Procurement refers to the procedure involved in acquiring products and services an organization requires to accomplish its business model. Procurement is associated with different tasks, including funding purchases, inventory control, bargaining prices, coming up with quality standards, among others. Procurement stops once an organization has ownership of the goods in the general process of the supply chain. The cost of obtaining goods has to be lower than the difference between the selling price and processing and selling cost for an enterprise to make a profit. Purchasing is a subdivision of procurement, and it involves buying products or services, and it regularly consists of paying and receiving. Supply chain refers to each person engaged in availing goods to customers; it ranges from producers, transporters, those who collect raw materials, staff, and others (Heizer, Render and Munson, 2017). The tasks and roles that play a part in moving the goods are also included in the supply chain, for example, marketing and sourcing. Various activities constitute purchasing and supply chain, and so a systematic understanding is needful in appreciating the strategies used by companies to gain a competitive advantage at a global scale.
Walmart’s Supply Chain Profile and Strategy Towards Value Creation
Walmart is a company ranked at the top by Fortune; it is a global giant that deals with retail trade, and it operates many stores using different company names around the world. Due to the large numbers of stores, inventory, and employees, it is crucial for the organization to have an effective strategy for supply chain management. The whole company is dedicated to a business model that can eliminate costs from the supply chain so that its customers can save money and have a good life. Walmart has grown to the world’s largest and influential retailer from about two decades ago while recording the highest sales and operating profit (Bastas and Liyanage, 2020). It is its supply chain management that made it shift from a local retailer to a global giant.
Walmart has become a talk to almost every university in the world due to its supply chain. The organization started with the aim of providing consumers with the products they needed at any time and place they wanted them from. The business then concentrated on coming up with cost structures that permitted it to provide low pricing daily. Walmart then focused on a more advanced supply chain to enhance the competitive advantage it now has (Jawad, 2017). In its initial years, it is the supply chain management that led to the success of Walmart. Innovation in its supply chain started with eradicating some chain links; it began functioning directly with producers to reduce cost and administer the supply chain effectively. Walmart had a drive that was termed as the Vendor Managed Inventory (VMI), and it was a supply chain initiative where producers became in charge of handling their goods in the depots of Walmart. This made its supply chain to be more efficient from that time till date.
The company has been practicing strategic sourcing for a long time to obtain goods at fair prices from its suppliers who can meet demand. The organization then formed strategic partnerships with many traders; this granted them the possibility of having long-standing and bountiful purchases in return for the possible fair prices. Walmart also builds a communication and association system with sellers, and this restructured their supply chain management to improve material movement with inexpensive stock. The collaboration of different entities has made Walmart so effective since they even act as a single organization. Walmart also has a logistics exercise that is the core of its strategy to restock efficiently and is referred to as cross-docking (Sweeney, Grant, and Mangan, 2018). This practice means direct transference of goods from incoming or outgoing trucks without requiring additional storage; this is done by unpacking goods from inbound trucks and packing them straight into leaving trailers without any storage in the middle. Suppliers have been distributing items to Walmart centers where the item is cross-docked before being transported to their stores. This helps in cutting down the cost of keeping inventory and decreases transportation time.
Walmart has trucks that deliver products to its distribution centers for storage, repackaging, and then dispensed without remaining in storage. This tactic has reduced the organization’s cost substantially, giving the company room to offer competitive pricing. As Walmart was in a persistent quest for low prices for its customers, it adopted and invested in technology to turn into a developer in the manner in which stock is traced in stores to give room for cutting down costs (Spicer and Hyatt, 2017). The company has then been spending a lot on information technology and enhancing its e-commerce proficiency.
Technology is important in the supply chain of Walmart as it acts as the basis for their strategy. The organization, as a private company, has one of the largest computing infrastructures, and this allows it to correctly predict demand and inventory levels. Technology also helps in handling customer relationships, deal with response arrangements and develop effective transportation pathways. For example, Walmart enforced the initial Universal Product Code to be used across the organization for collecting and analyzing information from the store at an instance. The organization then innovated this technology to a Savings Catcher that permits customers to scan barcodes of items using their phones and then analyze prices (Hunt, Watts, and Bryant, 2018). The company then developed a Retail Link that is an enormous database; this is linked to analysts using a global satellite, and it enables them to predict what suppliers need and shows instantaneous sales data from registers to distribution centers.
Producers and sellers inside the supply chain coordinate their demand forecasts following joint planning, forecasting, and restocking system. Every connection in the chain is linked through technology and comprises a satellite grid and a primary database. Information sharing between Walmart and its partners is what caused it to be so innovative. The method used by Walmart gives room for regular casual collaboration among suppliers, stores, and distributors. Also, the racking of purchases and demand dome by the organization’s supply chain permits customers to successfully draw products to stores using their requirements and not the organization keep products on shelves. In current times, the firm has been making use of Radio Frequency Identification tags (RFID) that apply arithmetical codes which can be inspected from afar to trace goods as they move along the supply chain (Chan, 2020). The company is now using smart tags that permit the workforce to easily understand the goods that require replacement for shelves to be continually stocked. There has been a decrease in running out of stock ever since RFID was initiated in the supply chain of Walmart.
Walmart has been able to gain a sustainable competitive advantage due to its strategy in supply chain management. Walmart has now grown into a leading force in the global marketplace, and as there is advancement in technology, the organization keeps concentrating on processes that can lead to innovation and cause improvement in its supply chain to realize greater productivity. Another strategy that Walmart has used for value creation is its marketing mix. Walmart has achieved its price positioning by having prices that are customer-friendly to maximize sales. The firm has exceptional procurement strategies to allow the organization to trade with reasonable actors in the supply chain for prices to remain low. Diversity guarantees that related products can propel the sale of other items in case one are not promoted as required (Cao, Zhang and Ma, 2020). Walmart also deals with a variety of goods that make available to the market what is needed by consumers. Every category of items in Walmart comes in various forms, they have a solid relationship with their suppliers, and their purchasing in bulky enables them to attain economies of scale.
Walmart runs regular promotions containing discounts at any season in the business world. Their store utilizes taglines that are related to low costs, for example, their slogan that states, “save money, live better”. They advertise their products in various media, including television and social media. They offer safe delivery methods that provide a quality service to online customers. Walmart has different strategies for the place as a marketing mix; they have a robust e-commerce platform that enables clients to buy goods online. They have innovative information technology systems that help the firm to trace goods irrespective of whether they are in stock or are being transported. The company has great geographical locations and has trucks to be used in delivering products from door-to-door. The organization has also distinguished its products from that of competitors through branding and differentiation.
Challenges in The Supply Chain of Walmart
Even though Walmart has thrived in the market due to its supply chain, there are still challenges that it experiences in the same. The operations in the supply chain were not associated with the firm’s strategies. The organization has a complicated network of supply chain and how substances move; information is incomplete, and the supply chain is practically rigid to new items. The supply chain of this organization was also challenged by the COVID-19 pandemic. When the pandemic set in, there was a requirement for people to remain in their homes and also maintain social distance. This greatly affects the operations of Walmart, especially when it comes to selling and delivering to customers (Sodhi and Tang, 2020). The organization had to be forced to come up with a new service that would act as a solution to this problem, and therefore they planned to come up with a service called Express Delivery. This service was meant to ensure that goods are delivered from stores to doorsteps of clients in the shortest time possible. It was a plan to give delivery options for many items.
The way of life of its customers changed and likewise their way of shopping as a result of the pandemic. And even when the pandemic comes to an end, clients will be very engaged and may need speedy supplies. Subsequently, since the organization had to hire a squad to offer Express Delivery services, the price tag on goods had to be increased by a certain amount on top of the prevailing delivery charges (Nilufer, 2021). This fee results in to increase in the costs of daily spending of the customers; this has resulted in some cancel their partnership with Walmart, especially when it comes to delivery since their model seems not to work. The chief executive of Walmart said that they and their partners were losing money. Walmart experienced inventory challenges from the panic that arose from the lockdown; customer demand increased, and the clients emptied shelves. The organization had not prepared for such an event since it was a new phenomenon; it found itself in the middle of it when customers purchased goods in bulky to sustain them during the lockdown (Norwood and Peel, 2021).
Walmart was also forced to turn some of its space to depots for them to match the e-commerce demands of their customers. The empty shelves in the store in the course of the early stages of the pandemic exhibited a huge strain on the supply chain of the company at that time. The stress and strain arose from weeks of grocery and regional distribution center systems making bulk records. The truck drivers, those filling orders, and those offloading trucks had much work to do in the retail to ensure good results. This made the team learn more on how to enhance the collections in terms of what should be kept in stores against those in depots and the market. The retailer is sensible of expanding its online stores and market portals (Bonnet and Sellers, 2020). The hiring methods of the firm changed since it needed to acquire new staff faster and therefore could not adhere to its hiring procedures.
Another challenge experienced by Walmart is setting poor retail implementations; data on Retail Link takes a lot of time to be prepared, and so it wastes a lot of staff hours. Some goods in the stores also tend to be misplaced since they are not placed on the correct shelves. These issues are the main causes of reduction of profits in the company and have the capability of resulting in losing sales opportunities and forecasting difficulties. These errors mainly emanate from the workforces; the organization needs to conduct training for its employing and do physical checks to ensure accuracy in data (Bressanelli, Perona and Saccani, 2019). The development in e-commerce has outpowered the existing delivery system since clients need faster deliveries but do not want changes in delivery fees, yet the company uses other organizations to conclude the delivery process.
How Digital Transformation Enhances Walmart’s Connectivity and Integration
Digital transformation is a continuous shift to technology solutions that offer innovative results when it comes to customer experience and business productivity. Walmart invested in technology and then integrated digital retail with the physical one to enable consumers to buy according to their conditions. The existing processes of Walmart are changed by digital transformation to offer new and developed abilities that lead to increased sales and enhanced consumer experience. The organization has established a WalmartLab, and it is an e-commerce center for creating goods to help many customers to recognize, study and buy goods online using mobile apps or from physical stores. This had quickened the determination to satisfy the demands of customers (Zhou, 2019). Kosmix is a data analytic setup that was acquired by the organization, and it created the center of worldwide e-commerce technology. The retailer also engaged in digital marketing by creating goods that are meaningful to customers around the world in teams. This platform enables the firm to acquire big data from social media, online and physical sales; the data is then utilized to improve the digital marketing of Walmart (Arunachalam, Kumar and Kawalek, 2018). The technology was incorporated with a customer loyalty program that provides a competitive advantage.
The company implemented mobile inventory apps that are useful in searching stock to easily located the highly demanded items during specific seasons. A centralized database was available to help suppliers and producers in the supply chain to coordinate their demand forecasts for planning, estimating, and restocking. This innovation facilitated information sharing among partners for free and reduced central management. Walmart is moving into an omnichannel strategy as a way of making its whole supply chain to be digitized. This strategy offers a cohesive shopping experience to customers in both online and offline channels. This shift is intended to support technology for information sharing from all sectors of the organization and give advanced deliveries for all orders made online while at the same time preserving prices and quality (Kamath, 2018). The steps taken by Walmart to support digitization include the development of online channels like obtaining Jet.com for them to increase their online presence and provide a better online experience for its buyers. The company’s digital inventory of products has increased, and this has enabled it to aim to have a customer base of the young generation.
The next step involves sharing information throughout the supply chain; it has invested so much in machine learning proficiencies, big data, and analytics. Data café is used and is one of the major private clouds present in the globe to examine data sources to generate understandings concerning customer demand and then analyze competencies in the supply chain to improve processes (Kache and Seuring, 2017). Walmart is making Café accessible to its dealers free of charge for them to gain an understanding of the needs of consumers to control their supply and inventory in a better way. Salsify is a content provider supported to combine digital data from all sellers so that new goods can be ordered depending on the demands of customers (Ageron, Bentahar and Gunasekaran, 2020). For example, when a buyer browses on Walmart.com about an item not found in Walmart, the company can inquire from Salsify to identify the supplier with the item for them to deliver it at the doorstep of the customer.
The company also uses machine learning and store acquaintances to support the distribution of products. Machine learning is used in determining the items that should be distributed by which associate and the directions to take as they deliver. Technologies like blockchain are used across the supply chain to trace goods (Tan et al., 2018). For example, Walmart is affiliating with IBM to power blockchain to trace food products in its supply chain and guarantee legitimacy and quality. With blockchain, all the actors in the supply chain become ready to share information that leads to efficiency. For example, when the organization was testing the origin of oranges using traditional methods, it took them almost a week, but when blockchain was employed, the results were out in barely three seconds.
Walmart has capitalized on instore Internet of Things (IoT) to smoothen customer experience. There are digital carts for assisting clients in shopping by recommending and notifying them about promotions available (Sathananthan et al., 2017). They join customer profiles that are used to buy both online and offline for them to improve intended goods and promotions. The organization is also testing RFID chips on items for easy monitoring of usage of the goods and control allocation of goods and inventory. The organization can also collaborate with suppliers to avoid stockouts and advance in retaining customers.
Concept of Supply Chain Differentiation
The ways of differentiating supply chain strategies vary from region and region. The first dimension involves differentiating using the value of availability. This concept states that organizations can only offer value suggestions, but they are not the absolute creators of value, but customers have to be involved before the value is created. Their differentiation is based on the interaction and information obtained from the customer. Another way is delivery flexibility differentiation that concentrates on general delivery, transportation, information, and the flexibility available in standards. There is also differentiation of products and services and finally differentiation of product features. Some regions differentiate based on what value the customer wants to derive from the product, and others produce unique goods and services while others base on the features of their products and make them unique during production.
Technology is an important tool in ensuring effective functioning across the supply chain as it saves time. Organizations need to concentrate on their supply chain and ensure that there is coordination within it as it contributes greatly to the success of an organization. From Walmart, other retailers can learn that it is not overpricing that leads to succeeding and leading in business and therefore focus on other aspects for them to thrive. Organizations should always be prepared for worst-case scenarios like the pandemic for them to remain in the market even during tough times; all they need to do is come up with strategies beforehand.
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