Select a company that you are familiar either from past experience or by researching on the Internet and address the four points below.
- Explain the strategic importance of the supply chain
- Identify six supply-chain strategies
- Explain issues and opportunities in the supply chain
- Describe the steps in vendor selection
Supply Chain Strategy: Wal-Mart
Supply chain is a series of units or activities (both internal and external) to an organization not only involved in the transformation of raw materials into finished products, but also the delivery of these products to customers, after-sales services, and even feedback systems required for future improvements (Ketchen & Hult, 2007). Effective supply chain management is very critical to the success of an organization as Boyer, Frohlich, and Hult (2005) recognized the modern competition as being a competition of supply chain vs. supply chain rather than firm vs. firm. Ketchen and Hult further emphasize the significance of supply chain as a core element of strategy rather than using it as a supporting function to strategy implementation. It’s this strategic supply chain management focus that brought Wal-Mart to the top of the retail businesses not only in the US but also in the global competition. The purpose of this article is to explain the strategic significance of supply chain with specific reference to the case of Wal-Mart’s global success. Some of the key supply chain strategies of the firm will be discussed. Furthermore, article will try to identify issues and opportunities in the firm’s supply chain and finally, the steps that Wal-Mart follows to select its vendors.
Strategic Importance of supply chain
Continuously evolving and innovative supply chain aligned to the strategic direction of Wal-Mart has been the backbone of Wal-Mart’s success over the last 55 years. Since its inception, Wal-Mart has been focused on low-price and differentiated products strategies while providing services at extremely distributed locations. Wal-Mart requires speed of supply in order to fulfill the demands of the customers. Geographical distribution of its retail stores offered speed issues. To overcome the speed issue carries extra-costs which add to the price and in turn suffer the prices. Moreover, high volumes of inventory as well as complexity offered by dealing with a huge number and variety of suppliers again bring problems of efficiency and cost. To overcome, all these issues and keep on its successful journey towards lowest price strategies, value addition to the supply chain has always been of utmost significance for Wal-Mart.
Supply Chain Strategies
Various supply chain strategies of Wal-Mart are as listed below:
- Wide Scope of Operation: Wal-Mart increased its sales volume by offering almost everything in its retail stores. Offering wide variety of items increased probability of sales per day. Huge customer base also allowed Wal-Mart to capitalize on its bargaining power as buyer by demanding lower prices from its suppliers.
- Enhanced Customers’ Accessibility: Wal-Mart enhanced its geographical presence in a way that around 90% of Americans have a Wal-Mart within 15 miles of their living place. This Omnipresence of Wal-Mart has increased Wal-Mart’s penetration into their customers’ lives.
- Advanced Inventory Management: Wal-Mart has been pioneer in deployment of Radio Frequency Identification (RFID) system in order to track inventory. This technology strategy has not only enabled Wal-Mart to keep track of what is available and what is required, but also about what is on the way or in the nearby warehouse. This management of technology and innovation has enabled Wal-Mart to cater both for overstocking and understocking.
- Integration of RFID to Vendors: Integrating the RFID technology for its suppliers has also enabled the Wal-Mart vendors to lessen the operational burden of Wal-Mart by empowering the suppliers to keep track of inventory requirements at retail stores and warehouses.
- Backward Integration: Wal-Mart eliminated intermediary suppliers and integrated back with the manufacturers directly in order to capitalize on its high volume inventory requirements and thus cutting intermediary operational and distribution costs. In short, they reduced the supplier links which were costing both time and money.
- Ecommerce: In order to further facilitate the customers’ accessibility, Wal-Mart introduced its Ecommerce component which not only enables customers to find the product details and availability, but also enhances Wal-Mart’s marketing function by adding to the digital marketing segment.
Issues and opportunities with Wal-Mart Supply Chain
Despite RFID system in place, Wal-Mart reported a decline in sales and hence profits due to poor inventory forecasts and management, which causes long waiting times for customers while increased search times for retail managers and hence lowering efficiency (Trujillo, 2016, November 15). Moreover, Donati (2015, July 4) reports quality problems of food items sold by Wal-Mart which is bringing a bad name to the gigantic retailer. Donati emphasizes that Wal-Mart should improve the selection and control process of suppliers through some monitoring and evaluation standards in order to rectify this issue.
Since every problem brings a new opportunity, same is the case with these issues. Wal-Mart in an attempt to rectify the inventory management issues is introducing a mobile app which will not only, help resolve the inventory management issue, but will also penetrate more deeply into customer community through their smartphones. This can provide them another potential source of marketing and close communication with their customers. Similarly, working on the standardization of food supplier selection, they can strengthen their corporate social responsibility strategy, which will bring them a name better than ever through true customer care.
Vendor Selection Process
Wal-Mart offers three different vendor programs i.e. National Supplier Program, Local Purchase Program and Services/Non-Resale Program. Anyone interested in any of these programs has to register his/her company at Dun & Bradstreet by visiting dnb.com. Upon registration, Dun & Bradstreet will assign the registrant a unique number which has to be provided to Wal-Mart in the financial section of the vendor registration application. Dun & Bradstreet will provide a D&B report to Wal-Mart which describes your financial health and risk scores ranging from 1 to 9. Wal-Mart does not accept any vendors with risks equal to or greater than 7. Download the proposal packet from www.walmartstores.com and complete the application. For National Supplier Program, submit the application online with all necessary documents. Sometimes, sample product is required to be mailed to Wal-Mart for further evaluation. For Local Purchase Program, visit the local store manager with the above paper work as well as sample product. The local store manager will notify the corporate office if he is interested in dealing with your business. Service vendors have to call an appropriate number listed on Wal-Mart website and discuss the details. At the end, a unique reference number is assigned to the caller for future use. Sometimes, Wal-Mart will call you for a meeting or for submitting additional information. Complete and return the vendor agreement paperwork. Upon approval of the agreement, the vendor has to call Electronic Data Interchange (EDI) to setup an electronic work desk for the vendor company in Wal-Mart database and provide the vendor with temporary passcode for accessing the vendor system. The vendor then opens the electronic work desk account and registers a new supplier agreement. Upon approval of the vendor agreement, a unique vendor number is assigned and shared with both the vendor and the buyer.