Supply chain management is a powerful source of competitive advantage for modern businesses. The process entails all the activities involved in bringing goods to the market in a bid to satisfy the needs of customers. Likewise, it may incorporate several arms of a business entity. These include production, procuring, transportation, and other physical supply methods. The success of a good supply chain management is determined by the ease with which business processes are undertaken within a firm. Through the procedure, useful links are made between the firm and its various stakeholders. The stakeholders may include such external partners as marketers, affiliated companies, retailers, carriers, and information management, teams. In a particular firm, the supply chain may include diverse functional areas. The functional areas may include activities related to supply chain like “inbound and outbound transportation, warehousing, and inventory control, sourcing, procurement, and supply management” (Zigiaris, 2000). Also , supply chain includes other activities like “forecasting, production planning and scheduling, order processing, and customer service” (Zigiaris, 2000). These contribute immensely to the success of the business.
Information systems must be put in place to ensure efficiency of supply chain management by making sure that all activities are monitored and reported in time to avoid recurrence of mistakes. Zigiaris (2000) asserts that “supply chain encompasses all of the activities associated with moving goods from the raw-materials stage through to the end user.” Many enthusiasts supporting the development of the supply chain agree that an increase in the productivity and profits of a business can be realized through effective management of relationships, information, as well as the flow of materials from one party to the next. In this case, supply chain management can be defined as “the delivery of enhanced customer and economic value through synchronized management of the flow of physical goods and associated information from sourcing to consumption” (Zigiaris, 2000). The concept of ‘from source to consumption’ in the definition of supply chain affirms the need to streamline relationships between stakeholders within and outside the organization.
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Wal-Mart is recognized as one of the largest businesses in the world, with revenue reaching an excess of $250 billion per annum. The firm has employed more than two million people across the globe. Over the years, Wal-Mart has recorded high and exponential growth in its business. The growth has been attributed to the unique creativity and revolutionized business processes that emphasize on cutting costs and streamlining the complicated business process, specifically with regard to the supply chain management. The firm’s novel model of business operation focused on reducing significant costs, completely revolutionizing the existing patterns in the wholesale and retail trade as well as the logistics involved in the distribution and transportation of commodities. Wal-Mart offers products at relatively low prices, hence giving it a competitive edge over its competitors in the industry.
The first Wal-Mart discounted store was opened in Rogers, Ark in 1962. Sam Walton, the founder of the firm, and his close associates were passionate about giving people of lower class the privilege of enjoying things that only the rich people enjoyed but at very low prices. Thus, Wal-Mart focusses on providing a broad range of products of high quality to customers at relatively lower prices compared to the prevailing market trends. Through its business model, the company has scooped massive profits, and this is the primary driver of its drastic growth over the years. Currently, the company has more than eight thousand stores all over the world, with four thousands of these being located within the United States (U.S). The stores are serving an excess of two hundred million customers within a week. Wal-Mart employs the strategy of selling for less, hence selling more, eventually making more in the long-run. Wal-Mart is known for bringing commodities to its clients at lower prices. This has fueled an increase in the number of customers recorded. Apart from the lower prices, the firm also offers a broad range of products to its clientele, hence making it more attractive compared to its competitors. The availability of a variety of goods in a single store is a primary attraction to Wal-Mart’s customers. Secondly, Wal-Mart uses a c entralized supply chain management. This increases the likelihood of other local wholesalers and distributors to witness a reduction in the demand for their products and services. Subsequently, this gives Wal-Mart an advantage.
The establishment or development of a Wal-Mart store in an area stimulates both local and international trade. The fiscal outcomes of Wal-Mart’s presence in a given location lead to the growth and expansion of retail activities within the same area. In general, the benefits drawn from Wal-Mart’s presence are varied. They include the availability of low-cost goods for consumers, increased employment opportunities, an increase in sales and property tax revenues, and lastly enhanced trade and retail activities. Wal-Mart’s business practice is guided by respect for individuals, the pursuit of excellence and the need to offer outstanding customer service. All of these aspects are core tenets of the supply chain management. Moreover, its operations are guided by various corporate beliefs. These include excellent interpersonal relationships (respect for individuals ), exceptional customer service, meeting the needs and motivation of employees, client satisfaction, and finally competitiveness within the market.
This paper will discuss Wal-Mart’s business operations, with a particular emphasis on the effectiveness of its supply chain management over the years. Towards this end, the paper will analyze Wal-Mart’s supply chain and whether the observed capabilities give the firm a competitive advantage in the industry. Further, the paper will discuss Wal-Mart’s performance relative to its competitors, while considering design element and the exhibits at the end of the case. Finally, the paper will explore the opportunities that Wal-Mart has on the global supply chain in the future.
Half Century of Supply Chain Management at Wal-Mart
Wal-Mart is the leading retail business in the world. In 2012, the firm experienced several challenges that caused competitors like Amazon.com and Dollar Stores seal the gap that existed between them. The competitors had replicated several distribution aspects employed by Wal-Mart which included “cross-docking of product to eliminate storage time in warehouses, positioning stores around distribution centers and widespread adoption of electronic data interchange (EDI) in the management of orders and shipments from distributors” (Mark, 2012) . James Neuhausen, a stock analyst who was preparing a recommendation to his company on what they should do with the Wal-Mart shares they owned during the drastic times of the business, argued that “Wal-Mart is believed to have one of the most efficient supply chains in the retail world” (Mark, 2012). In 2011, the U.S retail sales reached a peak of $3.9 trillion. The primary categories of goods in the retail sales recorded included consumables and general merchandise. Most businesses competed at local, county, and state levels. However, major players like Wal-Mart were competing even in foreign markets. Online retail stores were also rising in prominence accounting for more than $190 billion of the sales (Mark, 2012) .
Located in Bentonville, Arkansas, Wal-Mart was ranked as the best retail store in 2011. In the same year, it recorded sales of more than four hundred billion US dollars, with a profit of sixteen billion dollars. At the same time, the firm had more than two million employees in more than eight thousand stores located in fifteen nations. This achievement was driven by Wal-Mart’s serial acquisition of businesses and assets over a period of twenty years. Starting with the pioneering ‘big box’ business model at the beginning of the 1960s , Wal-Mart had expanded to include “supercenters, which were a large version of a discount store that included groceries, supermarkets, wholesale outlets, restaurants, and apparel stores” (Mark, 2012) . The aim of the business model was to offer customers a wide range of products at very competitive rates, and with ease of access. This was the principal cause of its drastic growth over the years. For instance, the discount stores supplied goods that included “ apparel, small appliances, housewares, electronics and hardware” (Mark, 2012) . This was despite the stiff competition from such firms as Sears and Target, and other specialty stores like Gap and Limited (Mark, 2012) .
Wal-Mart’s Supply Chain Management
Initially, Sam Walton owned several chains of stores under Ben Franklin Stores, which was then a franchise of numerous stores in America. During these times, Walton would purchase goods directly from suppliers instead of the Ben Franklin Stores. When he noted changes in the business environment, especially the discount stores that were coming up across the country, he decided to open his massive ‘warehouse-style stores’ so as to earn a competitive advantage. Originally known as the Wal-Mart Discount City, he increased his efforts in procuring merchandise for his stores. Since suppliers were unwilling to send their supply vehicles to the rural locations, he opted for self-distribution. Thus, “Wal-Mart's supply chain, a key enabler of its growth from its beginnings in rural Arkansas, was long considered by many to be a primary source of competitive advantage for the company” (Mark, 2012) .Historically, Wal-Mart also pioneered the use of data to make decisions concerning certain business processes. As a result, the firm was among the first to revolutionize and computerize the retail business. The most notable initiatives by Wal-Mart included the use of bar coding, information sharing with suppliers, fleet control, and computerization of retail sale systems. Due to its innovativeness, the company received the award of “Retailer of the Decade” in 1989. At the time it had a distribution cost of about 1.7 percent of its total sales (Mark, 2012) .
Though most of its competitors embraced the management methods, Wal-Mart continued to lead in efficiency, with profits increasing over the years. Walton liaised directly with manufacturers, reducing the cost of paying his intermediaries . Many of Wal-Mart’s suppliers had offices in Bentonville. Thus, the business analysts and managers supporting Wal-Mart worked close with these stakeholders to ensure that there was streamlined information sharing among them. Products were also sourced from international markets, with the emergence of China during the middle of the 1980s. Working directly with manufacturers, Wal-Mart was able to source goods with its brand. The products with private labels were sold at significantly low prices compared to the others. This significantly contributed to increased profits from such products compared to those sold by other brands. Also, the supply system aimed to procure products from various manufacturers in bulk and sell them at lower prices (Mark, 2012) .
The suppliers serving Wal-Mart numbered up to forty thousand, with major global suppliers like Unilever, Nestle, P & G, and Kraft being among them. Owing to the importance of sales data, management of categories and outside research, several employees from the suppliers would work with the Wal-Mart team. Wal-Mart’s competitive edge was also enhanced by the strategy of distribution, aiming to saturate zones with several distribution areas of ‘approximately 130 miles’ from the centers. The profile was also designed to fit the requirement, with similar goods placed together. Foreign merchandise was processed at port centers before being distributed directly to stores within the U.S. Unsold merchandise would be hauled back after the trucks offloaded the supplies, hence reducing the cost of distribution. This method gave the company a competitive advantage in the industry, maximizing profits through cost reduction in the supply chain procedures.
Mark (2012) asserts that “In the mid-1980s, Wal-Mart invested in a central database, store-level point-of-sale systems, and a satellite network.” These initiatives and computerization of the retail systems at the point of sale revolutionized the industry. Considering the state of its competitors, Wal-Mart had the advantage of expanding even further. For instance, the Remix Strategy established in 2005 ensured goods that were highly on demand would be distributed from dedicated centers. These “ high-velocity distribution centers differed from high merchandise distribution centers in the following ways: as primarily food distribution centers, they were smaller and had temperature controls and less automation. In contrast, general merchandise distribution centers required automation and conveyor belts to move fully ” (Mark, 2012) . General stores needed mechanization to move entire pallets of products. This step also impacted on the expenditure, in addition to ensuring better time management (Mark, 2012) .
Currently, the evolution of the business world is unprecedented. As the competition stiffens, Wal-Mart has to invest in improving its chances of survival. As a result, there are numerous opportunities to explore and venture into in a bid to remain relevant in the market. Different types of stores define the firm's operations . In the quest to win the global market, there should be a constant re-evaluation of the existing systems to ensure that its competitors do not get ahead of it. Global sourcing is one of the innovative ventures that Wal-Mart has employed. In this case, the firm has reorganized its systems into Global Merchandizing Centers. Instead of dealing with factories to develop its private label products, the company partnered with Li & Fung. Li & Fung will assist with the outsourcing of several products in various niches of interest to the enterprise (Mark, 2012) .
The focus of the business also lies in the supply chain. Therefore, extensive research and development using data from sales and customer feedback should be utilized to understand the market. The firm must focus on developing customer-focused procedures s o as to remain competent and maintain its global status as a renowned retail store. The Project One Touch is one such ambitious initiative that focuses “on the supply chain all the way down to the customer” (Mark, 2012) . The aim of the project is to enhance the efficiency of distribution centers so as to earn a substantial multiplier in savings. This is instrumental when combined with the Multiple-Channel Strategy, which leverages the “physical store and distribution center infrastructure and growing presence (of Wal-Mart) online” (Mark, 2012) .
Wal-Mart, as a global retail giant has a promising future. However, to realize its vision and remain relevant in the market, there must be continuous assessment and re-evaluation of its business operation. The supply chain must be managed in a manner that meets the needs of every stakeholder. Likewise, emphasis should be placed on the constant use of market data, partnership, and harnessing the opportunities brought by technology. Moreover, business analysts and managers must work on new ways to propel the business model higher above the capabilities of its competitors. Overall, while taking cognizant of the dynamic nature of the global marketplace, Wal-Mart’s supply chain management is vital in ensuring its competitiveness in the future.
Mark, K. (2012). Half a Century of Supply Chain Management at Wal-Mart. Richard Ivey School of Business Foundation.
Zigiaris, S. (2000). INNOREGIO: dissemination of innovation and knowledge management techniques. Report produced for the EC funded project .