The Lean Methods Application by Walmart Company

Abstract

This paper is a critical appraisal of Walmart in relation to how the company has applied lean tools in its operations. Considering that Walmart is not a manufacturing company, this report focused on its service delivery processes to analyze the application of lean practices. The 5-S concept, value stream mapping (VSM), standardized work, Kiazen, and visual workplace tools were selected and applied in analyzing the company’s operations. The results revealed that the use of lean tools had helped Walmart to reduce operating and handling costs during procurement and supply of its products to the end users or its chain stores. Additionally, using lean methods ensures that Walmart replenishes its products and goods as fast as possible. The purchased goods and products also reach the customers at the right time, quantity, and quality.

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Introduction

Walmart is the largest retail company worldwide. The company has about 260 million customers, all from different countries, who frequent its 11,500 stores and e-commerce sites on a weekly basis (WalMart, 2016). The company’s revenues culminated to US$482.1 billion for the 2015-2016 fiscal year (WalMart, 2016). Additionally, the company has about 2.3 million strategic alliances and business partners worldwide, whereby about 1.5 million of them are from the US. This paper analyzes the company’s use of lean methods in its business processes and transactions that give the company a competitive edge in terms of reduced lead-time and value creation, among others.

Analysis

The 5-S Concept

Walmart’s efforts are directed towards doing effective business with its partners. Thus, the 5-S concept is indispensable when it comes to its processes like procurement of its merchandise. The 5S stands for sort, set in order, shine, standardize and sustain. Walmart receives many tender applications from prospective suppliers daily. Once the applications are received, they are sort out depending on the categories of products applied for, such as food products, electronics, etc. (Roberts & Berg, 2012). Setting in order is attained by establishing specific dates when each category of the applicants is reviewed. After reviewing, the most appealing suppliers who shine above all others in each category are selected or win the tenders. The suppliers are then required to meet the quality requirements of Walmart, which are standard. Finally, Walmart sustains only those suppliers who supply quality products throughout the business cycle.

Value Stream Mapping (VSM)

VSM is a tool that maps the Walmart’s processes from the supplier to its customers (Sodhi, Son, & Tang, 2012). To avoid delay and lead time, Walmart sources its products directly from its suppliers. With the use of a Vendor Managed Inventory (VMI) system, Walmart gets almost 100% order fulfillment. All its suppliers are interconnected using the computer program that ensures information flow is made easier.

Standardized Work

Standardized work refers to a set of process procedures that are part of the daily routine, which forms a basis for continuous improvement in service delivery. It comprises three elements, namely: precise work sequence, takt time, and a standard inventory. Takt time refers to the timeframe products that must be produced or delivered to meet the demand. Walmart uses Radio Frequency Identification (RFID) technology as well as smart tags that enable it to replenish the stock in a timely manner to meet customer demand (Sodhi et al., 2012). The company documents standard operating procedures that are followed in meeting the customer demand within the takt time. Using the RFID, the inventory is monitored in real-time, enabling automated reordering to replenish the sold goods and products. This enables the company to maintain a specific number of items in their stores, thus attaining a standard inventory.

Kaizen

Kaizen is a tool that is aimed at improving a company’s best practices and processes by eliminating wastes. Walmart orders its products directly from its vendors and ensures that once the goods reach their stores, they are unloaded directly to the distribution trucks. This ensures that only a few products and goods are stored between receipt and distribution (Roberts & Berg, 2012). This helps the company to save money on inventory management and storage costs, which could have otherwise been wasted. Additionally, a reduced need for storage avoids goods and products from being damaged while in the stores, thus avoiding wastes associated with defective products that cannot be accepted by the customers.

Visual Workplace

As a lean tool, a visual workplace involves the provision of simple and visual answers to all stakeholders involved in the production or service delivery process (Johnson, 2001). These answers must be provided immediately the question is triggered to avoid wastage of time. For this reason, the visual workplace lean method recommends the use of posters, service blueprints, and other forms of pictorials that provide immediate answers to any party or stakeholders that refers to them. This avoids the need to consult, for instance, the product manager or fellow workmates on how a certain procedure works.

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In relation to this lean tool, Walmart ensures that all its objectives and core values are clearly stipulated and documented in brochures, newsletters, and other media. This ensures that all its employees and partners can refer to them when they need answers about how to conduct the operations. Walmart also has detailed service blue-prints that document the various points of contacts for all the stakeholders involved in the service delivery process (Sodhi et al., 2012). The service blueprints help to provide answers in a timely manner relating to the staff actions, support systems, and physical evidence or infrastructure needed to deliver ordered goods and services across different distribution channels, which could be either online or face-to-face interactions with the provider.

Results

The Outcome of Using Lean Tools at Walmart

The use of lean supply chain has helped Walmart to reduce operating and handling costs that may be incurred during procurement and supply of its products to the end users or its chain stores. With reduced costs, the company can set competitive prices across its different products and goods portfolio. Being the price leader, the company has more customers than its competitors world-wide.

Using lean methods, Walmart ensures that purchased products and goods are replenished as fast as possible. The purchased goods and products also reach the customers in the right time, quantity, and quality. This reduces chances of complaints from the customers that can contribute to many instances of returned goods, which can lead to increased expenses of having to reship the products. Because of the elimination of unnecessary costs in supply chain, for instance through cross-docking, the company’s operating profits increase thus gaining a competitive advantage over the competitors.

Three Interesting Points about Walmart Company

Walmart has employed lean tools to minimize large fluctuations in demand of products by its customers that cannot be matched by its ability to supply. The use of RFID technology and smart tags make it possible for the company to monitor their stock and replenish it to meet the customers’ demand and maintain their loyalty. Additionally, using the lean practices enables Walmart to attain a standard inventory of products and goods that it can handle at minimal storage costs. Perhaps this explains why the company is so much inclined towards cross-docking, whereby products procured from manufacturers or suppliers are distributed directly to the retail chains or customers who order them with marginal storage time.

Summary

Walmart epitomizes on the use of lean concepts in its supply chain management. Because of this, the company has gained leverage over its competitors in terms of market share and dominance. Despite these achievements, the company, just like other organizations in the world, must review its use of the lean tools quite often in order to remain competitive in terms of best practices, such as waste minimization and timely deliveries over its supply chain.

References

Roberts, B. R., & Berg, N. (2012). Walmart: Key insights and practical lessons from the world’s largest retailer. London, United Kingdom: Kogan Page.

Sodhi, M. S., Son, B. G., & Tang, C. S. (2012). Researchers’ perspectives on supply chain risk management. Production and Operations Management, 21(1), 1-13.

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WalMart. (2016). 2016 Anual Report. Web.

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