This "Half a Century of Supply Chain Management at Wal-Mart" case study looks at Wal-Mart, which is known as the world's largest retailer. It focuses on the company's strategies which seemed to be not so effective for the past years as its competitors have come too close to with them.
P. Fraser Johnson and Ken Mark
Harvard Business Review (W12894-PDF-ENG)
April 19, 2012
Case questions answered:
- As James Neuhausen, what is your analysis of Wal-Mart’s supply chain management? Are the company’s supply chain capabilities still a source of competitive advantage? Why or why not?
- How is Wal-Mart doing? How does it compare to its competitors?
- As Johnnie Dobbs, Wal-Mart’s Executive Vice-President (EVP) of Logistics, where would you spend your money or focus your energy?
- As Johnnie Dobbs, what recommendations would you make to the Chief Executive Officer (CEO)?
- Where do you see the opportunities for Wal-Mart in its global supply chain?
- How does Wal-Mart’s supply chain compare with Apple’s supply chain? How are they different and how are they similar?
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Case answers for Half a Century of Supply Chain Management at Wal-Mart
1. As James Neuhausen, what is your analysis of Wal-Mart’s supply chain management? Are the company’s supply chain capabilities still a source of competitive advantage? Why or why not?
As James Neuhausen, I think Wal-Mart’s supply chain management helps it attain various competitive advantages. According to Statista, Walmart is the largest retailer and discount store globally, with having net sales of U.S. $520 billion (Statista, 2020).
As we all know, now the competition is among the supply chains rather than the main businesses. Therefore, Walmart was more focused on the supply chain from the beginning to get profits by applying its everyday low-price strategy.
For this, from the beginning, Walton tried to reduce the operating costs and investment of Walmart. Walmart’s supply chain is a strong point of it, and with the time, adopted various strategic methods to improve its supply chain and follow its low-price strategy (Lu, 2018).
Moreover, the U.S. famous retailer Wal-Mart’s supply chain until now helps it earn a competitive advantage in the retail market. Also, it allows them to attain their mission and vision statements.
The main reason behind Walmart’s success is the collaboration and combined efforts of the partners, suppliers, customers, and management. Along with all the stakeholders’ participation, the various supply chain factors help the company gain a competitive advantage (Mark, 2012).
Some of the leading supply chain’s capabilities which support Wal-Mart to gain a competitive advantage in the retail market are:
- Walmart made excellent and long-term relations with suppliers. Also, it made the communication process easy to improve the flow of products by reducing their inventory level. Moreover, they try to use global merchandising centers to purchase bulk items to get lower prices (Lu, 2018).
- Initially, they removed the intermediates who help them to purchase the items. By doing this, they have reduced some of their expenditure (Mark, 2012).
- They are also using the vendor-management inventory to give the suppliers the responsibility to manage their products. This initiative’s advantage is that the stores would get almost full inventory after some time (Mark, 2012).
- Walmart is also using the cross-docking strategy. By applying this strategy, there is no need to store the items in between the way. However, they directly transfer the products from one truck to another truck. When they move the products to the company’s truck to deliver to stores, they change the packaging and put the tags within 24 hours. This helps to save the cost of transportation and inventory and also to save transportation time (Lu, 2018).
- Moreover, when they cross-docked the products, the company sent their black haul products back to the suppliers. Black hauls are unsold products. They can save some of the cost and use the backward integration method (Mark, 2012).
- Walmart was the first company which uses the UPCs for the transactions. After that, they have invested a lot in integrated technology to improve their supply chain and inventory. For this, they have implemented the retail link, a database connected with the global satellite system. There are various benefits of this database that help forecast the demand for the manufacturers and tell the real-time sales from the cash registers (Lu, 2018).
- They have invented radio frequency tags, which helped them to reduce the 16% out-of-stocks. These tags are readable at various places like in docks, shelves, warehouses, and recycled areas (Lu, 2018).
These are some of the capabilities which help Wal-Mart to attain a competitive advantage through the supply chain.
2. How is Wal-Mart doing? How does it compare to its competitors?
Wal-Mart is the leading grocery retailer worldwide. Every year, the company is increasing its total revenue by 5.65 % comparing with its competitors. However, this year, their profitability is less than its competitors by a net margin of 4.67%.
Wal-Mart’s net income is increased by 74.97% faster than the development of its competitors, which is 51.92% (CSI Market, 2020). This shows that with the increased income, their operating costs are also rising, due to which their net profit is not that much growing. Simultaneously, the statistics show that the profit margin is consistent for many years, resulting in cost reduction and management.
The main reasons behind Wal-Mart’s retail business’s success are increasing online and in-store sales, comprehensive financial services, a large number of pet product buyers, pricing strategy, a large scale of operations, and bargaining power.
These are the main factors responsible for Wal-Mart’s success instead of supply chain management. One more aspect is that there is no labor union or any union; therefore, the system and processes would never get affected due to external distractions (Pratap, 2018).
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