Exploring Supply Chain Strategies of Amazon and Walmart

This report explores the supply chain strategies of Amazon and Walmart, analyzing their positions in the retail industry and their supply chain processes. It discusses the commonality and transferability of their supply chain practices.

Running head: SUPPLY CHAIN 1
Supply Chain
An Exploration of Supply Chain Strategies that exist across two Similar Global
Retailers (Amazon.com and Wal-Mart Stores Inc)
Name
Institutional Affiliation
Author’s Note

SUPPLY CHAIN 2
A. Executive summary
The focus of this report is to explore the supply chain strategies which exist across
Amazon and Walmart. The paper explains the manner in which Amazon and Wal-Mart have
continued to assert their dominance of the mass merchandising as well as online retailing
industrial segments. The paper explains the supply chain strategies employed by the two
companies in ways that help them to reinforce and also be in a position of sustaining their
competitive advantages in such a low margin and highly competitive industry. By using the
case studies of Walmart and Amazon as case studies, the paper commences by examining the
two companies’ positions within their corresponding segments in the industry. The paper then
explores each of the companies supply chain strategy, design as well as processes. In the
aftermath of understanding each of Amazon’s and Walmart’s supply chain strategies, we
shall conduct an analysis of the linkage between the supply chain strategy and each of the
business’s strategy. The paper finally discusses the commonality as well as transferability
associated with Wal-Mart and Amazon.com’s supply chain practices across other industries
as well as within the retail industry.

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Table of Contents
Scope, context, and significance...................................................................................4
Introduction...............................................................................................................................4
Retail industrial statistics.................................................................................................6
(i)Trends and drivers within the retail industry...................................................6
Agile Strategy supply chain strategy for retailers..............................................7
Lean strategy for retailers................................................................................................8
Challenges of the Retail Supply Chain.......................................................................8
Analysis of the case study...............................................................................................11
(i)Wal-Mart Case study......................................................................................................11
(ii)The Supply Chain Processes and Network for Wal-Mart.........................12
(iii)Replenishment processes........................................................................................13
(iv)Wal-Mart Chain Initiatives.......................................................................................14
(v)Wal-Mart Business and Supply Chain Strategies.........................................15
the Amazon.com case study...........................................................................................16
(i)Amazon.com supply chain network, operating model, and different
processes..................................................................................................................................17
(ii)Amazon.com supply chain Initiatives.................................................................18
(iii)Amazon.com supply chain and Business strategy.....................................18
The different similarities between Amazon.com and Wal-Mart................19
Conclusion.................................................................................................................................20
Recommendations to the different companies so that they improve
their retailing sales.............................................................................................................20
Proposed outline for the final paper.........................................................................21
References................................................................................................................................22

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Scope, context, and significance
The retail industry has a massively huge scope. It is henceforth necessary to reduce
the scope in this analysis to specific retail segments. This thesis focuses on two segments of
the retail industry and these will include merchandising as well as internet retailing. To be in
a position of performing a deeper analysis for both internet retailing as well as
merchandising, the leader entity within each of these sub-segments is investigated (Poluha,
2016). On the basis of annual revenue, Walmart in the leader in the sub-segment of general
merchandising. On the other hand, Amazon.com leads in the sub-segment of internet
retailing. Each of Amazon.com and Wal-Mar has been subjected to analysis within this paper.
Introduction
The concept of the supply chain strategy is quite broad. Supply chain strategy is concerned with the
manner in which the supply chain should operate if it's to be competitive. In other words, the supply
chain strategy can be defined as an iterative process which involves the evaluation of the cost-benefit
trade-offs associated with operational components. The supply chain strategy entails the actual
organizational operations. It also involves the extended supply chain developed for the purpose of
meeting a specific objective of the supply chain. There are several reasons why an organization
should have an effective supply chain strategy. Essentially, a supply chain strategy helps to aid the
operationalization and support of an organization's business strategy. There comes a point in the
operations of an organization when they must execute the business strategy. This must typically be
done through an organization's operational components (Grenville, 2017). It is also the focus of the
Supply chain strategy to ensure that it helps the organization to drive down its operational costs while
also ensuring the maximization of its efficiencies. To develop an effective supply chain strategy, the
executives of the company must first and foremost evidently understand the manner in which the
organization chooses to engage in the competition (Grenville, 2017).
Retail industrial statistics
On the basis of the S&P general retail industrial report released in the month of May 2018, retail sales
have been continuously growing. There has been an unprecedented growth particularly in sales
concerning discounted as well as luxury goods. Wal-Mart is the biggest retailer in the world in terms
of the revenue generated. The retail industry grew further with the emergence of the internet. Internet-
related retail is made up of multi-channel retailers who are engaged in the operation of the online
channel as well as physical retail stores. Amazon.com continues to lead the way in terms of revenue
generated from purely online retailing.

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(i)Trends and drivers within the retail industry
Customer behavior is earmarked as the biggest and most influential driver of the retail
industry environments. Within internet retailing and mass merchandising, customers prefer a
selection that a large assortment of products is made available and at reasonable prices. To
satisfy the expectations of the customers, the trends of the retail supply chains are principally
associated with inventory management as well as relationships between the suppliers and
retailers. The logic in this kind of relationship is to ensure that there is support for the on-
shelf accessibility at costs that are deemed reasonable.
Agile Strategy supply chain strategy for retailers
The agile supply chain strategy adopted by both Amazon and Walmart has its focus on being
responsive to the needs of the customer and also being as flexible as possible. The agile supply chain
strategies are most applicable to products whose demand is not certain. This strategy is quite apt in
terms of compressing time and has a quick response mechanism. The strategy is also developed in a
way that it eliminates any barriers that impede on a quick response.
Lean strategy for retailers
The lean strategy applied by retailers focuses on the elimination of waste with the aim of pulling
goods across the system on the basis of demand. As far as retailing is concerned, the employment of
the lean strategy is aimed at diminishing the wastages as well as costs as much as possible.
Challenges of the Retail Supply Chain
Just like it is with majority of the industries, a fundamental challenge of the retail industry supply
chain is having to ensure that the appropriate products are delivered to the right place, right persons
and at the lowest costs possible. Within the retailing environments, the provision of on-shelf product
availability is an essential fundamental factor of success. When the shelves are empty, they represent
lost revenue to both the suppliers as well as the retailers. The biggest challenge lies in the need to
balance the cost associated with having stock available and having the inventory within the pipeline.
Supply chain strategies such as vendor managed inventory (VMI), collaborative, planning, forecasting
as well as replenishment (CPFR) and co-managed inventory (CMI) do make attempts to provide a link
between trading partners in a deeper manner. Given the need to offer product availability for a wide
range of products, the segmentation of inventory within Amazon's internal network of the distribution
network and between partners presents a huge challenge. Equally, the need to balance service options
amongst customers and the associated costs provides a challenge especially in attempts to provide a
differentiated service (Wieland and Handfield, 2015).
Kouvelis, Chambers and Wang, (2016) in their article explained that the present
globalization of markets has created a vigorous and cut throat competition for companies.
Because of such heavy competition, organizations have been forced to undertake profound

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changes in their manner of business practice. The customer has attained a high level of
prominence and therefore the need to ensure that he is satisfied is of critical need (Kouvelis,
Chambers and Wang, 2016). At the current rate at which the world population is growing, it
is important to devise means that will help to take care of the demands that come with the
increasing number of people. For this to be achieved, a company must set up clear strategies
that involve a supply chain, with a clear set supply chain, it is easy to meet the customer’s
demands at the same time make remarkable profits. However, it is important that the
companies that are involved in the supply chain provide the required services at the right
time, place and at the right price. With the right efforts, this can be achieved with minimal
struggle.
There are basically three important stages that are used in the supply chain
1. Procurement stage (this includes, manpower, raw materials, and equipment)
2. Production stage (this includes, packaging the manufactured goods)
3. Distribution stage (the stages included in this stage are warehousing,
transportation and then delivery)
Amazon Company is one of the international companies with the most decent supply
chain, this can be observed through the success that the company is enjoying today. The
company also has one of the best supply chain strategies that help to balance between the
service level and the cost of the distributors. This is an American best company with the zeal
and desire of reaching their unmatched services to the entire world, the services that are
provided are of high quality with minimum prices. Shipping is one of the strategies that is
used by Amazon to attract more customers to their side. Such and many other factors when
brought together, form a supply chain that is very strong (Saba & Mawhinney, 2014).
Data mining that issued in the company has been the ultimate reason why the
company has survived for so long in business without suffering any serious drawbacks
(Kozlenkova et al., 2015). The company’s warehouses were able to supply around 85% of the
inventory, the other companies that are in the same market made between 50-65%. In order to
renew inventory efficiently, the company makes use of cross-docking to eliminate
inefficiencies and reduce transportation costs(Wieland, et al, 2015). Cross-docking involves a
transfer of products for the inbound truck trailers to the outbound truck trailers without any
intermediate extra storage (Bensinger 2016).

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Analysis of the case study
This section describes Amazon.com an online retailing company as the case study for internet
retailing and Wal-Mart as the case study for mass merchandising. Using these case studies, the
relative position and strategy for every company within their retail industry segment is discussed.
There is conduction of detailed analysis of both Amazon and Walmart supply designs, chain
strategies, chain processes, operating models, and the corresponding improvement initiatives (Todo et
al., 2015).
(i)Wal-Mart Case study
Currently, Walmart is one of the top retailers in the world in terms of the revenue
which is collected annually. This company is one of the mass merchandiser in Australia and
the United States of America as well as the rest of the world in general. Currently, the
company is estimated to have a total revenue of US$514.4 billion, the company currently has
an operating income of US$21.96 billion. It employs a total of a number of 2.2 million
individuals where 1.5 million individuals are originating from the United States of America
while the rest of the employees are from other countries. The different business units for the
retail business are Walmart international, Global e-commerce, Sam's club, and Walmart U.S.
The different services offered by the company are Walmart Money Card, Pickup Today,
Walmart-2-Walmart, Walmart.com, and Walmart Pay. Larson and Halldorsson, (2014)
established usage profiles and explained the divergences which exist between the
conceptualization and adoption of supply chain management logistics and principles. The
findings also focus on the identification of the critical success factors as well as the
impediments to efforts focused at addressing supply chain management divergences. While
operating internationally as a business unit, the stores have grown through acquisitions and
mergers. The company, through the existing units of the business, aims at providing various
products at low prices to its customers.
(ii)The Supply Chain Processes and Network for Wal-Mart
The company operates over 11,368 stores globally. Within the United States of
America, the company has over 1500 Discount stores and surprisingly, it has at least a store
in all of the 50 states of the country. The supply chain of the company has over ninety
distribution centers in total, each distribution center or DC specifically deals in a given type
of product or segment. For Short-haul shipments, the company uses a private fleet. The short-
haul shipments are very useful in carrying out outbound and inbound transportations from the
different distribution centers. 80% of the store refills are processed through the distribution

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centers and 20% of all shipments are directly made from the vendors to the stores of the
company.
The company applies a unique system known as Inforem so as to automate the refill
process within its retail stores.
The different stages which are undertaken when refilling or replenishing the supply
stores of Wal-Mart Company are:
 The first process is Vendors receiving orders from the Wal-Mart company.
 The second process is Retail link routing shipment and then the corresponding
vendors make acceptance of the routing information so as to make the transactions.
 The third process is vendors and carriers negotiating the pickup time.
 The vendors make the shipment of ordered products
 The fifth process consists of products either arriving at the Walmart
Distribution centers or first arriving at the different center point and later arrive at the Wal-
Mart Distribution Center.
 After through going through the Distribution centers, the products are
organized in accordance with the basis of the store.
The center points within the replenishment process refer to the different facilities
which deconsolidate the full truckloads from the different vendors, they aggregate the
products from the vendors to the different distribution centers.
(iii)Replenishment processes
The company carries out different replenishment processes. The three replenishment
or refill processes which are existing within the company are Assembly, warehouse, and
Direct-to-store. Considering the warehouse replenishment process, the different products are
stored first within the warehouse and alter distribution to the various retail stores is carried
out. The warehouse replenishment process is a standard process for retail supply chain, it
consists of different vendors making delivery of goods to the warehouses, storing products
within the inventory till the retail stores make requests, and fulfilling the different orders of
replenishing the stores from the distribution center inventory.
(iv)Wal-Mart Chain Initiatives
So as to successfully support its different supply chain strategies, for example, the
cost reduction strategy which is supported by the EDLP strategy and also the strategy for
allocating different stores within the different location, the company is continuously

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launching different supply chain transformations and initiatives. Some of the initiatives which
are applied by the company so as to improve on the provision of services are; applying
different changes in replenishment processes or tasks for commodities having different
profiles, applying pick-to-pallet tasks or processes to the different discount stores, applying
post receipt allocations for the outbound distribution processes (O'Keefe, 2015).
The pick to a pallet as a replenishment concept or strategy is used by Wal-Mart to
handle goods which are perishable. This process is mainly applied to discount stores such that
there is a reduction in costs incurred during replenishment. The post-receipt allocation is used
in the assembly process for the stock keeping units. The use of Post-receipt allocation is used
to the reallocation of the inventory when there is the arrival of the different products at the
Distribution Center. This method of postponement easily allows Wal-Mart to gain more
flexibility so as there is an assurance of proper allocation of the inventories to the stores.
(v)Wal-Mart Business and Supply Chain Strategies
The Business strategy for the company as mentioned earlier is to provide Low Prices
Every Day (EDLP) to its different customers. The Supply Chain strategy for the company
supports its business strategy such that there is the availability of a variety of products on-
shelf (Kouvelis, Chambers and Wang, 2016). The operating model for the company
definitely also supports the business strategy. The Business strategy is supported through
asset utilization, efficiency in the supply chain, finding the balance between the service levels
among the customers. The use of this technology would help in providing automatic capture
of data so as to cause further streamlining of Wal-Mart's processes as well as promote vendor
compliance initiatives (Poluha, 2016). Figure 1: The figure below illustrates the supply chain
and business strategies of Wal-Mart Company

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The Amazon.com case study
The Amazon is one the biggest online retailer in the world.Amazon.com just started as an online seller
of books but later expanded to a wide variety of products which includes electronics, wear, media
devices, and other merchandise which basically supports their trade strategy. In the report which was
issued by Amazon 2011, they stated their mission as offering "Earth's biggest selection" as well as
being the "best customer-centric company on Earth" where there is a possibility of customer's finding
and discovering whatever thing they could possibly buy.
(i)Amazon.com supply chain network, operating model, and
different processes
The company makes use of a website which is used in the selling of different products
to different customers (Lotz 2019). There is a number of variations which are used by
Amazon in order to support the strategy. Amazon applies what is known as the seller model.
Through the use of the seller model, users or customers of the company places their orders by
using the website of Amazon. The company is responsible for the fulfillment of the order, the
technology which is to be involved in completing the order as well as carrying out the
inventory.
(ii)Amazon.com supply chain Initiatives
There are different initiatives and conduction Amazon also has Syndicated store
partners where different users who are interested in their services can possibly contact. An
example of a Syndicated store member of Amazon includes Borders.com. Amazon.com is a
pure play retailer of the internet, this means that Amazon does not necessarily own any retail

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outlet. The sales are generated specifically through using the virtual stores which were
created by the company's websites and websites of affiliates (Bensinger 2016).
(iii)Amazon.com supply chain and Business strategy
The business strategy for Amazon.com is competing favorably on price, convenience, and
selection with other existing online retailers for example Alibaba.com. The working model
variations, multi-tier inventory network, efficient distribution processes for Amazon.com are
responsible for supporting the different strategies of price, convenience, and selection.
Amazon makes use of a set of approaches applicable in the utilization and efficient
integration of the manufactures, warehouses as well as stores. With such an integration, it is
possible to produce merchandise and have it distributed in the right quantities, locations as
well as time. This would help in the minimization of the system costs in the process of
sustaining service level requirements (Simchi, Kaminsky and levi, 2017). The primary focus
for the supply chain of Amazon is providing efficient delivery of services within a short time
possible, offering a better quality of products to their customers so as to effectively meet the
different desires of customers (Newman, 2018).
The different similarities between Amazon.com and Wal-Mart
These two companies are different from one another. Wal-Mart is taken to be one of the largest and
biggest retailers internationally. The company owns thousands of store locations where the different
people internationally go and make their own choices from the different store shelves. Amazon is the
largest retailer on the internet within the whole world. The company makes services to its customers
by delivering products from the distribution centers and partner inventories. Given the fact that the
companies are quite different from one another, both of these companies have similar characteristics
of using supply chain management so as to effectively manage their strategies of the business. One of
the common characteristics of these companies is that both of these companies have one-stop
experience of shopping, this experience would be utilized through using on-shelf product availability
or having goods displayed on the website and distribution occurs from the distribution centers or
using third-parties to carry out the promotion of sales. Both of the companies emphasize low-cost
operation efficiency, the saving is passed onto the customers in a number of ways for example
through promotions, promotion of after sale services, and many other activities (Newman 2018). The
success of both of the firms over the years is due to their use of Information technology (IT).
Information Technology is used by the companies for efficiency in promotion of processes as well as
better visibility.
Conclusion
Amazon and Wal-Mart within the retailing world or industry have similar ways of out-competition
their competitors. These companies both focus so much on price, selection, and convenience. Given

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the fact that these two companies have similar strategies of operations, they differ in certain areas.
Wal-Mart focuses so much on driving there costs down so as to attract more customers. In the world
and areas where this company operates there are few retailing stores which can charge prices lower
than what this company is potentially offer using its Every Day Low Prices Strategy. The company
over years has maintained its Everyday Low Prices (EDLP) strategy which has also over the years
increased on the revenue of the company. Therefore, the primary operational goal for Wal-Mart is
driving the costs lower or down. On the other side, the primary operational strategy or goal for
Amazon is providing services at a very high level.
Recommendations to the different companies so that they
improve their retailing sales
These two companies are both retailing companies where each company has a strength over the other.
Wal-Mart is stronger in terms of managing business using brick-and-mortar business setting while
Amazon.com is stronger than Wal-Mart in terms of online. Therefore there is a need for both
companies to learn from one another. Walmart has a strong interaction with the different vendors, this
promotes supply chain visibility, co-management inventory, as well as vendor, managed inventory.
These would be the same principles that would be applied by Amazon.com so as to increase its
efficiency in the distribution centers. In the same manner, Wal-Mart should also take on Amazon's
consignment inventories which are shown through drop shipments of the different merchandise from
wholesalers directly to the customer; Wal-Mart should use the same principles to prosper in its online
platform and business.
Proposed outline for the final paper
A. Executive summary. This section provides a summary of what is entailed in the
entire report.
B. Scope, context, and significance. The scope, context and significance section
provides an explanation of why the report is necessary or important and also explains
the extent to be covered in the report
C. Introduction. The introduction section provides a background to the report including
the defining the topic and the variables to be covered.
D. Retail industrial statistics
(i)Trends and drivers within the retail industry
E. Agile Strategy supply chain strategy for retailers
F. Lean strategy for retailers
G. Challenges of the Retail Supply Chain

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H. Analysis of the case study
(i)Wal-Mart Case study. This section includes defining and explain the supply chain
management practices employed by amazon.
(ii)The Supply Chain Processes and Network for Wal-Mart
(iii)Replenishment processes
(iv)Wal-Mart Chain Initiatives
(v)Wal-Mart Business and Supply Chain Strategies
I. The Amazon.com case study. This section includes defining and explain the supply chain
management practices employed by amazon.
(I)Amazon.com supply chain network, operating model, and different processes
(ii)Amazon.com supply chain Initiatives
(iii)Amazon.com supply chain and Business strategy
J. The different similarities between Amazon.com and Wal-Mart. This section includes
an exploration of what strategies of supply chain management are shared by Amazon
and Walmart.
K. Conclusion. The conclusion provides an overall summary of the exploration of Supply
Chain Strategies that exist across Amazon.com and Wal-Mart Stores Inc
L. Recommendations. The recommendations sections include the explanation of what needs
to be done by the different companies so that they improve their retailing sales.

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