communicating point of sale data and replenishment schedules to trading partners involved using electronic data interchange (EDI) as the information conduit. As technology advanced, Wal-Mart’s developed a private exchange, called Retail Link, to provide trading partners with ready access to Wal-Mart’s information. In developing technology to support supply chain collaboration, Wal-Mart’s overturned long-standing practice in the retail industry. Wal-Mart’s provided its retail information for free, which was counter to the norm in the retail industry in the 1980s. in fact it was considered revolutionary by the industry insiders and blasphemous by outsiders. At several industry conferences in the mid-1990s, CEOs and other executives of retail companies vowed never to share point of sale data with suppliers. Wal-Mart’s was never bashful about redefining business rules. The company’s actions are in concert with what Gary Hamel and CK Prahlad observe in their book, ‘Competing for the Future’, that it takes to be an industry leader: “To create a future, a company must change in some fundamental way the rues of engagement in a long-standing industry” By providing data to its trading partners free of charge, Wal-Mart’s challenged more than just and industry accepted business practice. More significantly, Wal-Mart’s challenged more tha just an industry accepted business practice. More significantly, Wal-Mart’s challenged the prevailing mind set about the relationship between retailers and their suppliers that fostered mistrust and adversarial behavior toward one another. Prior to Wal-Mart’s redefining these very rules, retailers and third parties like K-Mart sold point of sale information to their suppliers. Selling point of sale data was considered simply a business transaction and revenue stream. Suppliers primarily used this information as market intelligence that aided decisions about marketing programs and promotions. Point of sale information prior to the late 1980 was rarely communicated to the supply side of the organizations for informed decisions about demand and supply planning. Where Wal-Mart’s scored over its competitors was with respect to the fact that it was able to perceive correctly that if its trading partners had better visibility of point of sale consumption and future consumer demands, both the company and its trading partners could reduce inventory and other wastage activities. The model pushed by Wal-Mart’s was the supply chain collaboration model which is a manifestation of its intrinsic, consumer pleasing policies. The Challenge: The biggest challenge that Wal-Mart’s faces would with respect to the increasing integration of technology within the system of its supply chain management. Companies such as IKEA have made information technology which provided accurate data and other tools to support its planning process. One has to understand in this context that a supply chain cannot be viewed simply as a series of one-to-one, business-to- business links along the chain. There are those that have not been able to embrace e-management practices as part of an integrated supply management approach. The idea in this context therefore should be to ensure that the supply chain is able to keep up with the evolving changes happening in the world of technological advancements. The perfect example in this case is the use RFID technology that many are attempting to integrate within the contemporary SCM processes. As new software applications are developed SCM needs to able to accept them and be able to reap the benefits that these are able to create for the business. The reason of this would be a success story could therefore be traced back to the fact that computers and technology are able to improve the efficiency of business operations. Changes: Recommendations There is an increasing need also to achieve the implementation of process ideas like operational efficiency in terms of quick change overs, productivity savings, speed of new product introduction and innovation in manner of research and design, standardized packaging machines and thought out process of development in new products. Some strategies that could be placed under consideration would for example consist of Trading offices the world that provided support to the suppliers in their region in formulating competitive bids for a product’s “landing price” which included material, manufacturing and logistics costs    Innovation and Low costs: Supply chain management must be able to quantify a bottom line impact. A concern, however, is that some supply chains will quickly realize the "low hanging fruit,” and then neglect long term investments required to acquire the more difficult, but potentially larger gains. this concern is negated by a philosophy that seeks to orient product design and development within a cost bound method. This is evidenced by the fact that new product design happens only keeping cost considerations in mind, reducing costs of products while ensuring quality maintenance. The company also considered the production capacity and capabilities of the supplier before outsourcing so as to ensure no supply shortages in future. The governing principles that one understands from an interpretation of the given facts points to decentralization in principle. The idea here is that by moving the decision to the level of the customer instead of having department of paper pushers haggling with clients, a big part of bureaucracy can be eliminated. Good relationship management with suppliers. The main advantage of a semi-automatic approach is that sensors would be capable of assessing huge amounts of data and information quickly to respond to changes in the cjain environment (supply and demand) without hindering human autonomy. Particularly e-sensors provide the real time information needed so as to prevent the bull-whip effect (Kock, 2009). Wal-Marts has led the development of a global supply chain, having discovered the advantages of the ability to track real-time changes. By doing so, it has been able to maintain low-inventories, implement lean production and manufacturing operations, and even defer building and assembly resulting in lower costs and increase responsiveness to variable consumer demands.  This practice also in fact could be extended to incorporate e-sensors and human collaborators throughout the value-chain and perceive and react to demands.             The effects of a company seeking globalisation are far reaching. Managing the ``supply chain’’ becomes a key focus as international operations must be able to source equivalent supplies anywhere in the world. Motwani et al. (1998) believe that global supply chain management ``allows corporations to take advantage of diversity in the international environment by recognising and exploiting regional differences’’. Business information, including order details, inventory levels, directives and product changes, must be communicated to the people who need it, when they need it, wherever they are. Similar arguments are advanced in applying systematic measurement to BPM. Fully or semi-automated warehouses/distribution centres may incorporate automated unloading and put-away, automated retrieval, hanging garment systems, auto-sortation systems and automated load-building The fact that globalization is an everyday increasing trend along with the fact that this trend is representative of factors of market volatility poses major challenges the process of SCM, particularly those of distribution centres within them (Baker, 2006). There is research on the manner in which distribution centres are being designed to be agile and the need for this agility, despite the fact that distribution centres are by nature long-term fixed assets. It has to be understood backed by research that there are comparatively higher costs that are attached to the building and management process where warehouses are concerned. Distribution centres are a crucial part of the order-delivery process. The more automatic the centre’s functions become, the more challenges they set for reliable power. Here the importance of the use of the Sig-Sigma approach comes into prominence. Six Sigma provides quality measurement that can be used throughout an organization-not just in manufacturing, but also in design, administrative and service areas. The approach is built on well founded total quality principles, applied within a disciplined company wide network. The idea is essentially to measure how far a given process deviates from perfection.. the central idea behind the concept is that if one is able to measure how many defects there are in the process, one would be able to systematically figure out how to eliminate these and get as close to zero defect as is possible. It is thus a comprehensive and flexible system for achieving, sustaining and maximizing business success, driven by a uniquely formed understanding of consumer needs, disciplined use of facts, data and statistical analysis and diligent attention to managing, improving and reinventing business processes.   The six sigma process as outlined by the literature identifies six essential themes (Boyer and Verma, 2009); (Antony et. Al., 2007); (Antony, Kumar and Madu, 2007a):  1. there is a genuine focus on understanding the needs and preferences of the consumer given the fact that the customer’s definition and assessment of quality are central to the Six Sigma approach 2. Management by fact is a necessary requirement for the approach; this essentially emphasizes the requirement that companies need use only relevant and objective data collected from the process to make decisions and refrain from basing decisions on preconceived subjective judgments 3. The unit of analysis within the approach is a process consisting of a sequence of activities that is ultimately necessary for the satisfaction of consumer needs. 4. The method emphasizes the need for a more proactive style of organizational management given the fact that the approach advocates preemptive quality control action rather than waiting for a defect to occur so that it could be rectified 5. Active cooperation and collaboration between employees working within different functional areas in a firm is a must if the approach implementation is to be successful. Teamwork at different levels and across the organization therefore requires that barriers based on hierarchy and/or functional areas are broken down. 6. Finally, the approach could be defined as one that strives for perfection. The term itself refers to a statistical terms meaning 2-4 defects in a million opportunities.   The themes identified in the literature on Six Sigma seem to suggest a process that is perceived as a strategic approach to setting aside defects and ensuring that the organization in the macro economic environment is able to apply itself to the elimination of defects. Interestingly, howvere while the literature does seem to suggest certain openness to making the process applicable to every area of functional, in practice much of the process advantages are restricted to the process of manufacturing and production along with the management of the supply chain, thereby disregarding the management and strategic operations aspect of the larger approach. Moreover, little to no attempts have been made to come up with suggestions on how the process is to be integrated in terms of the larger organizational outlook in terms of human resource management or even programming changes.   One of the most remarkable shifts in corporate strategy and operational activity in recent times has been the externalization of production to the extent that corporates are now thoroughly dependent on external resources. The reason for the trend, at least at the superficial level is the core-periphery model that has seen an impact. Centralized operations like design, services and facilities management and logistics, among many others have now been taken over by suppliers. This is in fact on of the direct outcomes of the processes of integration in the world economy. What one needs to notice here is the fact supply chains that extend beyond the boundaries of a country or more recently of a continent will automatically push up the logistics cost of the corporation in question thereby making it clear that the importance of an effective management of this department is absolute must in the success of any given corporate that seeks to grow big. Big names like Mattel for example set up units that were purely international.   With regards to logistics and distribution it has to be remembered that these are only one of the aspects of the supply chain that starts at the source and ends at the consumer. Despite this logistics contributes to about 10%of any given retailers cost and hence reduction in the costing in logistics can significantly help to bring down the cost of the product or inversely bring up the profit.   The logistics practices of any given corporate can be and in fat should be undersold only in consonance with that of the growth of the business itself. Warehousing and building of distribution centres will happen only when there is in fact a growth of business in the vicinity thereby prompting the need for storage space. Marks and Spencer in its initial phases for example, supported a distribution strategy in Europe from southern Britain itself. It was in fact only with the growth of the demand operations in Spain and France that warehouses were built in order to support operation there.   Conclusion: In conclusion, therefore one could reiterate the fact that with the increasing globalization of not just the company but of the supply chain there is an increasing requirement for the adoption of technology in the overall management of the supply chain system for the better management of the very system of operations management, especially in a global retail chain like Wal-Mart’s where the very survival of the company is hinged on the effective management of back-end operations. Reference: Aptel, O., and Pourjalali, H., (2001). Improving activities and decreasing costs of logistics in hospitals: a comparison of U.S. and French hospitals. The International Journal of Accounting. 36(1). Pp65-90 Herzlinger, R. 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