Supply Network Management in Walmart

This paper demonstrates and overview of the issues arising in Walmart’s attempt to maintain sustainability in its supply network. From the past studies it is evident that Walmart has considered the impact of its operations on the people and environment.

Running head: SUPPLY NETWORK MANAGEMENT IN WALMART
Supply Network Management in Walmart
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Executive Summary
This paper demonstrates and overview of the issues arising in Walmart’s attempt to maintain
sustainability in its supply network. From the past studies it is evident that Walmart has
considered the impact of its operations on the people and environment. The paper illustrates
Walmart’s successful integration of supply chain contributing its dominant position in the retailer
market and identifies challenges in the globalization era. It also discusses the some of the
specific issues identified about the sustainability of their supply network of Walmart.
Introduction
Supply chain management is the major source for the company’s’ growth and
achievements in the market. The economic activities of entities have expanded globally and are
regarded as the supply chain. The rapid changes have caused businesses to seek to develop and
survive under the new economic order. Supply chain management has developed into the
competition between different enterprises. The international purchasing of goods has become a
major strategy for companies. Companies consider supply chain as a major competitive
advantage leading to sustainability management as they are able to develop a supply network.
Background Information of Walmart
Walmart is one of the largest retail stores operating in different countries over the world.
It runs over 10,000 retail stores in different countries. According to Traub (2012), the success of
Walmart is attributed to its effective supply network. It has a highly integrated supply chain
which is cost effective and speed efficacy. Walmart’s growth over its competitors has been due
to its supply chain management and retail strategy which has gained it a competitive advantage

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in the market. To facilitate the supply chain, information technology initiatives were used to
enable innovation and creativity. Integrated supply chain, cost-effective and speed brings success
for the company, but Natto (2014) emphasizes that there is a need to develop agility and
adaptability to maintain a sustainable competitive advantage in the market.
The global manufacturing has switched to Asia, specifically China. It plays a crucial role
in the multinational procurement network/chain. It has become the world’s processing plant and
is very important to the world’s supply chain. Many multinational companies consider China as
the source of global sourcing as it is the direct supply of the multinational products.
Multinational retailing companies cooperate with the Chinese enterprises due to the large
consumer market in China and also the cheap raw materials and labor. Walmart set strategy of
low-cost goods by turning to countries offering low-cost production of goods such as China. For
instance, Walmart has virtually centralized its procurement operations to be done through Global
Procurement Centers. Its major centers are located in China and account for 70% of worldwide
purchases (Chuang, Donegan , Michele & Kan, 2011) . This paper focuses on analyzing the
Walmart’s successful integration of supply chain resulting in its retail market dominance its and
identifies challenges in the globalization era. It also discusses the specific issues identified about
the sustainability of their supply network.
Issues existing in the Walmart supply network
A collaborative supply chain/network is very important for the growth of Walmart. Their
vendors differ in the company size and quantity of products sold. Therefore it is important for the
company to collaborate with its suppliers to produce the goods and services at lower prices.
However, it is challenging for Walmart to maintain the equal profit margins among different

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vendors. This might lead to conflicts and lack of collaboration between partners leading to
excess inventories. According to Shin and Tucci (2015), despite a faster and cost-effective
supply chain, the company faces challenges when it comes to inventory growth to the level of
sales growth. The inventory growth is higher than that of sales.
Another challenge is the inventory problem arising from misalignment of the interests of
Walmart and that of the suppliers. Due to the global competitive environment, Walmart should
consider handling the inventory problems and focus on other alternative supply chains. Walmart
should not only focus on the cost-effectiveness and speed but also customer satisfaction.
Globalization has made easy access to products, and lack of customer satisfaction will lead to
losing customers to the competitors.
Walmart also faced another challenge with the Chinese market due to the cultural
differences. The areas where Walmart set there stores were the high-end class where people were
aware of the different brands and the quality of the products they require. The ‘everyday low
cost’ Walmart slogan did not work in the high-end communities as they favored quality than low
prices Chuang et al., 2011). Therefore, Walmart needs to strategize differently in different
cultures depending on the needs of the target market.
Walmart should reduce on partnership and information’s shared to with the suppliers.
Walmart only depends on their supplier networks for some products. For example, selling fish
which are MSC-certified. This might bounce on them as the suppliers might use the information
against them to increase their prices especially in times of scarcity when the demand is high
(Lockamy & McCormack, 2010).

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The over-dependent on the long-term relationship with its supplier’s network may also
lead to Walmart losing its ability to provide low-cost goods. In cases where their supplier's
networks cannot deliver products, they would be unable to access the low cheap products as they
have to source for other suppliers who might not offer the products at lower prices. Walmart can
partner with nonprofit partners to develop innovations and reduce pressure on costs (Plambeck &
Lyn, 2008).
Walmart is also at risk of losing its nonprofit partners as its sustainable value network
because of the high number of nonprofit participants who may not be able to get specific
individual credits which are measurable to the environmental factors. Since donors demand
results, they might lose on this. Walmart as one of the largest retail company in world
acknowledges the environmental problems arising. Walmart CEO 2005 stated the main goals to
align the company’s future strategies; that is use 100% renewable energy, produce zero waste
and sell products that enhances the sustainability of people and the environment (Plambeck &
Lyn, 2008).
Walmart faced backlash on selling products which are not eco-friendly in the past.
Therefore, Walmart has focused on educating their customers on eco-friendly products and also
reducing the costs of green products (Hanan, 2013). Walmart has ensured this by collaborating
with their suppliers to purchase these products in large quantities which reduce the cost of
production hence enabling Walmart to sell these products at low retail prices. These products are
environmentally friendly (Facenda, 2010). Walmart has proven over the years that they are firm
in pursuing the environmental agenda.

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Walmart has also used technology to ensure sustainability to the consumers of its
products. It has a database that captures and analyses ingredients for all the chemical based
products in the company outlets. In instances of red flag on a product, Walmart suppliers are able
to identify the chemical causing the problem and eliminate it. Walmart customers are also
presented with a description of the products and the ingredients it contains which helps them in
making buying decision (Plambeck & Lyn, 2011). This provides Walmart to build relationship
with their products and purchase more.
Walmart supply chain
The competitive strategy of Walmart is to provide quality product and services at
affordable and low prices to customers. The company employs ‘everyday low prices’ program to
guarantee the different types of products at low prices than other retailers (Walmart 2012).
Walmart using the low prices strategy enabled them to save on advertisements expenditure and
operation costs which lead to a reduction in price and resulted in the expansion of the stores over
the world. There distributions centers were also put integrated with the information systems at
the stores monitoring the stock levels which enabled them to move the products automatically to
the stores. According to … for Walmart to manage its supply network, it had to consider three
important segments within the supply chain. That is the procurement and distribution, inventory
management and logistics. The adoption of information technology in managing supply chain
enabled Walmart to enhance its core competencies.
 Procurement and distribution

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For Walmart to achieve its everyday low-cost policy, they eliminated the intermediaries
and approached the suppliers directly for procurement of the required products. They also
learned the cost structures of the suppliers and negotiated. They were the first retail outlet to
experiment the centralized database and store-level point of sale system. With the introduction of
barcodes, they were able to analyze real-time information in the stores. The company divided
areas of its distribution centers into various sectors according to the number of products. The
products were not directly transported without the needed percentage of inventory. The
distribution to the centers only occurred when the frequency demand was high. This enabled the
efficiency in managing the flow of products to the distribution centers. According to Mark
(2012), the introduction of application of information technologies such as radio frequency
identification tags or barcodes enabled the smoothness in the process. Employees can acquire
information on all the merchandise in the distribution centers as they can store data of the
products and also track inventories from the manufactures to their stores.
 Logistics
Walmart has a private truck system that enables the logistics division to complete the
shipments of goods from the distribution centers to the outlets in a short period to replace the
replenished inventories. It also has an innovative cross-docking logistics technique that enhances
efficiency distribution. It can classify and convey the merchandise from the manufacturers to the
stores without further storage. This helps Walmart reduce the handling cost of inventories. The
cross-docking technique system has enabled the Walmart to use just one distribution center to
serve many retail outlets in one region (Abbaterusso, 2010). In China, for example, Walmart
established two logistics distribution centers in Shenzhen and Tianjin (Chuang et al., 2011).

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 Inventory management
Walmart uses the information technology to truck level of inventory. The information
system captures the customer’s demand on products for different outlets. This enables them to
control the level of stocks needed as they can determine what products to stock most and least.
They are also able to monitor the reduction in the inventory level and can determine when to
make a purchase. Walmart also developed another system known as Retail link which enables it
to store and share data to its vendors. This helps the shipment routine. The RFID also facilitate
inventory management as it saves the retailers’ time. It can determine the number of inventory
goods correctly without conducting a manual count which is time-consuming.
Company Supply Chain Effectiveness
Walmart has become the largest retailer with rapid expansion in their network due to the
reduction in their operations costs and inhibiting the marginal expansions. The effectiveness of
Walmart’s integrated supply chain has enabled them to reach a dominant position in the retail
market. Walmart has built a stronger relationship with its suppliers through the customized
operations and providing a large platform to brands to market their products (Natto 2014).
Walmart considers their customers in the supply chain network. They maintain efficiency in
inventory level and allow their suppliers to access information on the sale of their products on
time. The supply chain of the company can keep track of the customer demand on the product.
They monitor the consumption of their products in different stores through their effective
information system that keeps data on transactions and transits. The supply chain division also
analyses the customer trends and product sales following the market information and
communicate to the distribution centers and the manufactures.

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Integrated supply chain
An integrated supply chain is a fundamental factor in achieving a competitive advantage
for Walmart. It is important to maintain the fast growth and the leading position in the retail
industry. According to Krajewski, Ritzman and Malhotra (2013), integrated supply chain refers
to the collaboration of suppliers and customers to maximize their collective performance in the
manufacture, support, and distribution of the final product. It can also be described as the
competency of the supply chain management to bring competitive advantages to an enterprise by
improving the performance of the supply chain. Walmart has integrated the information of sales
and inventories amongst their suppliers throughout the supply chain process to enable
collaboration of activities and reduce intermediaries and achieve stability in the company. The
supplier relationship and customer relationship processes are integrated with internal and
external activities enabling efficiency in the supply chain. For instance, new products required by
the customers are communicated to the manufactures in time, and they are able to produce them
at low costs. The use of RFID and barcodes has also increased the relationship between their
suppliers and customers as they are able to control and track the inventory levels in the outlets
(Spicer & Hyatt, 2017).
Supplier management
The suppliers are key members of the company’s supply chain division. It plays an
important role in the management performance and provides goods for the enterprise. Walmart
does not use intermediaries in its operations. Therefore, the suppliers are more important to the
company. Walmart has a good relationship with its suppliers in order to keep the efficiency of
the supply chain system. It used the electronic information interchanged to share information

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with suppliers to establish a collaborative relationship. Walmart provides a larger platform for
some of the biggest suppliers in order to showcase or arrange their products. They are also
involved in the production with their suppliers by providing information on the quality control
requirements, new products, and research. This enables Walmart to meet the customers’
requirements by acquiring the earliest goods provided to them by their suppliers ahead of
competitions (Moreau, 2008).
Conclusion
Walmart uses the supplier relationship they have established to solve different issues and
problems in the retail industries and the environment. In the past, Walmart has used their
networks to provide solutions to their suppliers. For example, when the Chinese government
threatened to shut down the textile dye companies, they used their nonprofit supply network to
help innovated environmentally suitable solutions to reduce the pollutions. For Walmart to
continue enjoying the impressive expansion in the market, they have to utilize the competencies
of their supply network in order to address challenges affecting the organization.

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