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Company Analysis Report: Walmart Stores, Inc. Evaluation Essay

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Updated: Feb 10th, 2020

Strategic Overview

Walmart Stores, Inc. is a global retail chain that prides in being the largest company in the industry throughout the world. Walmart is headquartered in the United States of America, but runs its stores in Europe, Asia, and South America.

The company sells a wide range of products and services, including foodstuffs, electronics, furniture, apparel, toys, video games, shoes and jewellery, books, music, as well as music and office supplies among many other products.

Among the range of services provided by the firm include financial, such as bill payment, credit cards, money transfers, and debit cards, wireless services where the company has entered into partnership with T-mobile to provide wireless phone service, and photo services such as developing and uploading digital photos through the corporate website (Walmart, 2009).

Walmart is famous worldwide for its low price market strategy that mainly seeks to offer its products and services to clients at the lowest prices compared to its competitors. The company has segmented its market into three main categories that include low, average, and high-income earners.

The firm’s value proposition is tied to its marketing strategy, where it promises everyday low prices, abbreviated as EVLP. Up to 33% of the US retail market is strongly under Walmart’s control. Walmart pursues a differentiation strategy that has earned it an edge in terms of competitive differentiation.

This includes the provision of unique warranties, as well as brand images that make their customers believe they are receiving unique services that may not be accessed from other industry players.

Walmart is structured into four main divisions of Realty, Specialty Stores, Sam’s Club, and International. The divisions are headed by Senior Vice Presidents or Divisional Presidents. Several stores make up a district that is headed by Market Managers. At the stores level, each one of them is headed by a General or Store Manager.

Larger stores have Co-Managers who are directly answerable to the General/Store Manager. Other levels of management in the stores include Assistant Manager, Support Manager, and the Customer Service Manager.

Supply Chain Analysis

Key Inputs

People

Walmart sources its workforce through job advertisements and interviews that target the selection of the best individuals. The workers are trained to be equipped with appropriate skills on service delivery before being deployed to the shop floors where they meet customers and offer services to them.

Buildings

Business sites, including retail stores and warehouses that are branded with the Walmart logo are either purchased by the company or leased. The Walmart Realty is a division of the company that is charged with the responsibility of purchasing and leasing buildings occupied by Walmart. The firm chooses building assets that are strategically located within the market and undertakes its own modifications. This transforms the buildings to the intended standards set out by Walmart.

Raw materials

The raw materials acquired by Walmart are often in the form of processed products from different manufacturers and producers. These materials are sourced, although Walmart adds more value to the products by branding and repackaging them before stocking on the stores’ shelves.

Information

Walmart has an elaborate information communication technology that links its operations with those of its business partners. This ICT infrastructure provides information to the firm in the form of supply quantities, stock levels, and demand levels, among other forms.

Walmart analyzes the data and draws out summaries that indicate demand, supply, and distribution statistics for each product. The information also helps in drawing out sales amount and the necessary statutory payments.

Key Value Addition Processes

Human resources management

Walmart employees are entitled to comprehensive benefits, in addition to competitive wages in order to provide them with job satisfaction and limit their chances of being lured by other employers.

The firm encourages them to provide new ideas, enjoy themselves, communicate openly, and strive for excellence to ensure their service to customers is highly efficient. This, in turn, provides the workers with the right motivation to perform at their best while serving customers.

Technology Development

The technology development process enables Walmart to initiate its own technological systems for purposes of enhancing efficiency. The firm developed its own satellite, as well as radio frequency identification technologies that it uses to track its products. The technology development process ensures Walmart enjoys competitive advantage by virtue of having the ability to control and effectively plan the flow of its products.

It also pays relatively less to manage the technology, unlike its competitors who mainly acquire technology from third party developers. The company employs its own IT specialists and spends a significant amount of resources in performing researches in order to establish highly functioning IT systems.

Procurement

The procurement process at Walmart only involves the firm itself and the manufacturers. The firm does not buy products from distributors or wholesalers.

This enables it to avoid inconveniences, such as product delays and the additional costs that come with distributor channels. The products are procured only in the right quantities and shipped to the distribution centers where cross docking is done before they are supplied to the individual stores.

Flow-time Analysis

Walmart stores are fitted with Point-of-Sale systems that enable real-time data capturing immediately purchases are made. The information is relayed to the supplier who immediately manufactures a new product based on the real data that is acquired, as well as from historical records.

The merchandise is dispatched to the distribution centre or directly to the particular store to replenish the stock. This process enables Walmart to achieve competitive advantage in the sense that the supply process of the company operates in real time. Thus, there are limited chances of stock outs ever being experienced in the stores.

Logistics

Walmart owns distribution centers that are centrally placed to serve about 150 stores. The firm uses both third party supplier companies and privately owned trucks in ferrying goods to the distribution centers. This enhances the competitive advantage of the company as it increases reliability. The distribution centers undertake cross docking on the products before they are processed and shipped immediately to the stores.

No inventory is held at the distribution centers. Each of the distribution centers employ the radio frequency identification (RFID) that helps in segregating products, updating relevant information, as well as identifying pallets used by its employees through their mobile systems (Richardson, 2005).

The Role of Information Technology and e-Commerce in Serving Customers

The information technology system mainly enables efficient communication between Walmart and its suppliers. As goods are purchased from the stores’ shelves, the IT system through the help of the Point-of-Sale coordination tracks the movement of products indicating the specific items and the quantities available in stock.

Suppliers have their systems linked directly to Walmart’s internal system through IT technology and produce and deliver products basing on how product movement is tracked at the stores.

Customers benefit from this in terms of low product costs because the firm does not hold any inventory in its stores. Additionally, while the system eliminates the need to hold inventory and thus the inventory costs it benefits customers in the sense that Walmart does not experience any stock outs.

Walmart has also introduced e-commerce services that allow its customers to buy products online. This enables customers to buy products stocked by the company without necessarily visiting any of the store locations.

It enhances convenience on the part of customers because they can do shopping even in the comfort of their offices or houses and at their own convenient time. Delivery of the goods is also organized by the company to further enhance the customer’s own convenience.

Key Performance Measures for Evaluating the Supply Chain

Cost of inventory

This is the cost paid by the company because of handling stock after acquisition from the manufacturers but before being sold out to the customers.

When this cost increases, it means the supply chain is less efficient while it implies that the supply chain is efficient when it is maintained to the lowest possible level. Walmart’s inventory costs are the most competitive in the industry as the company maintains leadership in this front (Flexible Packaging 2012).

Consistent product stocks

Consistency in product supply and availability implies that the firm’s supply chain is efficiently performing. On the other hand, constant product stock outs indicate failure by the supply chain to perform efficiently. This will result in poorly timed reordering process with inaccurate figures. Walmart leads its competitors in maintaining efficient and consistent lean stock (Flexible Packaging 2012).

Diminishing customer numbers

Walmart has managed to attract and keep majority of its customers because of its ability to maintain low prices. The supply chain enables this because it has managed to maintain costs at low levels.

An inefficient supply chain will, thus, see the number of customers grow less because the company will no longer have the ability to limit costs and achieve low prices. According to Flexible Packaging (2012), Walmart has the highest number of customers in the retail industry as the company continuously maintains its everyday low price policy. This attracts more customers for the company.

Plan to Improve Operating Processes

Targets for Improvement

Distribution centers

Walmart can improve its operations even further by eliminating the distribution centers as they only add costs. Instead, the cross docking and product segregation that occurs in the distribution centers can be handled right at the manufacturers’ sight before the products are shipped directly to the individual stores.

This will increase speed in delivery because trucks will directly serve the stores from the suppliers’ locations without having to make stops at the distribution centers. This will also increase efficiency in terms of cutting costs even further because the company will no longer pay the cost of maintaining the delivery centers.

Transport

Walmart currently owns a fleet of trucks that are used for shipping goods to the stores. Although the firm also relies on outsourcers, this is done only partly as it also maintains its own trucks. An alternative practice should see Walmart fully outsource this service instead of privately owning its trucks. This will eliminate the burden to manage so many business processes on the part of the management.

With a third party fully in charge of the transportation sector, the company sets out its quality and efficiency standards that it demands from the transport company. Walmart’s management, on the other hand, will fully have the opportunity to concentrate on the stores’ operations, thus enabling the company to achieve increased efficiency and productivity.

Technology development

Walmart is a retail company that fully concentrates on its core retail business. Dividing the management’s attention by formulating and running a technology development department is not a good move for the company. The firm should, instead, outsource the technology development role to a fully established IT firm to enhance its services.

This will see it eliminate the need to employ many IT experts who are expensive to maintain. It may only need to keep a lean internal IT team of about three people who will liaise with the outsourced IT firm and offer them their suggestions and ideas about how to improve the firm.

Apart from quality service delivery, this move will also see Walmart reduce its operation costs further because of the highly efficient IT system that it will have at its disposal.

Results of Performance Improvements Regarding Product or Service

How product and service will be improved because of these changes to the supply chain activities

Distribution centers

Although Walmart does not hold any inventory, the existence of its numerous distribution centers increases the operation costs to some degree. This means the firm has to pay huge amounts in leasing or purchasing buildings that it later on transforms into the distribution centers. Additionally, other expenses such as security and fixture costs continuously inflate the overall operation costs of the firm.

However, Walmart will achieve leaner costs in terms of operations by abolishing the existence of these delivery centers and instead performing product segregation and cross docking at the manufacturers’ sites. The saved expenditure can in turn be passed to the customers in form of even much lower product prices. It will also take less time to ship products from the manufacturer to the stores.

Transport

Maintaining a fleet of privately owned trucks means that Walmart must have an internal division that manages transportation. This department will require an additional number of employees, including department managers as well as drivers who will be in charge of the trucks.

The divided management attention will have an effect on the overall company management because the trucks will have to be maintained in good mechanical condition always and purchase of spare parts will also have to be done constantly. This is a challenge to Walmart’s management given that the firm’s core business practice involves running a retail business.

However, contracting an independent transport company will increase service performance and delivery in the firm because the firm will have to be a specialist in the industry. This means their core business activity is transportation and they have all the necessary measures in place to ensure a highly efficient transportation service.

The company will have special carriers that limit product damages during transportation to almost zero. In essence, the quality of the products will be assured even where the transportation distance to be covered will be long.

Technology development

Technology is a very demanding sector that involves employing highly trained experts, as well as acquiring very expensive equipments and gadgets. It is also time consuming as experts have to take their time doing extensive research in order to determine an effective new technology that may accurately perform the needs of Walmart. This is difficult to achieve if Walmart maintains this as part of its internal business.

It will also end up being expensive because technology development is not a core retail business. However, outsourcing the service to an expert third party firm will increase efficiency in terms of more reliable technology at less cost.

When this is applied to the firm, it will provide Walmart with even greater ability to lower costs as well as increase reliability in integrating business activities between Walmart and its main partners.

How the specific features or attributes of the products and service will be altered

Applying these changes in the supply chain will mainly see Walmart maintain prices of its products at competitively lower prices. The changes target cost reduction, thus these benefits will be passed to the customers in form of low prices.

Why these specific changes are important to customers

Customers are continuously seeking for products with lower prices, but with uncompromised quality. The cost of living is becoming expensive as prices of commodities continue to rise every day. This is affecting consumers because they are forced to do without some basic commodities as prices grow out of their reach.

How these changes enhance the value proposition and competitive position of the company

Walmart’s value proposition is to maintain low prices every day. Thus, with these changes seeking to lower prices even further, the company will succeed greatly in enhancing its position as the industry’s leader in terms of offering low commodity prices.

The specific lasting capabilities and improvement that I am introducing in Walmart through these changes

The company will continuously enjoy the advantage of initiating new practices that aim at lowering prices once these changes are effectively implemented at Walmart. Walmart will have immense new ideas that will be continuously offered to the firm to enable it constantly change operations that fail to improve on the operation cost, while adopting others that are leaner.

How scope and impact of the improvements will be measured: My key performance indicators

The main measure of success in terms of scope and impact of the new changes that I will use will be the overall cost amount. If the company will manage to post even lower operation costs with an improved business scale, it will be a good indicator that the changes adopted in the supply chain will have yielded positive results.

Assessment of the Impact on Human Resources

The HR roles and responsibilities in Walmart have been properly defined and aligned to accommodate these new changes. The two departments of IT development and transport that will be affected by these changes will have to either lay off their staffs or redeploy them to other departments currently experiencing under performance due to minimal staff size.

The purchase and supplies department will mainly take the leading responsibility of looking for highly ranked third party companies to undertake the outsourced services. The purchase and supplies department will have the full authority of directly managing the outsourcer companies because it has individuals with the right qualities and skills to effectively handle the necessary requirements.

Customers will be motivated by these new changes because efficiency in service delivery and low prices will be achieved. Suppliers will have reliable systems that relay accurate and reliable data concerning stock movements at Walmart. Employees can enjoy increased salaries and benefits because more customers will translate into increased.

References

Flexible packaging. (2012). Walmart continues as a leader in sustainability. Flexible Packaging, 14(5), 10-10.

Richardson, L. (2005). Wal-Mart: Benefits will be shared. SN: Supermarket News, 53(10), 6-63.

Walmart. (2009). Walmart. Drug Store News, 31(4A), 23-50.

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