Wal-Mart’s Supply Chain and Merchandise Turn Issue

Introduction

The key focus of the following paper is operations management about the supply chain of the Wal-Mart company. The paper enlists the company’s background and its competitive priorities, which mainly consist in reliance on IT ad data analysis implementation, as well as operations management deployment. In this respect, the importance of operations management in its supply chain, and the problem of merchandise turn as a consequence of poor distribution organization. The underlying reasons for the issue are enlisted as well. The problem can be solved by storing the goods on the premises of the department stores rather than in distributions centres. Overall, the fact that the company identifies the problem can be considered advantageous.

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Organizational background

The founder of Wal-Mart, Sam Walton, was born in 1918 in Oklahoma. He was 44 when he started his first Wal-Mart in the city of Rogers, Arkansas. What had started as a local freight outlet has turned into an Inc. seven years after it was opened, and, just a year later, Wal-Mart’s first distribution centre was opened in Bentonville, Arkansas. In 1978, the company established pharmacy, car-care centre, and jewellery divisions in its retail outlets.

1978 was the first billion-dollar sales year for Wal-Mart (Ghazzawi, Palladini & Martinelli-Lee 2014). In 1988, Wal-Mart started to sell groceries to become the most extensive store chain of its kind less than two decades later. By the year 2004, Wal-Mart was running $80 billion of sales in the Unites States alone. By 2012, the global sales amounted to $444 billion (Meyers 2014).

The mission that the founder envisioned was to pursue compassionate and devoted customer service approach through corporate culture and leadership. Among the values cherished by the company are law-abidance, integrity, prompt conflict resolution, and fair work-life balance for all employees. Life quality improvement and sustainability, either globally or locally, are deeply valued as well (Ghazzawi, Palladini & Martinelli-Lee 2014).

As to the structure of the establishment, Wal-Mart deploys a hierarchical functional approach. As the title implies, it is featured by distinct hierarchy and function determinacy. Wal-Mart’s hierarchy can be characterized by top-to-bottom command where directives from the top management are distributed to lower-rank employee cluster. At the same time, the company’s function determinacy means there are separate departments to render certain functions. Some of the examples include, for instance, an HR-department, an IT-department, and a marketing department. On the other hand, among the downsides of this structure is that the tedious communication processes from the bottom to the top and back present an obstacle on the way to implementation and adjustment of business practices (Csaszar 2013).

Competitive priorities

In an economic situation where manufacture and supply are largely dictated by demand and consumption rates, the corporations are bound to take account of the vox populi. It is especially relevant for corporations of Wal-Mart’s scope to adapt their strategies to the public’s demand and maintain competitiveness through adaption (Hanan 2013). As a consequence, the main competitive priority of Wal-Mart is to present an economic value to their customers (Chekwa, Martin & Wells 2015). By keeping the prices lower than in the majority of other grocery stores, the company receives positive feedback from the public and keeps its sales rates higher than the others’.

More importantly, the main factor that facilitated Wal-Mart’s expansion is its supply chain management. At that, Wal-Mart was the first to adopt data analysis as a competitive feature (Shin & Tucci 2015). When measuring the competitive moves in Walmart, it is noticeable how the company implements technology to achieve its competitive priorities in cost and innovation. Walmart was one of the leading innovator by adopting a new technology called Retail Link System.

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The system consists of extensive databases that are linked by satellite with experts who analyse a real time data coming from Walmart’s distribution centre and sales point to predict the demand and communicate the data to the suppliers’ network. Retail Link System was placed to effectively monitor their inventories and track them to maintain a perfect stocking time as not to face any shortage in shelves.

Furthermore, Retail Link System helps cutting cost by ordering a perfect estimated amount of inventories intended to eliminating the storing cost (Thawatchai 2014). Furthermore, combined with the Retail Link System, the company makes use of Radio Frequency Identification (RFID) technologies. These lie at the baseline of Wal-Mart’s supply chain since they track the product distribution and conform to the company’s competitive efficiency priority. Also, the company benefits from RFID in terms of logistics cost reduction, which is another competitive advantage (Shin & Tucci 2015).

Cost reduction and data analysis aside, Wal-Mart’s supply chain management is not entirely technology-based. The company possesses a network of distribution systems, on which the fundamentals of their growth had been based before the company started to adopt IT and data analytics. Also, Wal-Mart’s interaction with suppliers is grounded on the expectations that the company sets; if a supplier fails to meet them, the cooperation is quite likely to cease (Comm & Mathaisel 2008). For efficiency maintenance and further growth, the value of operations management is hard to overestimate.

The importance of operations management and its features

The operations management strategy employed by Wal-Mart incorporates a wide array of diverse approaches. These are aimed at supply and inventory management, as well as boosting the sales rates. It is possible to say that operations management is partially the cause of the company’s success on the global scale due to the efficacy of supply chain sustainment. At that, operations management is known to cover several decision areas, and Wal-Mart’s management takes practically all of them into account.

To illustrate the effect of operations management for Wal-Mart, it is worth considering, for instance, the design of goods and quality management. Wal-Mart has its line of goods, for one, and the quality standards are one of the customers’ priorities (Chekwa, Martin & Wells 2015). The first area of managerial decision-making emphasizes efficiency of the company’s retail services and proves both the services and goods cost-effective. The other area is primarily concerned with the quality of good. The management’s task here is to assure the goods and services are compatible with the quality standards.

Within the scope of the current research, the value of operations management lies in managing supply chain and inventory. It is worth considering that Walmart deploys IT and sets high expectations that suppliers have to meet. In this respect, the supply chain is intertwined with IT due to the company’s active deployment of data analytics. The information systems that management possesses are one of the causes of the company’s ability to shrink the operation costs to the minimum.

Through such systems, operations management is capable of cooperating with vendors; the result of this cooperation are competent decisions concerning the timeframe and the location where the merchandise should be moved. As to the inventory management, the suppliers are enabled to get access to the company’s databases to analyse and supply the goods based on this analysis. That way, the stock-outs are minimized, as well as the inventory bulk (Shin & Tucci 2015).

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Consequently, the company’s performance runs high while the costs are decreased, which is what the task of operations management consists in. At the same time, the company has enhanced the chain management and upgraded it to suit its interests. In addition to the aspects mentioned above, Wal-Mart’s operations management is focused on planning the demands, making forecasts, and managing inventory (Vivares-Vergara, Sarache-Castro & Naranjo-Valencia 2016).

Overall, the features of Wal-Mart’s supply chain management demonstrate no great deviation from the major constituents of the majority of such chains, such as the ones employed by Target, Sears, and Costco (Corona 2014). The operation management, at that, is responsible for the purchases, distributions, and integrations. Undoubtedly, operations management is a critical part of the company’s success. On the other hand, some issues at the operation-managerial level can be singled out as well.

Issues experienced by Wal-Mart

Insofar as the Wal-Mart acknowledges the issues it experiences, the basis for problem-solving is built. One of the issues to be acknowledged is the way the company tries to decrease the total inventory. (Bensoussan et al., 2016). Trying to cut back on that, the company has overlooked the fact that the sales have been growing considerably slower than the inventory. This cannot be regarded as Wal-Mart’s mistake, only; many retailers have reflected upon the counter-productivity of the inventory during the past several years. These are regarded as even more profound business challenge than out-of-stocks (Bensoussan et al., 2016).

The primary implication of it is that the demands imposed by the investors have overpowered demands that customers impose. Another issue is the complaints about empty shelves that Wal-Mart has been getting lately. The possible cause might be that, in an attempt to increase the supply chain flexibility, the goods are held up in the distribution centres rather than on the stores’ premises.

Analysis and discussion

It can be conceded that the problem of merchandise turn is at the root of the issues experienced by the company. To put it simply, merchandise is mainly concerned not with the amount of the goods sold but with how quickly they are solved and in what relation to the inventory. It would be simple to provide a solution on the spot, were it not for the fact that the turn is summed up from a variety of numbers (Bensoussan et al., 2016).

For instance, if fish sauce X sells fairly well and marmalade Y does not demonstrate such sells rates, the distributors would probably regard it within the framework of the category “condiments.” The meaning is that the orders probably will not be made for either the fish sauce or the marmalade to get the turn in control. The customers and the retailers are, thus, forced to confine themselves to the averages, which can be uncomfortable at times.

The situation is still further exacerbated by the fact that the very same marmalade is produced locally while the fish sauce has to be imported, for instance, from Vietnam. As a consequence, while the situation with the marmalade can be dealt with relatively fast, the imported merchandise turn issues take more than a month to even detect, let alone correct (Bensoussan et al., 2016). To resolve these issues, operations management might take measures to move inventory to the stores’ premises when there is such a possibility. Also, the inventory from the centre can be reallocated to distribution via the Web.

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Conclusion

To conclude, the focus of this paper was operations management as seen through the lens of the Wal-Mart supply chain. The paper held the company’s background as the point of focus, as well as the competitive priorities of Wal-Mart. Among the company’s competitive priorities are reliance on IT and data analytics – areas in which the company has pioneered – as well as operations management usage to back up the supply chain. Among the issues to be solved is the problem of inflexible distribution system which is incapable of tackling the merchandise turn. As a result, both the customers and the retailers are overcome by the average amounts of goods delivered in each separate category. The possible solution could come in the form of better storage location option, e.g., the department stores’ warehouses. It is also recommended that the company pays more attention to other options, such as Web-based distribution.

References

Bensoussan, A, Çakanyildirim, M, Li, M & Sethi, SP 2016, ‘Managing Inventory with Cash Register Information: Sales Recorded but Not Demands,’ Production and Operations Management, vol. 25, no. 1, pp. 9-21.

Chekwa, E, Martin, J & Wells, K 2015, ‘Riding On the Waves of Sustained Competitive Advantage: Consumers’ Perspectives on Walmart Corporation,’ International Journal of the Academic Business World, vol. 9, no. 1, pp. 61-73.

Comm, CL & Mathaisel, DFX 2008, ‘Sustaining higher education using Wal-Mart’s best supply chain management practices,’ International Journal of Sustainability in Higher Education, vol. 9, no. 2, pp. 183-189.

Corona, R 2014, ‘A Comparative Analysis of Major Us Retailers Based on Enterprise Marketing Efficiency,’ Global Journal of Business Research, vol. 8, no. 4, pp. 25-39.

Csaszar, FA 2013, ‘An efficient frontier in organization design: Organizational structure as a determinant of exploration and exploitation,’ Organization Science, vol. 24, no. 4, pp. 1083-1101.

Ghazzawi, IA, Palladini, M & Martinelli-Lee, T 2014, ‘The Wal-Mart Stores, Inc.: An American Dream That Touched the World,’ Journal of the International Academy for Case Studies, vol. 20, no. 1, pp. 13-34.

Hanan, JS 2013, ‘The Ecology of Empire: Wal-Mart’s Rhetoric of Environmental Stewardship and the Constitutive Power of the Multitude,’ Environmental Communication, vol. 7, no. 4, pp. 529-547.

Meyers, M 2014, ‘‘Save Money Live Better’: An Analysis of Wal-Mart’s Story,’ Academy of Marketing Studies Journal, vol. 18, no. 1, pp. 51-55.

Sharma, S & Sisodia A 2014, ‘Comparative multi criteria analysis and dependent optimisation through integrated supply chain,’ International Journal of Productivity and Performance Management, vol. 63, no. 8, pp. 1046-1069.

Shin, S & Tucci, JE 2015, ‘Wal-Mart’s Dilemma in The 21st Century: Sales Growth Vs. Inventory Growth,’ The Journal of Applied Business Research, vol. 31, no. 1, pp. 37-46.

Thawatchai, J 2014, ‘The Study of Competitive Priorities and Information Technology Selection: Exploring Buyer and Supplier Performance,’ Journal of International Technology and Information Management, vol. 3, no. 3/4, pp. 91-124.

Vivares-Vergara, JA, Sarache-Castro, WA, & Naranjo-Valencia, JC 2016, ’Impact of human resource management on performance in competitive priorities,’ International Journal of Operations & Production Management, vol. 36, no. 2, pp. 114-134.

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