BMGT 392, SG 91
Supply Chain Management at Wal-Mart (Case Study)
Wal-Mart is based in Bentonville, Arkansas and founded by Sam Walton; Wal-Mart has over 6,500 stores worldwide, including stores in all 50 states in the USA and international stores in many countries such as Argentina, Brazil, Mexico, United Kingdom and China. The company has 1.3 million employees in the USA and 1.8 million worldwide. It is widely estimated that Wal-Mart serves more than 138 million customers each week. Wal-Mart’s strategy is to provide a wide variety of assortment of quality merchandises and services at “everyday low prices” (EDLP). In addition to that Wal-Mart owns a membership-only warehouses store called Sam’s Club and a smaller grocery store known as Neighborhood Markets. Due to the uniqueness of Wal-Mart selling a variety of products they have many competitors. In general merchandise they have Sears and Target, in specialty retail or department stores you have Gap and J.C. Penney, in grocery Safeway, and last but not least in warehouse competition they face Costco Wholesale. Wal-Mart was the world’s largest retailer, with 312.4 billion dollars made in 2006 in sales from operations spanning 15 countries. Wal-Mart’s supply chain which began from Arkansas is considered to be the key reason for its growth and source of competitive advantage for the company. Although Wal-Mart is a dominant and successful company, many competitors have caught up to them by 2006 as other companies have started copying their management techniques and have caught up with them. Although Wal-Mart continues to search for cost saving initiatives, in the most recent times they had been unable to meet self-imposed target of holding inventory growth half the level of sales growth. In 2005, the retail industry in the USA, not including motor vehicles and parts dealers, reached 2.8 trillion dollars. Some of the industries with the biggest benefits from sales are general merchandising stores, food and beverage, gasoline, and building materials and equipment’s. In the USA retailers compete at local and national levels and there are some chains like Wal-Mart that compete in foreign countries as well. Wal-Mart made the most from sales at 312.4 million dollars in 2006. That figure is the highest amount top 10 retailers around the world such as Carrefour SA who only made 88.2 million, Tesco who made only 63.7 million, and Target Corp. who only made 52.6 million from sales. There are few major challenges the company faces as of right now. One is the lack of improvement in worker wage as there have been major protests for higher worker compensation. “More than 475,000 of its 1 million hourly store employees earn at least $25,000 a year for full-time work” (Businessweek 1). The Guardian of the United Kingdom reported that there have been protests to form in union and receive higher wages in 15 cities in the United States. “Last week's fast food strikes were aimed at raising workers wages to a minimum of $15 an hour and giving them the right to form unions. The federal minimum wage, which is $7.25, has not altered in four years. Wal-Mart workers earn on average $8.81 an hour, according to OurWalmart. Wal-Mart says its "average full-time hourly associate" makes $12.83/hour” (Theguardian 1). Wal-Mart has to increase wage to prevent workers from creating environment and creating an unstable workplace where there is friction as human resources is one of Wal-Mart’s biggest strengths. Another major problem Wal-Mart has is with supply chains as competitors have caught up with Wal-Mart in regards to logistics. To solve this they are trying to control inventory while maintaining higher profits, “For Wal-Mart, though, slashing inventories was a major cost-cutting strategy aimed at building waning profit margins. Fewer products on hand leads to less rent on storage, lower labor costs, fewer markdowns and potentially less theft and...
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