Walmart is a multinational retail company that runs a network of more than 11,000 discount retail stores as well as warehouse stores distributed in more than 27 countries. Its headquarters are located in Bentonville, United. It ranks as the world’s leading private employer with over 2.2 million employees serving in different countries’ retail stores. Walmart operates as a family owned organization that is managed by the Walton family. The Walton siblings own more than 50% of this company through managing the Walton Enterprises as well as through individual holdings (Charles, 2014). Walmart is equally ranked among the highly valuable companies, in terms of market value, as well as the biggest grocery retailer where it generates more than 51% of its sales from the grocery business. This paper explores Walmart’s operation management with regard to supply chain characteristics, global business operations, production processes, the company commitment to quality and excellence, inventory methodologies, operational planning and movement towards lean processes (Massengill, 2013).
Walmart’s operation management
History and background information
Walmart’s history dates back in 1945 when Sam Walton bought an outlet of the Ben Franklin retail stores with the aim of selling products at a relatively low cost so as to generate huge sale volumes and make profits at a low margin. Although this portrayed the purchased outlet as a crusade for most consumers, Walton experienced challenges, as the branch purchase as well as the lease cost was strangely high. He however managed to avoid these setbacks after he managed to identify low-cost suppliers than those operating in other stores (Brown, 2013). This helped to increase sales and subsequent revenues by two folds annually. Walton however could not meet the agreed requirements for lease renewal, and hence, he relocated this branch to 105N where he renamed it Walton Five. Walton founded the initial Walmart Discount Store in 1962, which was located along the Walnut Street in Arkansas. The company managed to expand to about twenty four stores within Arkansas and managed to generate about 12.6million in total sales (Dixon, 2006).
The company was then incorporated in 1969 into a legal entity under the brand name Wal-Mart Stores, Inc. It opened its domestic office and distribution location at Bontonville in 1970, during which it started operating as a publically traded company. During this time, Wal-Mart had about thirty-eight stores with 1500 employees and generating 44.2 million in total sales. Rapid expansion of this company was witnessed in the 1980s and by 1987; the company had over 1198 branch stores generating sales of over 15.8 billion. By 1988, the company was generating more profits than its rival companies that included Kmart and Sears (Plambeck, 2011). The company started to expand into other countries in 1990 particularly in South America, Argentina and Europe. The company’s expansion as a multinational corporation has been rapid and today the company operates more than 3800 stores in the US and 2800 in other regions. Its operations are managed under three divisions that allow for products distribution through different retail formats that include general stores, food and drugs, bodegas, superstores, soft discount stores, clothing stores, restaurants and membership general merchandise clubs. The company operates in the retail industry and it trades a wide range of products that include general merchandise, apparel products, food, and drugs as well as grocery products (Charles, 2014).
Supply chain characteristics
Walmart is perceived to be one the most rapidly growing companies in supply chain management. This phenomenal expansion is attributed to its overall commitment to enhance its central focus on consumer needs and cost reduction through adopting effective supply chain management activities. Since early 1970s, Walmart’s supply chain has been characterized by the hub-and-spoke distribution system. Under this system, products are usually ordered and assembled at a distribution center from which they are then transmitted to individual retail stores (Walmart, 2014). This distribution system enables the company to achieve tremendous cost benefits by enhancing the purchase of products in large quantities as well as distributing them via its logistics infrastructure to various retail stores distributed across United States (Abbott, 2009). As a major characteristic to its supply chain, Walmart insists on the need to cut down purchasing costs to be able to offer the most favorable product price to its customer. To achieve this objective, Walmart procures its products direct from the manufacturers, skipping all the intermediary operators. The company has integrated cross docking, which is a unique logistic technique in its supply chain to allow finished products to be directly collected from manufacturing firms and be directly distributed to consumers. Walmart employs vertical organization as the negotiation strategy with its customers. This strategy is intended to make company the driver of its supply chain by coordinating all the supply chain activities, which include ensuring it secures the highest quality products at the lowest cost (Roger, 2014). The company has for example integrated its computer systems to those of its suppliers, which allows the suppliers to access all purchase order information and dispense required items to different distribution centers as fast as possible. This strategy has enabled the company to obtain quality products at low cost, which in return ensures that the customers are able to obtain these products at low cost compared to other retail companies. Globalization has however proven to have a tremendous impact on Walmart supply chain (Walmart, 2013). The company should thus aim to continuously improve its system formulation and information transmission to ensure that it retains its competitive edge.
Approaches to maintaining a competitive edge
Walmart has managed to retain its competitive edge as the market leader in the retail industry by employing the cost leadership approach. Through employing this approach, Walmart aims to offer quality products at the lowest cost, which is not the case with other global competitor. It adopts a satellite-based distribution arrangement that allow for procurement and delivery of products at low cost. Walmart further tries to keep the cost of its varying distribution stores at minimum by locating them at low-cost small-sized towns (Walmart, 2014). This gives it a competitive advantage over its rival competitors that locate their stores in large cities. Similarly, Walmart purchases large quantities of products from suppliers, which enhances its economy of scale. This, together with an efficient stock control approach enables the company to maintain its operation costs at minimal, which is not the case with other global competitors in the industry (Vincent, 2012). Unlike other global competitors that employ a universalistic best practice approach to human resource management, Walmart employs a contingency approach. This approach allows it to choose the “best fit” management practice depending on the context within which the company is operating. This means that leadership practices employed in one country may not be the same as those employed in another, which ensures that the company is able to maintain a competitive edge over its global competitors (Rijmenam, 2014).
Organization’s production processes
Walmart’s production process, unlike other global competitors, has undergone a logistics revolution by changing from the push approach to production to pull production. This means that the company has gained a strong grip on demand thereby causing a disconnection between supply and demand. Through this production process, Walmart does not rely on manufacturers’ decision pertaining to the type of products it will produce as well as distribute to the retailers. Instead, Walmart employs a pull production strategy where it engages in a market research to study the type of products being sold (Wei, 2011). It then instructs manufacturers on what to produce as well as when to produce it depending on what is on demand in the market. Customers have an important role in the interaction process as they equip the company with information about the type of products that they are interested in as well as the level of pricing employed by other competitors. Walmart uses the bar-coding revolution technology to shift production power from the manufacturer to the retailer. Through this technology, Walmart collects information from customers pertaining to certain precise products. Such information is then dispensed to the manufacturers so they can know what is selling on high demand. This influences manufacturers’ production process as they do not produce what they want but what the company instructs them to produce (Narendra, 2010).
Commitment to quality and excellence
Walmart, despite it continued pursuit to significantly reduce cost at every step of its production process, is committed to product quality and excellence. In order to ensure that these concepts are constantly maintained, the company ensures that every decision made will significantly reduce cost, enhance customer service, and promote supplier collaboration. To achieve this objective Walmart integrates skillful inventory management, excellent communication with suppliers, supervision over the entire supply chain and high quality supplier collaboration approaches within a strong retail-suppler platform (Romero, 2005). The company employs a strong team of global suppliers integrated through a technological platform that enhances end-to-end supervision of the supply chain progress. Quality and excellence at Walmart is usually measured by the extent to which customers are pleased. This may be reported through establishing whether products being manufactured as well as those being dispensed to different distribution stores meet various customer requirements. Walmart also gives its global suppliers access to its database to be able to access information pertaining to store information, product inventory and decision support (Neumark, 2007). This ensures that the suppliers are able to immediately replace sold products to ensure that customer demands are not failed at any given point and that any product that they ask for is readily available. Customer happiness is also measured through establishing the extent to which the best qualities products are provided at the lowest price possible (Vincent, 2012).
Inventory methodologies and models
Walmart has equally employed effective inventory methodologies and models to help improve overall competitiveness of the larger company. The point-of-sale system is one of the important methodologies that Walmart integrates within its operations system to enhance proper inventory management. Through this methodology, the company uses a computerized system to monitor each item sold so as to prepare for reordering of this item (Roger, 2014). It also uses this system to identify the products that the merchandise sells slowly and eliminates it from the reordering to avoid overstocking. Another inventory methodology used at Walmart is the bar-code scanner methodology, which enables the company to monitor each item sold and make such information available both for reordering and sales review (Walmart, 2012). An important model employed in Walmart’s inventory management process is the CPFR process model. This model allows for reengineering of the relationship prevailing between the trading partners to enhance transactions. CPFR enhances collaborative planning, forecasting, and replenishment of inventories to ensure that they are readily available for customers. Through this model, Walmart collaboratively plans about creation of certain products with manufacturers, forecasts possible exception of certain products during distribution process as well as organizes for replenishment of depleted products (Romero, 2005). This model however depends on comparisons made between companies thereby allowing Walmart to copy the strategy employed by other companies. This should however be adjusted to allow Walmart to employ a best-fit strategy rather than copying what another company does.
Operational planning policies
Walmart has employed operational planning policies aimed at keeping company expenditure on its employees at minimal. One of these policies is the internal compensation policy, which inhibits compensation increment as a way to reduce overall company expenditure. Although the company states on its website that it offers jobs that would open doors to a better life, this does not reflect in its compensation policy (Plambeck, 2011). This is because this policy does not allow for pay increment particularly for hourly workers, which makes it difficult to cater for personal bills. The medical insurance policy is also unfavorable to employees’ wellbeing, as it demands for Walmart to deny medical insurance to new employees working less than thirty hours a week. This policy only enhances the company’s welfare while failing to cater for employees’ welfare. The job design employed at Walmart is also demoralization in that it does not offer an opportunity for promotion or job rotation (Narendra, 2010). This demoralizes employees as they only gain experience from monopolistic jobs without gaining new experience on other jobs. Walmart is further criticized for exposing its employees to poor working conditions that include unpaid overtime and poorly conditioned and understaffed stores (Charles, 2014).
Movement towards lean processes
Walmart is committed to lean processes, which acts as a means through which the company reduces wastage to maximize overall benefits. Walmart is committed to lean retail, which is a process that demands for efficiency maximization as well as identification and reduction of wastage. The company adopts simple work coordination as well as uses the pull strategy to enhance replenishment (Abbott, 2009). This reduces wastage of time, materials, and other resources. Walmart further simplifies work by using similar tools as those used in other companies to indentify waste and enhance operational efficiency. This ensures that time and resource wastage is eliminated, which improves overall organizational efficiency. The lean processes are important in Walmart as they help to promote the cost leadership culture by ensuring that customer services are improved without necessarily raising labor cost. This is particularly achieved by hiring a small number of highly productive employees. Adopting lean processes further promotes efficiency by ensuring that nonproductive employees are eliminated, which enhances overall performance improvement (Massengill, 2013).
Walmart is renowned for being the market leader in the retail industry, which is measured by its employee capacity; revenue generated and estimated market value. Such success can be attributed to its unique supply chain process, which is characterized by unique procurement, distribution, communication, and inventory approaches. The company employs cost reduction, leadership, and technological aspects to retain a competitive edge. It is also committed to quality and excellence through ensuring that every decision made is bound to contribute to customer satisfaction, cost reduction, and service improvement. It also aims to reduce wastage while improving efficiency and ultimate success through the use of a lean process. Its operational planning policies have however been critiqued as they do not contribute to overall employee welfare.
Abbott, M. (2009). Providing Fast and Reliable Delivery, Indian Journal of Economics and Business, 19(2):67-111.
Brown, K (2013). Buying into Fair Trade: Culture, Morality and Consumption, New York: New York University Press.
Charles, C. (2014). Competing with Costco and Sam’s Club: Warehouse Club Entry and Grocery Prices, Southern Economic Journal, 80(3):321-356.
Dixon, F. (2006). Sustainability and System Change Walmart Pioneering Strategy, Retrieved on 28th April, 2015 from http://www.csrwire.com/pdf/WMT_Sustainability_4-06.pdf
Massengill, R. (2013). Wal-Mart Wars: Moral Populism in the Twenty-First Century, New York: New York University Press.
Narendra, B. (2010). Walmart is Coming to India-the Case, Journal of the International Academy for Case Studies, 16(3):91-139.
Neumark, D. (2007). The Effects of Walmart on Local labor Markets, Journal of Urban Economics, 63(2008): 405-430.
Plambeck, E. (2011). The Greening of Walmart’s Supply Chain, Retrieved on 28th April, 2015 from https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=6&cad=rja&uact=8&ved=0CD4QFjAF&url=https%3A%2F%2Fwww.gsb.stanford.edu%2Fsites%2Fdefault%2Ffiles%2Fdocuments%2FSCM1109_Walmart.pdf&ei=C-k_VZ6eD8PtatrtgIgO&usg=AFQjCNEZ03qjSxeRaV0fQeIG1FbT5PaHbA&sig2=W9Za5eqXQeM3voR-KHl0Qg&bvm=bv.91665533,d.d2s
Rijmenam, M. (2014). Think Bigger: Developing a Successful Big Data Strategy for Your Business, New York: American Management Association.
Romero, E. (2005). Leadership, Culture and Competitive Advantage, retrieved on 28th April, 2015 from http://competeoutsidethebox.com/wp-content/uploads/articles/Leadership,%20Culture%20and%20Competitive%20Advantage.pdf
Roger, S. (2014). The Risk-Driven Business Model: Four Questions that will Define your Company, Research Technology Management, 57(40:12-45.
Vincent, L. (2012). Brand Real: How Smart Companies Live Their Brand Promise and Inspire Fierce Customer Loyalty, American Management London: Association.
Walmart. (2014). Serving Customers and Delivering Savings Every day, Retrieved on 28th April, 2015 from http://cdn.corporate.walmart.com/66/e5/9ff9a87445949173fde56316ac5f/2014-annual-report.pdf
Walmart. (2013). A History of Delivering Strong Results. Retrieved on 28th April, 2015 from http://c46b2bcc0db5865f5a76-91c2ff8eba65983a1c33d367b8503d02.r78.cf2.rackcdn.com/88/2d/4fdf67184a359fdef07b1c3f4732/2013-annual-report-for-walmart-stores-inc_130221024708579502.pdf
Walmart. (2012). Walmart in Lowa Revisited. Monthly Labor Review, 135(12):90-112.
Wei, L. (2011). Strategic Analysis for Walmart, Retrieved on 28th April, 2015 from http://www.sfu.ca/~sheppard/478/syn/1137/G_6_1137.pdf