Wal-Mart China represents another new branch of the Famous Wal-Mart that has its main headquarters in the United States. The group in China has undergone numerous transformations after its inception in the country growing in bounds over the period of years that it was present in the country. Although the company faced some blocks in the past years, it picked up to becoming the lead distributor and transporter of products across China (Fishman 2003). Its supply chain was totally restructured to meet its demands and expectations. To reiterate the words of its initial leaders, Wal-Mart has never been afraid to spend money to improve its distribution and transportation network. This is what has put the company on the map for all of these years. This paper provides a case study about Wal-Mart China and shows numerous modifications that the company has made in its supply chain functions.
Mapping of the Existing Supply Chain
Wal-Mart China was established as a subsidiary group of the large scale group for the main company located in the United States. The company supply chain in this country is made up of a total of more than 416 retail stores which cover across 19 Provinces in China (Gold et al. 2011). The company has two autonomous regions where most of its products are distributed across the Country. The support base of the company has hit a target of more than 260 million customers (Fishman 2003). The company has also expanded its supply chain to deliver online deliveries to some of its customers. Such information shows how the company has positioned itself as the leading supply chain company in Asia and the rest of the world (Gereffi and Lee 2012). The supply chain has also incorporated the sale of fresh perishable products in the market. The e- commerce section of the company has been on a constant improvement mode since it was the company’s management was restructured to meet its demands in the market (Olson and Dash Wu 2010). The company also recently launched its hypermarket online – offline platform in the form of ‘Wal-Mart to go’. This system allows most of the clients or customers to have home time deliveries. Essentially, Wal-Mart China can be said to have a new interest in expanding its supply chain through the internet making it possible to access more people at one go and deliver their products instantly (Kramer 2011). The growth in their online industry will reduce the amount of space take by some of the products normally stored at warehouses as well as improve their communication and distribution channel to its consumers (Melnyk et al., 2010). The diversification process of having both an online and offline and online system will ensure that the company meets all of its needs in one go at one time. Wal –Mart went forth and acquired another part of the famous Chinese online retailer known as Yihaodin. Therefore, it has managed to reduce all aspects that related to costs as well as reducing the costs that were associated with distributing their products through the online system (Gereffi and Christian 2009). Its online system represents one of the greatest diversification in the market and more especially improves numerous processes in the supply chain.
Initially, the company used to store close to twenty thousand stock units in its stock. The process was in itself inefficient and since most of the suppliers in the chain had to ship their products directly to retailers in the market. Wal-Mart China main areas of specialization are in the distribution and transport system. If supplier ships their products directly to retailers, it means that Wal- Mart was not playing the required role set forth in its mandate. Most of the suppliers in china had been used to the Ship – direct store method (Olson and Wu 2011). Wal- Mart came in allowed all suppliers to ship their products in loads of economic quantities as per the wishes of the customers. In essence, the establishment of the distribution center provided several important activities that would benefit the retail supply chain at this period. To keep up with the growing needs of the chain the company diversified and opened up two sets of distribution centers (Schell 2011). One was to deal exclusively with the perishable products while the other was to deal with dry products. Perishable distribution centers were to handle any products that could be stored below eight degrees while the other would essentially deal with all the other products above eight degrees (Rao and Goldsby 2009). Essentially, it meant that the organization’s distribution network was being tailored to meet specific needs of the consumer. Both distribution centers would definitely deal with one kind of product in the market and would, therefore, be able to capture the attention of suppliers interested in passing their products under the current supply chain.
Challenges of Wal-Mart Supply Chain
Wal-Mart might be one of the most established companies in the world. Initially, the group in China fell the full effects of an undeveloped distribution supply chain. Most of the problems of the previous channels revolved around enterprise issues. Initially, the business had been fragmented into a total of about 29 autonomous buying offices. What this effectively meant was that the distribution centers would not provide the requisite functions in the market. The company had only a total of five dry supply chains. The company was also supposed to pay for the logistics fee in the market. This discouraged a lot of suppliers and retailers from using the market since it was costlier than having their own network chain (Durand and Wrigley 2009). As a result, most of them never passed their products through the above channels. The costs and services being rendered at Wal- Mart during this formative stages was essentially too high for any consumer to think of investing in the market (Dyckhoff et al. 2013). The cost in logistics was always attributed to the key performance indicator commonly abbreviated as KPI. To deal with the issue, the company normally commissioned trucks which could hold more cases and deliver them at respective stations (Freeman et al. 2011). This could effectively take a period of about two weeks before they returned back. This way the company was able to keep all costs in line but at the same time, most of their stores were empty. To compensate for the above losses, stores became over –ordered and were rented outside of their warehouses.
The Company had more than 20000 suppliers who also doubled up as distributors in the market. Despite this large size, the company had no leverage because most of the distributors handled very low amounts of orders at a particular time. The number of orders normally ranged between 0 to 6 orders at any provided time. At any period where there were more orders coming in from the market, the company could net effectively handle a large amount of order. One example was the case of a multinational company that sold order to 144 exclusive distributors in the market (Gereffi. and Lee 2012). It meant that the company was supposed to sell a total of 144 different orders for eighteen similar products. The company would rarely meet such target and would, in the long run, end up losing the same clients. These two are examples of problems that faced the company in its informative years before numerous structures were put in place to address the current concerns (Wisner et al. 2011). Initially, there was a belief that the company would remain in the same way but that radically changed in the coming years after a change in the leadership style. Today, the company faces is totally new, and most of the processes have considerably changed.
Transformation of Wal-Mart in the Past Five years
Several important changes were made to Wal- Mart in the coming years that saw a major change in the supply chain structure. The company centralized all its activities in one area making the process more effective than the way it had been in the informative years. The centralization process reduced the number of offices in China from the initial twenty-nine to a manageable number. The centralization of most activities in improved the structure of the supply chain is significantly increasing the amount of products that were being shipped out of the country to other regions across the world. In essence, this strengthened the market position of the company to levels that had not been anticipated. It also increased the number of companies that were directly willing to collaborate in this new venture. This was the start of the transformation process of the supply chain that put the company back into the supply chain business with a bang (Dyckhoff et al. 2013). Initially, the company put forth a lot of capital in the business market and more specifically in the dry distribution centers. After a brief period, money was then invested in perishable distribution centers (Basker and Pham 2008). The company opened up more than twenty perishable distribution centers. The company also chose to have an aggressive management system that would effectively fulfill the demands of the people within the supply chain. The supplier fill rates improved significantly and so was the stock market position of the company. The distribution centers emerged to be quite different as compared to the other in the market. The company also set its value to a stock market price that increased the number of people willing to invest in the company’s resources. Wal-Mart also decided to take to manage most of its distribution centers and left those who were fresh to be run under PL (Stevenson and Sum 2009). The company opted to share some space with PL support and in the process was setting up another important network in the supply chain. Teaming up with PL proved to be cheaper compared with teaming up with other parties. In time, the capacity of the space that was being utilized became limited by physical constraints and other parties (Jacobs et al. 2010). A fresh strategy was then put in shape to ensure that all strategies became more efficient than it had been earlier anticipated (Closs et al. 2011). The company was also interested in constructing a new perishable station in one of the areas around Dongguan. The new station is aimed at reducing the number of the effects noted in the above section. The new place where the distribution center is to be established is considered to be one of the prime areas in Southern China where there are lot opportunities in the supply chain market. The new place will have different opportunities to manage different systems. The company also intends to operate for a total of six days in the area with a daily average of delivery of more than ninety thousand cases at any particular time. Some of the different range of products that are to be delivered across the area include dairy and meat products as well as other junky foods present in the market. Approximately 300 suppliers and 200 stores will be utilized (Fawcett et al. 2014). Venturing into new areas that have greater opportunities for the company is one of the key reasons for success as to why similar groups to the United States managed to succeed.
The company established two main models that were to be utilized to deal with the perishable distribution centers. These models were referred to as the staple stock flow and the cross dock flow model. Both of the models represented above have different advantages as it relates to global perishable supply chains (Ganesan et al. 2009). The staple stock flow offers an excellent opportunity in terms of issues that relate to inventory management while the other method offers use a flow through a model that in no way relates to maintenance of inventories. The cross dock system involves loading of products in full truckload and then unloading them from incoming trucks before loading directly into another inbound truck (Handfield et al. 2009). The supplies are then transported to the stores on the same day. In the staple model, several important variables are required for any business to become successful. They include greater capital investment, investment in equipment, and essentially the presence of building materials. It also requires additional costs in the setting up of the new area (Sanders 2011). This form of design would provide a better cubic footprint that could be utilized in solving some of the problems affecting different distribution centers. Cross dock flow does not in any way involve the use of inventory and storage. If the company, choose to use the staple dock method. it would gain several important advantages. The inventory could be held for longer periods of time basing on the shelf live of different products in the market (Dyckhoff et al. 2013). Some would stay for a single day before being shipped out the next day. The staple flow dock is also associated with greater flexibility especially when it comes adding the number of stores. The numbers of stocks that are available are not limited.
Cross dock flows have no limits making them the best alternatives in the supply chain especially when it comes to seasonal assortments. Their efficiency of the products is dependent on several issues including the adherence of different suppliers to their schedules. Issues relating to scheduling and capacity management are more difficult when it comes to the cross dock flow since some of the supplies arrive concurrently and require that all processes such as unloading, and dispatching to be carried out at the same time (Dyckhoff et al. 2013). The company’s new distribution center was constructed in line with specification with real estate firms with the adoption of the cross dock strategy in mind.
Cross dock had several advantages to the company. It offers low construction, capital and handling costs. It is also able to maintain a given number of SKU. However, it normally becomes inefficient when the structure is limited to a large number of stores since the path of the process is too complex and large. Additionally, scheduling of the process becomes too complicated. In this system, all stores will generally start picking orders at the same time and end within certain periods (Waters 2011). Therefore, the company’s suppliers need to react in a quick manner for the company to achieve its goals in the required time period. Scheduling of the process under the new process will be required to be simpler. Any product can be picked at any time and dispatched to the appropriate site when the need arises. The company using the staple dock distribution centers reacts quickly to the sales present in the stock. This method also supports buying opportunities that directly relate to seasonal products and those who are imported directly from the other countries (Waters 2011). The stock dock model also provided an opportunity to place the inventory much closer to the stores where most of the products will be sent. This initiative is meant to spur growth in a country like China.
All in all, Wal- Mart has managed to transform its supply chain in the recent years by centralizing all of its operations to one location. The company has also placed a lot of emphasis on the development of online network systems. It purchased an online site and is thus able to deal with any issues relating to e-commerce. Wal-Mart has also invested heavily in the development of staple stock-flow models that have assisted in the development of distribution centers across China. These strategies have placed Wal-Mart on the map as one of the best companies with efficient supply chains.
Issues, Risks and Challenges faced by Global Supply Chains,
The global supply chain faces different risks in the current society. Some of the commonly associated risks faced in supply chains include safety and quality challenges, environmental compliance, risks associated with weather and disasters as well as regulatory imposed policies in countries of interest. Global supply chains face all of the above challenges plus other issues. Some of these issues include geopolitical instability, data security or IT hitches, shipping and logistics challenges as well as legal and regulatory issues. Other important critical elements that affect supply chains include safety and quality incidents, incidents at supplier’s facilities and a shortage of supply materials present in the industry (Waters 2011). Geopolitical conditions create instability in different regions and therefore most of the networks present in the supply chain are broken. Shipping, distribution and transportation of material from one region to another becomes virtually impossible. Regulatory issues affecting global supply chains involve a change in policies in the foreign countries where companies have been established. Essentially, this may come in a different form including the imposition of heavy taxes or favoring the local supply chains that have been established in a given country (Rao and Goldsby 2009). Most governments in different parts of the continent have established different policies that hinder developmental aspects of different supply chains. All above factors will weigh the manner in which supply chains conduct their business. Other issues that may become relevant may relate to issues affecting finances. These issues revolve around financial incapability of different suppliers, the price of different commodities in the supply chain, and financial failures of different markets.
Identify barriers and enablers of supply chains
There are several enablers of the supply chain. They include regulations that promote investor confidence and in general, ensure that supply chain network processes are running in the most effective way without any slowed down process (Coyle et al. 2012). Political stability creates a good climate for all the development of different supply chains in the market. Most of the global supply companies would prefer to be established in countries that are witnessing a period of political stability (Rao and Goldsby 2009). Other important enabling factors include the presence of suppliers, and different members of the supply chain are willing and ready to invest in the business process (Coyle et al. 2012). A market that provides all of the above issues is considered to influence how the network will be essentially formulated. Some of the critical elements that have been established as barriers include geopolitical instability, data security or IT hitches, shipping and logistics challenges as well as legal and regulatory issues (Coyle et al. 2012). Other includes safety and quality incidents, incidents at supplier’s facilities and a shortage of supply materials present in the industry. The presence of any enabling or barrier factor will be largely determined by the above-mentioned factors.
Failures of Australian Firms
There are three chief reasons as to why most supply chains fail. The major reason is the lack of key competencies and capabilities in different sectors. Most of the supply chains present in Australia lack key competencies and skills in several parts of the supply chains. The supply chain is consists of various points including the suppliers, retailers, distributors, and transporters. Other sections include the manufacturing and logistics section (Coyle et al. 2012). When all of the above parts of the supply chain have been identified a network exists that ensure that all required parts are functioning effectively (Hugos 2011). Australia as a nation lacks several important parts of the supply chain which include manufacturers and efficient distributors and transporters. Most of the countries that are establishing their chains in these countries tend to observe certain areas and leave out some. The manufacturing segment made up of producers of different materials form the major component of the supply chain. The other important parties are rarely developed and therefore the link between the manufacturers of the different segments is not broken. Most competencies and capabilities that lack fail to develop the supply chain (Hugos 2011). When one part of the supply chain is broken, there are increased chances that movement of the products in the supply chains will be with more difficulty and will be costlier compared to the others. Additionally, most of the suppliers would prefer using different routes that are not present in the supply chain. The effect of this would be the presence of established networks of the supply chain that do not effectively meet the demands of the consumers. In this case, they fail to serve their required function and become effective (Ross 2013). To change all of the above effects, the supply chain needs to be developed having acquired key capabilities and competencies that are not in any way limited by any factor (Coyle et al. 2011). Once this has been developed, there are high chances that the system would become more efficient, and more suppliers would use this route to conduct various forms of products in the market.
Role of supply chain management in additive Manufacturing or 3D
The increase in technological advancements has made the world a small place to live. Local firms in different regions are now able to partner effectively with different suppliers across all areas of the world and in the process increasing the development of supply chains in different countries. One of the best advancements in technology has involved the use of 3D to connect the world globally (Waters and Rinsler 2014). The use of 3D brings on board several important factors that are present in any supply chain. The design of different supply chains have been established by use 3D. The effect of 3D designs that is also known as additive manufacturing is quickly shifting some manufacturing processes from low wage countries and moving them closer to the customer base where companies can be able to attend quickly to the needs of the users. Additive manufacturing has the potential to eliminate all of the repetitive functions present in production tasks (Mollenkopf et al. 2011). The use of 3D has affected the supply chain in a number of ways including reducing manufacturing time, the release of new designs in the market, meeting the demand of the customer more effectively, passing materials from one area to another effectively and eliminating the need to carry inventories.
3D printing has greatly affected the manufacturing section of the supply chain. It has effectively eliminated the need for high volume products that were a major domain of the traditional form of factory workers (Waters and Rinsler 2014). Even the most effective supply chains have been identified to have some few weak links. Some parties have been concentrated in one area while other suffers from issues ranging from quality control as well as with retailers. Sometimes the issues affect customers. Either way, it seems that the system needs to be strengthened to remove all of the weak links that are available in the supply chain (Ross 2013). The efficiencies are supposed to run the entire supply chain from the distribution cost to the time the products are assembled and carried all the way. This reduces chances of any component from being scratched and also maximizing on its cycle times
Transition to Sustainability across Supply Chains
The concept of the sustainable supply chain is relatively new in the market. The concept encompasses different aspects such as the company’s objective, the creation of meaningful expectations, selection of suppliers and setting of targets as well as evaluating and developing suppliers and finally building on past experiences (Ross 2013). The company’s objective defines the way the management team is supposed to develop initiatives that will serve the companies both internally and externally (Blanchard 2010). The objective of the company should be aligned to making progress on the costs and payback periods. The company is also supposed to create meaningful relationships by noting several factors (Hugos 2011). These factors include conducting appropriate environmental research measures in the context of the supply chains that are recognized internationally. It also ensures that all challenges are anticipated much better. The company is also supposed to allow for the organization to actively manage supply chains. Another major expectation is to ensure that all stakeholders have all the applicable documents that define the efficacy and legitimacy of all policies (Tempelmeier 2011). Another expectation would be to assess the applicability of all of the existing standards that may be adopted by the company to increase the efficiency of different processes.
The supplier is also supposed to be selected through an interview process and develop the supplier’s base basing on the traditional ticking method. A safe environment ensures that key performance indicators are developed and benchmarked. This guarantees all the expectations to be within required standards. The next important step in the process will be to develop and evaluate suppliers. All parties are supposed to communicate effectively with suppliers informing them of the status of their targets. The suppliers are supposed to be advised accordingly when it comes to understanding the chances that the success and failures of the supply chain are realistic and are observed. The last aspect involves building on the past performances. This will involve cultivating and prioritizing the culture of learning (Waters 2009). It also involves establishing processes of transparency and accountability which directly relates to success and persistent growth. The last section will involve measuring the company’s performance against KPI.
Backer, E. and Pham, V.H., 2008. Wal-Mart as a catalyst to US-China trade. Available at SSRN 987583.
Blanchard, D., 2010. Supply chain management best practices. John Wiley & Sons.
Closs, D.J., Speier, C. and Meacham, N., 2011. Sustainability to support end-to-end value chains: the role of supply chain management. Journal of the Academy of Marketing Science, 39(1), pp.101-116.
Coyle, J., Langley, C., Novack, R. and Gibson, B., 2012. Supply chain management: a logistics perspective. Cengage Learning.
Coyle, J., Langley, C., Novack, R. and Gibson, B., 2012. Supply chain management: a logistics perspective. Cengage Learning.
Durand, C. and Wrigley, N., 2009. Institutional and economic determinants of transnational retailer expansion and performance: a comparative analysis of Wal-Mart and Carrefour. Environment and Planning A, 41(7), pp.1534-1555.
Dyckhoff, H., Lackes, R. and Reese, J. eds., 2013. Supply chain management and reverse logistics. Springer Science & Business Media.
Fawcett, S.E., Ellram, L.M. and Ogden, J.A., 2014. Supply chain management: from vision to implementation. London: Pearson.
Fishman, C., 2003. The Wal-Mart you don’t know.
Fitzsimmons, J. and Fitzsimmons, M., 2013. Service management: Operations, strategy, information technology. McGraw-Hill Higher Education.
Freeman, R.B., Nakamura, A.O., Nakamura, L.I., Prud’homme, M. and Pyman, A., 2011. Wal‐Mart innovation and productivity: a viewpoint. Canadian Journal of Economics/Revue canadienne d’économique, 44(2), pp.486-508.
Ganesan, S., George, M., Jap, S., Palmatier, R.W. and Weitz, B., 2009. Supply chain management and retailer performance: emerging trends, issues, and implications for research and practice. Journal of Retailing, 85(1), pp.84-94.
Gereffi, G. and Christian, M.M., 2009. The impacts of Wal-mart: The rise and consequences of the world’s dominant retailer. Annual Review of Sociology, 35.
Gereffi, G. and Lee, J., 2012. Why the world suddenly cares about global supply chains. Journal of supply chain management, 48(3), pp.24-32.
Gold, S., Seuring, S. and Beske, P., 2010. Sustainable supply chain management and inter‐organizational resources: a literature review. Corporate social responsibility and environmental management, 17(4), pp.230-245.
Handfield, R.B., Giunipero, L.C. and Patterson, J.L., 2009. Purchasing and supply chain management. Mason, OH: South-Western.
Hugos, M.H., 2011. Essentials of supply chain management (Vol. 62). John Wiley & Sons.
Jacobs, F.R., Chase, R.B. and Chase, R., 2010. Operations and supply chain management. McGraw-Hill/Irwin.
Kramer, M.R., 2011. Creating shared value. Harvard business review, 89(1/2), pp.62-77.
Melnyk, S.A., Davis, E.W., Spekman, R.E. and Sandor, J., 2010. Outcome-driven supply chains. MIT Sloan Management Review, 51(2), p.33.
Mollenkopf, D., Stolze, H., Tate, W.L. and Ueltschy, M., 2010. Green, lean, and global supply chains. International Journal of Physical Distribution & Logistics Management, 40(1/2), pp.14-41.
Olson, D.L. and Dash Wu, D., 2010. A review of enterprise risk management in supply chain. Kybernetes, 39(5), pp.694-706.
Olson, D.L. and Wu, D., 2011. Risk management models for supply chain: a scenario analysis of outsourcing to China. Supply Chain Management: An International Journal, 16(6), pp.401-408.
Rao, S. and Goldsby, T.J., 2009. Supply chain risks: a review and typology. The International Journal of Logistics Management, 20(1), pp.97-123.
Ross, D.F., 2013. Competing through supply chain management: creating market-winning strategies through supply chain partnerships. Springer Science & Business
Sanders, N.R., 2011. Supply chain management: A global perspective. Wiley Global Education.
Schell, O., 2011. How Wal-Mart is Changing China. Atlantic, December.
Stevenson, W.J. and Sum, C.C., 2009. Operations management (Vol. 8). Boston, MA: McGraw Hill/Irwin.
Tempelmeier, H., 2011. Inventory management in supply networks: problems, models, solutions. Norderstedt: Books on Demand.
Waters, D. and Rinsler, S., 2014. Global logistics: New directions in supply chain management. Kogan Page Publishers.
Waters, D. and Rinsler, S., 2014. Global logistics: New directions in supply chain management. Kogan Page Publishers.
Waters, D., 2009. Supply chain management: an introduction to logistics. Palgrave Macmillan.
Waters, D., 2011. Supply chain risk management: vulnerability and resilience in logistics. Kogan Page Publishers.
Wisner, J., Tan, K.C. and Leong, G., 2015. Principles of supply chain management: a balanced approach. Cengage Learning.