The Walmart: Supply Chain Management case study discusses the cost-saving strategy of the company and its supply chain management strategy. It focuses on how the company manages its supply chain in comparison with its competitors.
P. Fraser Johnson and Ken Mark
Harvard Business Review (W19317-PDF-ENG)
July 08, 2019
Case questions answered:
- Analyze the Walmart supply chain. Do you think their capabilities are a competitive advantage for Walmart? Why yes or why not?
- How is Walmart managing its supply chain? Compared it with its competitors?
- What are the most important business challenges Walmart faces and what implications do they have have for its supply chain?
- If you were Doug McMillon, president, and CEO of Walmart, what would be your strategic plan to improve Walmart’s supply chain and why?
- Where are the greatest opportunities to improve efficiency?
- How do you think this plan would help Walmart to compete against Amazon?
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Case answers for Walmart: Supply Chain Management
1. Analyze the Walmart supply chain. Do you think their capabilities are a competitive advantage for Walmart? Why yes or why not?
According to Barnes (2001), capabilities can be understood as a certain set of business developments that are being understood strategically. Every firm delivers value to its customers through these business developments. Stalk et al. (2015) dispute that a firm’s business processes can be used to achieve a competitive advantage, provided that they are being seen as strategic capabilities. As such, Walmart’s supply chain practices assist in attaining multiple competitive advantages, such as cost-saving strategies and better client service and solutions delivery procedures.
Walmart implemented a ¨everyday low-price¨ (EDLP) strategy as its business model to reduce the costs and investments related to its operations.
Thus, Walmart’s supply chain plays a major role in maintaining this “good-deal” strategy. This strategy consists of the following key practices down below.
The primary and fundamental reason behind Walmart’s successful competitive advantage relates to the intensive involvement of customers, partners, suppliers, and management.
For instance, Walmart has an excellent and long-term affiliation with its suppliers due to two reasons. Walmart offers the suppliers large orders and commits to them for a relatively long time. by using Electronic Data Interchange with its suppliers (EDI).
EDI is a standard format used by exchanging firm documents and making up communication and translation (8th and Walton, 2013). Thanks to this, Walmart creates coordination between suppliers tightly in product delivery schedules, thus minimizing potential risks involved.
Walmart’s second strategy involves utilizing global merchandising centers to acquire merchandise in bulk for lower prices. The company adopts the cross-docking strategy, in which the company avoids the storage of goods during the transportation process.
Instead, the company transfers the products between trucks. Right before the products reach these trucks, the packaging is changed. The tags are being attached to save on the inventory costs and the transportation itself and save on transportation time. This strategy allows Walmart to send unsold products (Black hauls) back to its suppliers, a cost-saving method (Lu, 2018).
Finally, Walmart is the first company that incorporates UPCs (Universal Product Codes) for their transactions to enhance the quality of inventory and supply chain.
The codes will be transferred into a collection of data connected to the global satellite system. Lu (2018) believes that this data collection provides multiple benefits in forecasting the demand and telling the real-time sales from the registers in the stores.
Moreover, thanks to the invention of the RFID (Radio Frequency Identification) tags in shelves, docks, recycled areas, and docks, Walmart managed to save $500 million a year on average. This inventory reduction has made the communication process easier at the same time.
By applying and managing the inventory with the newest technology in distribution methods, for example, the implementation of ¨shelf-scanning¨ robots, etc., this will result in a highly efficient supply chain process and a low rate of the ¨bullwhip-effect¨.
This occurs when a lack of communication between the supply links causes the inventory to pile up as a reaction to demand ¨spikes¨.
Clayton M. Christensen (2001) provides some insights regarding Walmart’s Supply Chain in his book, ¨The Past, and Future of Competitive Advantage¨. He states that ¨competitive advantage is a concept that often inspires in strategists a form of idol worship – a desire to imitate the strategies that makes the most successful companies successful¨.
The fact that Walmart was one of the first companies to (successfully) implement data-based decisions regarding their operations processes led to a ¨copycat¨ trigger in other comparable companies, according to Ken Mark (2019). The latter confirms that the capabilities of Walmart are indeed a competitive advantage for the company.
2. How is Walmart managing its supply chain? And compared with their competitors?
Walmart believes in selling merchandise to customers at discounted prices or below standard to gain profit, using developed structure and advanced supply chain management strategies as a competitive strategy. Thus, Walmart has become one of the market leaders and has maintained its status for a long period.
The company applies…