Supply Chain Management and Logistics- Walmart, Inc.
Table of contents
1.0 Introduction…………………………………………………………………………………..3
2.0 Relationship between supply chain network, logistics and competitive advantage for Walmart Inc…………………………………………………………………………………….3
- Walmart’s Successful management strategies……………………………………………4
2.1.1 Fewer supply chain intermediaries………………………………………………………4
2.1.2 Strategic vendor Alliance……………………………………………………………….4
2.1.3 Cross Docking……………………………………………………………………………..5
2.1.4 Use of advanced inventory technology…………………………………………………..5
3.0 Management of Competitive Advantage from the Application of Agile Supply Chain Strategy………………………………………………………………………………………….5
4.0 Recommendations on ways Walmart can achieve sustainable competitive advantage…7
4.1 Walmart’s Sustainable Competitive Tools……………………………………………….8
5.0 Conclusion…………………………………………………………………………………
6.0 References………………………………………………………………………………..
1.0 Introduction
The management of the supply chain network and logistics in many multinational business enterprises has a direct relationship on how competitive they remain in the market. In a bid to assume a market leadership position, reduce logistical costs and ultimately satisfy their customers, such firms resort to employing strategies in their supply networks. As a result, many firms experience a surge in profits, with vast command in market share even as they remain competitive in their respective industries. The report will focus on Walmart retailer as a case study, with emphasis pegged on the relationship between supply chain network, logistics and competitive advantage it commands. After that, the study will examine the benefit accrued from the application of Lean strategy. Later the phenomenon will give recommendations on ways Walmart can achieve competitive advantage.
2.0 Relationship between supply chain network, logistics and competitive advantage for Walmart Inc.
Walmart Company, a giant global retailer, boasts of having a robust supply chain network which helps it have a competitive advantage over other players in the industry. Walmart was founded in 1962 by Sam Walton. Headquartered in Arkansas- the United States of America, the retailer has arguably become the world’s most substantial inventory turnover (Lu, 2014). Besides, the firm has the highest sales per square foot and a profit operating discount retailer. Its transition from regional retailer to gracing the world with the provision of groceries, electronics and many other household goods is recommendable. The firms’ competitive advantages emanate from the many burners it operates worldwide. In the U.S., the technique works in the following forms: Walmart supercenters, neighbourhood markets, and Sam’s warehouse membership clubs. Internationally, Walmart has nearly 63,000 banners with over 11,700 branches globally in 28 different countries (Ludema, Laszlo and Lynch 2012, p. 273). The Company has stood the test of time in competing favourably in the supply chain and logistics networks. Other global competitors in the industry like Carrefour, amazon and Alibaba has made it possible for the retailer to change its operational strategies. Generally, Walmart has opted to master its logistical practices and manage its supplies electronically to remain competitive. Therefore the relationship between its supply chain and logistical network and competitive advantage relies on the following four successful management strategies:
- Walmart’s Successful management strategies
2.1.1 Fewer supply chain intermediaries– In a bid to cut costs and more importantly manage the supply chain, Walmart began working directly with the manufactures. Before this, the giant retailer, upon its inception, had purchased bulk merchandise and transported it instantly to its stores. However, under the firms’ supply chain strategy known as vendor management inventory (VIM) – products brought in Walmart’s warehouse were to be managed directly by manufactures. In 1989, the Company was named the retailer of the year, cutting its costs by a considerable margin (Lu, 2014).
2.1.2 Strategic vendor alliance– To remain competitive in the retail industry, Walmart has long entered in strategic partnership with most of its suppliers (Lorentz et al, 2011). Further, these alliances have enabled it to offer them a high volume of purchases with potential extended- term agreements. Besides, its supply chain management has also been streamlined through building secure communication networks with its vendors. That way, an improvised flow of raw materials with low inventories has sufficed.
2.1.3 Cross Docking-This is a logistical practice Walmart uses to replenish its stores just in time. The method entails transferring products directly from one truck to another output, without necessarily using extra storage. Supplies ship products to Walmart’s warehouses across the region and automatically re-shipped in the stores. With reduced logistical times and reduction of inefficiencies, cross-docking helps in maintaining inventory hence acting as a competitive advantage to the retailer.
2.1.4 Use of advanced inventory technology– Technology plays a vital role in Walmart’s supply chain management. The Company has arguably the most extensive technological infrastructure than any private company worldwide. Its unique and sophisticated advanced technology helps enables the management in accurately predicting demand of products. Besides, it helps in managing logistics, predict inventory levels, and create transportation that is highly efficient to meet customers’ needs on time. For example in 1983, Walmart invented the first barcodes and saving catcher which up to date allows customers, with the use of smartphones scan products and compare the best prices that fit them (Lu, 2014).
3.0 Management of Competitive Advantage from the Application of Agile Supply Chain Strategy.
Walmart retailer operates in a highly competitive market, with an indication of a new entrance in the industry every year. The application of the agile tool will enable it to manage competitive advantages and respond to the market demand with reduced and customized batches of items (Lorentz et al, 2011. In the product management strategy, the Company engages the end-users at the very beginning of the launch of the product. Rather than unveiling the prototype and waiting for it’s the results for its performance for several months, Walmart incorporates customers’ feedback in real-time to remain competitive in the market. They do this while monitoring and improving the reception of the products in the market. In the long run, the real-time feedback benefits by saving the time taken to get a sense of the customers’ needs and money.
In terms of technological advancement, Walmart uses an agile approach to know the customer’s product tastes and performance. This involves active learning and performance monitoring criteria. Walmart’s management believes that its customers should adapt to products and services they offer as quickly as possible. Due to technological changes, models in supply chains and logistics are bound to change. Data storage devices and models get outdated. Hence the firm invests in applications features that automatically relearn how it should perform in case real-time data is activated. They enable the product to be refined in all stages of production based on the feedback received. The refining process occurs while the product is still active on the shelves. Today, this agile learning tactic is incorporated into the new technology products unveiled at Walmart.
The application of real-time approach also monitors the performance of the Company. It uses technology that incorporates aggregated data and metrics to access the performance of the application. It is worth noting that the application requires less minimal system resources to function. Both agile technological approaches enable Walmart’s management to identify the overall logistical process at every stage (Kalish et al 2018, p. 43). Besides, the synchronized activities will help know what is working and has stalled. It gives room for improvement in terms of events along with the supply chain network besides examining where precisely the future of the product development is headed. Generally, the use of technology in Walmart’s supply chain and logistics networks has not only to help track the movement of goods but also sales within all distribution centres and store locations. Also, it has improved operation efficiency, and propelled the firm to what it is today- the most abundant giant retail compared to its competitors. Walmart’s supply chain strategy is focused on directly purchasing goods from producers to cut on cost and reduce lead- time. Here, products are sourced real-time, taken to the Company’s warehouses and immediately dispatched to the specific stores. The technique paid off as customers do not have to wait for the products in their stores for an extended time. Customers get the taste of their preferred goods on time as they are assured of the value and availability of items they need. Therefore, this enables the retailer to have a competitive edge over its rivalry.
Another benefit of agile application in supply chain network revolves around inventory management. In the late 1970s, Walmart came up with a warehouse and inventory strategy in which vendors were allowed to supply their products at a centralized distribution centre in Bentonville (Shabbir, 2015). In this regard, the Company would sort out and dispatch these products to various stores locations in and out of the U S. today the system has further improved as there are several warehousing locations in the U.S. which ultimately serve multiple stores around the country. This agile approach puts Walmart at a relatively competitive advantage. Customers get to inquire for goods in specific stores and delivered to them just in time without necessarily having to travel miles going to other stores looking for the same product.
4.0 Recommendations on ways Walmart can achieve sustainable competitive advantage.
Since its inception in 1962, Walmart retailer has stood the test of time. Defying all odds by becoming the largest outlet in the U.S. Today, in the U.S. and indeed, the global retail supply chain network is flooded with many retailers who would want to come in the industry. Retailers such as Kmart, carrier four among others pose considerable competition to the outlet. Kalish et al, (2018), however, asserts that moving forward Walmart should maintain specific strategies for a sustainable competitive advantage.
4.1 Walmart’s Sustainable Competitive Tools
- Size and brand name; like any other retail firm in the world operating in a highly competitive industry, Walmart should take advantage of its size and brand name to expand globally. Having the most significant size will enable it to have strength in global supply chain networks and logistics. For example, in the year 2017, it had opened 15 new outlets in Chile, 11 in the U.K. and 47 outlets in Central America (Kalish et al 2018, p. 40). Therefore, its presence in the global arena should act as a motivation to expand significantly. Also, its brand name in most households should be a stepping stone in improving its services. Its online store has over 60 million items visited by millions of customers around the globe hence its source of sustainability.
- Favourable Pricing strategy; this is the most important model in which Walmart should focus its energy as it’s the focal point to the firm’s sustainability program. The popular low-cost technique adapted will not only maintaining customers but also increase the customer base. With value proposition already in the pipeline, the pricing model will act as a basis for low-cost model application hence proper quality delivery of products across its stores’ locations.
- Focus on customer service; customers act as the most important stakeholders for Walmart retailer. Keen monitoring and evaluation of customer service should supersede those of any other activities on the firm. For example, to increase customer experience, it should invest more in technology. Shabbir, (2015) suggest that Digital tools like Scan and Go and club pick up should be increased in all its supply and logistics areas to enable customers to have the best experience. Consequently, this will lead to higher sales.
- Focus on large scale operations and bargaining power; large scale operations result in great strengths hence acting as a source of competitive advantage to the Company. With this application, Walmart will increase its economies of scale, therefore able to buy supplies in bulk while selling at lower prices hence lowering the cost of supply chain network (Nguyen, 2017, p.115). Moreover, since Walmart will be able to purchase items in bulk, it will have higher bargaining power over its seasonal suppliers as compared to its rivalry who buy products in smaller quantities.
- Financial strength; Walmart’s economic clout act as a fundamental source of competitive advantage. The firm should use this strength not only on research and development of new products but also in marketing and advertising programs. A case carried out showed that there was a sharp increase in expenditure from 2.4 billion U.S. dollars in 2014 to 2.9 billion dollars in 2017 (Nguyen, 2017, p. 112). This statistics continues to surge as significantly. Besides, the Company’s market capital rests at 2211.1 way above its potential competitor like Kmart. With these figures, its strategic financial plans in the coming years should not be a hurdle. Perhaps it should use a fraction of this money on human resource policies, recycling of wastes and marketing programs.
5.0 Conclusion
The continuous surge in supply chain and logistics activities across the globe has brought with it the need to for organizations remain competitive and hence sustainable in the market. The report has examined Walmart retailer as a study case in this context. There exists a sharp relationship existing between supply chain networks, logistics of Walmart and competitive advantages it exhibits. Such benefits like cross-docking, the formation of partnerships, use of fewer supply chain intermediaries and employment of advanced technologies play an integral role in the companies urge to remain competitive in the retail industry. Besides benefits accrued from the application of agile strategy in managing competitive advantage has been discussed in depth. Walmart sustainability programs are primarily anchored on their financial stance and expansion plans. It should, therefore, take advantage of these competitive advantages which other players in the industry like Kmart and amazon lack for its sustainability.
6.0 References
Kalish, D., Burek, S., Costello, A., Schwartz, L. and Taylor, J., 2018. Integrating Sustainability into New Product Development: Available tools and frameworks can help companies ensure that sustainability is embedded as a fundamental building block of new product development. Research-Technology Management, 61(2), pp.37-46.
Lorentz, H., Shi, Y., Hilmola, O.P., Srai, J.S., Ramanathan, U., Gunasekaran, A. and Subramanian, N., 2011. Supply chain collaboration performance metrics: a conceptual framework. Benchmarking: An international journal.
Lu, C., 2014. Walmart’s successful supply chain management. Tradegecko, available at: www. tradegecko. com/blog/incredibly-successful-supply-chain-management-Walmart (accessed May 2020).
Ludema, J.D., Laszlo, C. and Lynch, K.D., 2012. Embedding sustainability: How the field of organization development and change can help companies harness the next significant competitive advantage—research in organizational change and development, 20, pp.265-299.
Nguyen, T.T.H., 2017. Wal-Mart’s successfully integrated supply chain and the necessity of establishing the Triple-A supply chain in the 21st century. Journal of Economics & Management, 29, pp.102-117.
Shabbir, M.S., 2015. Why are Manufacturers Less Powerful than Retailers in Trade Circles? A Case Study of Wal-Mart Retailing Business. Business and Economics Journal, 6(4), p.1.