Comprehensive Report on Walmart's Supply Chain Management Strategies

This report provides a comprehensive analysis of Walmart's supply chain management. It begins with an overview of Walmart's background and mission, highlighting its global presence and retail operations. The report then delves into the core of Walmart's supply chain management, emphasizing the role of inventory management models and the company's efficient logistics network. It explores the challenges faced in supply chain management, such as raw material storage and goods distribution. Key models like Porter's Value Chain and the Kraljic Portfolio Purchasing Model are discussed to illustrate strategic approaches. The report also covers support activities like human resource management, technology development, and procurement. Furthermore, it examines strategic positioning, inventory management systems like the two-bin system, waste management practices, and structural decisions in physical distribution. The report concludes by addressing CSR/sustainability concerns, ethical considerations, and recommendations for improvement, providing a well-rounded perspective on Walmart's supply chain operations.

Contents
Background of Walmart..............................................................................................................................2
Supply chain management at Walmart........................................................................................................3
Models of supply chain management..........................................................................................................4
Support activities.........................................................................................................................................8
 Human resource management..........................................................................................................8
 Technology development.................................................................................................................8
 Firm Infrastructure...........................................................................................................................9
 Procurement.....................................................................................................................................9
Kraljic portfolio purchasing model............................................................................................................10
Strategic Positioning..................................................................................................................................12
Two bin system in inventory management................................................................................................13
Waste management....................................................................................................................................14
Structural/ strategic decisions in physical distribution...............................................................................15
Tim wood value added activity..................................................................................................................16
CSR/ sustainability/ modern slavery and ethics.........................................................................................18
Challenges.................................................................................................................................................19
Recommendations.....................................................................................................................................20
Conclusion.................................................................................................................................................21
References.................................................................................................................................................23
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Background of Walmart
Walmart deals with the retail business in all apparels, housewares, electronics and food and non-
food products and services. The successful operation of this organization makes this store the
world’s largest retail store chain and this company has approximately 11,453 stores worldwide.
This retail store is founded by legendary Sam Walton in the year of 1962 and before he started,
Sam Walton owned a chain of stores in the US. The main aim of Walmart is to offer the products
and services according to the needs of customers either it’s related to housewares, electronics,
clothing and general services. Walmart is serving more than 138 million people every week in
the world. The Walmart main motto at the time of establishment was ‘lower price anytime,
anywhere’ and this is unchanged from 1962. Moreover, customers used to call this store the
Discounting Store. As per the records of financial report in 2015, the company achieved revenue
of $485.7 billion and approximately 1.8 million employees are working in 50 states stores as
well all the international stores in Argentina, Mexico, Brazil, and Canada etc. across the world.
The market Capitalization of this retail store is around $195 billion as of December 2015 (Lu,
2014).
Mission- The mission of the Walmart is low price every day and also the other mission is to
provide the best online shopping experience for the customers with the use of technology and to
give customers a huge variety of products at low prices with guaranteed satisfaction and friendly
service on convenient hours. Sam Walton takes care of the quality work and the needs of the
customers. The main focus of Walmart is to provide the best quality services to its customers so
that they will visit and shop in this departmental store again and again. The goal of the Walmart
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is to make the life of customers easy by the way of offering quality services at reasonable prices
and fulfill the needs of the clients whatever they want.
Supply chain management at Walmart
Supply Chain Management plays a very significant role in the success of Walmart because
Inventory management models help the company to find out the quantity of stock that is
delivered to the retail stores twice of every week and this stock is very limited and it’s very
important to check that each store is getting the required stock what they want. This quick
service of shipment of stock is easy and feasible for Walmart because production houses are
situated near to Walmart distribution headquarters. Inventory is managed by the workers and
they are taking care of in how many batches the stock is to be delivered and what should be the
quantity. The individual’s needs are dynamic and keep on changing from time to time, so it is
recommended to analyze their demands. Several methods can be adopted to know their needs,
for an example, a questionnaire method, surveys, personal interview, etc. This can be done by
appointing professionals and trained employees to collect the data of employees and motivate
them accordingly using such methods. All individuals are different and come from a different
background so this is why their choices vary (The University of Western Ontario, 2003).
There are some issues that can arise at the time supply chain management, these issues are:-
1. Movement and storage of raw materials: Since the raw materials are delicate and the
storage has always remained an issue in the perfume industry, it becomes difficult for the
companies to handle fragile materials.
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2. Work in process inventory: The next problem which the perfume industries encounter is
management of work in process inventory and maintenance of true and accurate data
(Marcilla, 2014).
3. Goods to be supplied from point of origin to consumption: The process of supplying
goods from point of origin to consumption is quite a cumbersome process and involves
many intermediaries which make the whole system very slow (Flash Global, 2015).
The issues that are visible are related to the logistics and SCM in the Walmart. The suitable
strategic approach should be planned to face suitable conditions. The two strategies are identified
on the wide levels that are identified as the strategic supply chain management and the Just in
Time Policy. Both these policies are helpful in defining the suitable approach in the specific
direction and with the help of these aspects; it could become easier to manage the perspectives
and issues related to the SCM. Both these strategies are well organized, managed, object oriented
and focused in nature. The quantifiable strategy is also considered in respect to Walmart to
manage the aspects in a suitable way (Natto, 2014).
Models of supply chain management
Apart from all, the maintenance of the customers’ goods and logistics in an appropriate manner
is also identified as the best function carried out by the strategies defined for SCM. For making
the smooth flow of supply chain management and to manage logistics, the retail supermarket
brand introduces its various innovative projects in France, New York, Sydney and Melbourne.
To attract the customers, the brand also merges with the other retail markets. These products are
successful in managing their brand identity worldwide and in the retail market of UK. This
merger not only helps in supporting the organization in making the financial aspects successful,
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but by this, the logistics and supply chain management of the organization can also be
maintained in the right direction (Xu, et al., 2014).
1. Porter’s Value Chain
Talking about the First tool of Supply Chain management is the Porter’s value chain Model
and the five forces model was developed by Micheal Porter to analyze the competitive
environment in which a product or company works. Porter’s model is the number one tool of
supply chain management and it can be well explained with the help of the following figure:
(Cambridge, 2016)
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New Market Entrants: For Walmart there is no threat of new entrants. The reason for this low
threat is that the costs for Marketing, production, and distribution are already divided over units
of production that lowers the cost of production. For new entrants it is not an easy task as it is
very difficult for them to compete and achieve its aim as in the starting point, the huge amount of
funds or investments are needed to enter into the industry (Mann & Kumar, 2009).
Supplier Power: There are lots of people in the retail business who supply the raw material in
the retail industry and the raw materials are adequate and can be offered to the many rising
countries. Due to this reason the bargaining power of suppliers is low.
Buyers Power: The bargaining power of buyers of Walmart is reasonable as Walmart
customers’ switching cost is low and the products offered by Walmart are at affordable prices. In
the Retail business, the customer is the only one that is very flexible in choosing the Store across
a number of other brand retail stores. The High Brand Loyalty of Walmart also the low
possibility of customer integration is the reasons of lowering the bargaining power of buyers
(Crain & Abraham, 2008).
Development of Substitute Products: In this competitive industry, there is always a high threat
of substitute products. There are many substitutes or can say competitors of Walmart that are a
threat to this Retail industry like Sainsbury, Costco Corporation, Tesco PLC, Metro Group,
Home Depot corporation, Kroger, Amazon company etc. the Sam said, for him the biggest
competitor is Costco Corporation and because of this, high availability of substitute or
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competitors leads to the huge threat for the retailers. There are many chances of Customer
switching because of the price comparison for the same product of a different brand.
Porter in his model also introduces two activities-
 Primary Activities- These activities are the part of logistics management as it includes
inbound logistics, operations, outbound logistics, marketing and sales, service etc.
 Support Activities- These activities provide help and support to all the primary activities
and these include Human resource management, technology, Firm Infrastructure and
procurement.
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Support activities
 Human resource management
Organizations like Walmart have different kinds of employees and it is very important to retain
the employees for as long as it is possible. Recruiting new employees in an organization involves
a huge amount of expenditure and time as well. So, it is important to keep the employees happy
and satisfied so that they can work for an organization for quite a long time. It promotes the
brand image of an organization and helps in building the goodwill of the organization as well.
Every individual is different and so are his needs. Some needs monetary incentives for
motivation; some needs non-monetary incentives some needs both. The motivational programs
should be conducted after regular intervals to keep the employees on track. The leaders and
supervisors should be friendly and should help the employees in achieving their goals. For
example, if we provide non-monetary incentives to the employees who feel highly satisfied when
they receive monetary incentives, it will ruin the whole purpose of providing rewards. So, this is
very important to know what the needs of employees are. Various monetary and non-monetary
incentives are getting evolved these days and organizations are using various tactics to motivate
their employees. Motivation is basically inducing the employees to work.
 Technology development
As we know that technology changes the life of people. Similarly, Technology plays a significant
role in Walmart’s supply chain also. Walmart has the largest information technology
infrastructure because its state-of-the-art technology and network design helps the organization
or Walmart to identify the demand, continue tracking and forecasting of the stock levels,
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management of the customer relationships etc. For example, Walmart is the first company in the
world who implemented the use of Universal Product Code Bar Codes with the help of which all
the data and store level information is collected and analyzed (Cambridge, 2016).
 Firm Infrastructure
The firm infrastructure refers to the organization structure and management as it includes the
different departments of Walmart like finance, planning, legal, public affairs, and quality control
management.
 Procurement
Procurement means how the raw material is to be arranged and from where it is obtained.
Walmart has many distribution channels and suppliers across the world. Procurement includes
the direct contact with suppliers through any middle man and maintain cross border relation with
suppliers for the inventory purposes (Jafry, 2012).
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Kraljic portfolio purchasing model
Peter Kraljic created the Kraljic Portfolio Purchasing Model and this model is the very popular
model used by the companies across the world. The main motive is to help buyers to increase the
supply security and decrease the costs, by the way of making purchasing power. According to
the Kraljic, purchasing must become the management of supply.
The model involves four steps:
1. Purchase classification.
2. Market analysis.
3. Strategic positioning.
4. Action planning.
Purchase Classification: The first step that involves in this model is the classification of
purchasing into two determinants one is supply risk and profit impact.
 Supply risk is defined as low to high. This risk can be occurred due to the reason of the
shortage of raw material, or natural disasters, or when there are few suppliers (Vliet, 2014).
 The impact of profit is high when the product adds value to the output of organization of
Walmart. The high impact on quality is the reason of the high proportion of profit.
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(Vliet, 2014)
 Strategic items (high-profit impact, high supply risk).
 Leverage items (high-profit impact, low supply risk).
 Bottleneck items (low-profit impact, high supply risk).
 Non-critical items (low-profit impact, low supply risk).
Market Analysis: This involves the analysis of the market by using the porter’s five forces
model explaining the bargaining power of suppliers and buyers.
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