The paper attempts to describe the components of supply chain that has been applied in Wal-Mart and identifies problems with each component. The paper further discusses the importance of quality management in a global context and provides information on global operations system for Wal-Mart.
Background
Wal-Mart is an American based retail chain department stores which offer huge discounts to their customers. It has been ranked as the largest retailer and is listed as the third biggest public corporation in the world. The company operates different part of Europe and North America, and employs over two million employees in its company. The company has over 8,500 retail chains and operating with different names in different companies. The company is headquartered in Bentonville, Arkansas (Roberts & Berg, 2012).
Components of supply chain
Radio Frequency Identification Technology (RFID)
This technology is a wireless based tag which is used for the purpose of automation and tracking a consignment. Wal-Mart has been a frequent user of new technologies and forces its supplier to do the same which supersedes the bar code technology. Due to current RFID technology, Wal-Mart could be able to follow the inventory from its release by suppliers until a customer purchases the product (Leeman, 2010).
Problems
An increase in burden and extra cost for supplier to use particular technology as it works as retrofit to their inventory. However, there is no confirmation that Wal-Mart will make future deals with the particular supplier. Therefore, suppliers are hesitant to fulfill company’s requirements (Roberts & Berg, 2012).
Solution
Wal-Mart has made contracts with suppliers and has shared the cost for the new technology adopted by these suppliers to enhance better relationship.
Inventory Management
Wal-Mart has an aim to reduce its inventory which can help the company in many ways by lowering its total cost. The total costs include carrying cost, handling cost, and excess inventory cost. The company also aims to increase accounts payable and to decrease its operating expenses (Wisner, 2012).
Problems
The problems that can be faced by the company regarding particular strategy is stock out inventory. This also increases cost for suppliers because they often do not get paid on time.
Solution
The company applies RDIF system which notifies both the company and the supplier about the inventory in company’s stocks or if purchased by customer. Therefore, if the company is nearing an end of its inventory the signal is reached to its supplier (Wisner, 2012).
Supplier Collaboration
Wal-Mart tends to improve relations with supplier by sharing certain information and offering them advice about their products. Even though the suppliers have low bargaining power against Wal-Mart but the company aims to achieve higher mutual collaboration for long term relationship (Wisner, 2012).
Problem
The problem arises when certain suppliers are not able to meet the standards that are set by Wal-Mart which forces them huge inventory losses. The reason that Wal-Mart had to quit competing in Germany is because suppliers were not reducing their cost for a product and were not providing concessions (Wisner, 2012).
Solution
The company now has set different standards in different countries according to their capabilities so that Wal-Mart does not enforce too much burden on suppliers.
Logistics and Distribution
The company establishes a distribution center in a country when it targets to set its base (Sadler & Craig, 1993). The company’s growth is then monitored through these distribution centers. The aim of stores is to support these centers to make enough profits to sustain in the preferred environment (Wisner, 2012).
Problem
The only one problem associated with the current strategy is that Wal-Mart focuses on managing its inventory based on its distribution centers instead of consumers demand. Therefore, if consumer demand lowers the required inventory that has been stocked in Distribution center then it will increase the inventory of Wal-Mart (Wisner, 2012).
Solution
A regular survey is being conducted to measure the consumer demand annually so that the company has a fair idea about managing its inventory (Leeman, 2010).
Outsourcing
The suppliers that are being collaborating with Wal-Mart outsource their manufacturing from the third world country to reduce their cost. The cheap labors of under developed countries are being exploited by these suppliers, which benefits them in lower manufacturing cost and higher profits (Roberts & Berg, 2012).
Problems
This type of outsourcing can create human rights problem for suppliers, which in turn can greatly impact the goodwill of Wal-Mart as well because they are collaborating with these suppliers (Wisner, 2012).
Solutions
Wal-Mart has made contracts with suppliers for their ethical behavior in subcontinent and other areas where cheap labor exists. Wal-Mart has the right to cancel contracts if any supplier is found to have exploited human rights norms (Roberts & Berg, 2012).
Importance of quality management globally
In the 21st century, the customer advocacy has been set as a higher priority for multinational organizations to remain in the competition. Therefore, companies have to constantly come up with a product that satisfies the needs of customers and that can lead them to repurchase their items and avail their services (Hill & Jones, 2012).
Companies make higher standards for their product because a customer can purchase the product from a different country and it has to be of the same quality as in another country. The concept of total quality management reduces the chances of defects and errors within the company which then provides less reason for customers to blame the company about its product or services. It is necessary for a company that operates globally to maintain their standards through their operations around the world (Leeman, 2010).
Currently, Wal-Mart has managed to build a best enterprise resource planning system and it tries to make enhance in its current ERP system to make it more efficient. The system has made better collaborations with suppliers and has enforced in reducing the cost, increasing its profits and satisfying customers to greater extent by providing them huge discounts.
Wal-Mart also applies the Lean manufacturing model which helps a company in reducing its waste and to utilize the space efficiently. The space utilization is an effective part for retailers because they use to sell their space to companies in displaying their product (Leeman, 2010).
The major concerns that need to be addressed are the bargaining power of suppliers which has been reduced to a greater extent since Wal-Mart has risen with power. Wal-Mart dictates the price for their products and offers its own profit margin ratio which leaves the supplier with less profit to earn and more cost to invest.
The other concerned area is the enforcement of Wal-Mart to their suppliers in becoming efficient with their technology and maintain standards in order to meet requirements of Wal-Mart. This has raised concerns for many suppliers across countries that do not tend to display their products at Wal-Mart (Wisner, 2012).
Reference List
Hill, C. W., & Jones, G. R. (2012). Strategic Management Theory: An Integrated Approach. Mason, OH: Cengage Learning.
Leeman, J. (2010). Supply Chain Management. Dusseldorf: BoD – Books on Demand.
Roberts, B., & Berg, N. (2012). Walmart: Key Insights and Practical Lessons from the World’s Largest Retailer. New York: Kogan Page Publishers.
Sadler, P., & Craig, J. C. (1993). Strategic Management. London: Kogan Page Publishers.
Wisner, J. (2012). Principles of Supply Chain Management: A Balanced Approach. Mason: Cengage Learning