Since its establishment in the 1960s, Walmart’s supply chain capabilities have been its chief competitive advantage source. According to the case study, Walmart’s remarkable success, not only in America but also globally, is due to the various competitive advantages it draws from its uniformly structured supply chain management. The corporation’s supply chain management is grounded on its goal of conveniently providing customers with a wide range of quality products at a low price (Johnson and Mark 3). Walmart developed the Vendor Managed Inventory (VMI) model that enables it to deal directly with manufacturers, reducing the number of links in its supply chain model to achieve the mentioned goal (Johnson and Mark 7). Shrinking its supply chain model enabled it to save on expenses, such as transportation and warehousing costs, and increase its value orientation. Under Walmart’s VMI model, manufacturers were also responsible for taking care of their products at the retailer’s warehouses (Johnson and Mark 7). According to the case study, manufacturers’ involvement in Walmart’s warehouses enabled it to increase its order fulfillment efficiency, thus further increasing the company’s value orientation. By developing a cost-effective supply chain model based on VMI, Walmart provided its customers with low costs and medium quality products, thus achieving a massive competitive edge over its competitors.
Vendor partnerships and integration of technology in Walmart’s supply chain management also provided the firm with an immense competitive advantage over its rivals. Walmart made strategic partnerships with vendors who could supply it with large quantity products at a low price. The strategic partnerships were based on long-term contracts to reduce its supply costs (Johnson and Mark 7). Walmart not only managed to cope up with its demand but also control the market. The firm increased its market share and control, thus, augmenting its competitive edge over its competition.
Walmart has also integrated various forms of technology in its business operations, such as supply chain management. By integrating these innovations in its supply chain management, the corporation has developed supply chain programs, such as Project One Touch and Omni Channel, to enable the retailer to streamline its distribution network to offer Everyday Low Price (EDLP) for its products. Walmart’s EDLP e-commerce model of supply chain management has enabled the company to provide low costs but quality goods to its online customers, thus, keeping a competitive advantage over its competitors, such as Amazon.
By leveraging its efficient supply chain management, Walmart has managed to record impressive financial success compared to its competitors in the global retail market. The competition Walmart faced was mainly from small-format stores and online e-commerce platforms. Since going global and transforming itself into an e-commerce giant in 2019, Walmart started facing stiff competition from small stores, such as Dollar General (Johnson and Mark 7). According to the case study, Dollar General is an American retailer that bases its operations on the strategy of opening its stores in damaged inner-city neighborhoods with basic goods at low prices. Dollar General is currently the main competitor of Walmart, particularly in the rural areas of America. Walmart also faced stiff competition in the online e-commerce platform, particularly from Amazon. In the 2019 financial year, the corporation recorded a $514 billion revenue compared to Amazon and Target that posted $232 billion and $75 billion, respectively (Johnson and Mark 13). With more than $514 billion in revenue, Walmart achieved 4.2% comparable sales growth in the fourth quarter of the 2019 financial year, the best performance in the last decade (Johnson and Mark 13). The firm’s share value also increased by around 4%, making it one of the most profitable businesses in the world (Johnson and Mark 14). Thus, though facing fierce competition from various competitors, Walmart was able to post impressive annual financial achievements.
Though Walmart has recorded more financial success than its competitors, it has to improve its competitive advantages, particularly in e-commerce, to increase its dominance. Walmart has been forced to expand its stores and distribution centers and venture online to keep up with its surging demand. However, expansion and transformation into an e-commerce giant pose several challenges to Walmart, particularly on how to keep its operational costs low. Walmart has to focus on increasing its online presence to develop a competitive advantage over Amazon, which is currently its main competitor in the domain of e-commerce. Moreover, the firm has to penetrate new markets in various parts of the globe to have a massive share of the global retail market. Dominating the global retail market will provide Walmart with immense competitive advantages, such as market control, thus limiting its competitors’ operations. In line with its increasing number of stores, Walmart has to guarantee product availability by entering into profitable long-term partnerships with low costs, high quantity suppliers. Strategic partnerships with suppliers will enable Walmart to achieve its low-cost e-commerce business model of EDLP, thus, gaining a competitive advantage over Walmart.
Walmart’s supply chain management experienced some challenges that affected its supply chain and business operations. The main challenge to Walmart’s supply chain management was its high Account Payable Turnover (APT) that negatively affected how the company financed its operations. APT measures the speed of paying suppliers, and it usually determines how quickly a retailer collects money from sales to finance its other operations. According to the 2015 financial records, Walmart recorded the second-highest APT rate compared to Amazon and Macy’s after Nordstrom (Johnson and Mark 14). Walmart’s APT rate of 69.32 meant that the retailer collected money from sales after an average of eight weeks (Johnson and Mark 14). Thus, Walmart financed its operations for an average of eight weeks before it paid its suppliers. The eight-week period the firm took to pay its suppliers impeded its supply chain management. Walmart needs to improve its ART rate to promptly pay its suppliers and, therefore, finance its operations more efficiently. To increase its APT rate, Walmart should adopt a Cash to Cash metric such as that being implemented by Nordstrom that recorded an APT rate of 75.28 (Johnson and Mark 14). The Cash to Cash supply chain metric will enable Walmart to pay its suppliers in time and thus improve its financial operations.
Walmart’s slow international expansion and adoption of e-commerce was also a result of its inflexible supply chain management policies. Though being one of the biggest global retailers with a presence in around 28 countries, Walmart’s international growth was slow and costly. The enterprises’ slow international growth was a result of its inflexible business model of providing EDLP. For Walmart’s EDLP model to be effectively implemented, Walmart had to identify cheap and fast supply chain routes that could provide its international stores with quality products at a low price. However, not all the suppliers of nations in Europe and other parts of the world can offer high-quality, low price goods over the long term. Walmart’s inability to change its EDLP business model, even when it could not be achieved in foreign countries, negatively impacted its global growth. Moreover, Walmart’s inflexible supply chain management policies, particularly its EDLP business model, also resulted in the company entering the e-commerce domain later in 2019 after Amazon had taken a head start (Berthold 49). The late entry of Walmart into e-commerce implies that the company has to invest more time and resources in building competitive advantages over its competitors, such as Amazon.
As Walmart’s CEO and President, I would focus on increasing the company’s online presence. Walmart is originally a Bricks and Mortar retail business with thousands of physical stores globally. However, in the recent past, the retail business has shifted to e-commerce, whereby customers buy goods from the convenience of their homes or offices and expect that their goods to be shipped to them. Therefore, as CEO, I would focus on increasing Walmart’s online presence
I would also implement the last-mile delivery of goods to customers. Last-mile delivery involves shipping purchased goods to customers’ home or office addresses and is also known as home delivery. Currently, Walmart has a strong online presence in only 11 countries, which is insignificant compared to Amazon, which boasts of 58 (Johnson and Mark 10). Unlike Amazon, Walmart’s current e-retailing is limited as it does not offer last-mile delivery of the products purchased by its customers from its online stores. Walmart’s online platforms are based on click-and-collect free pickup services that require its customers to visit its physical stores to pick goods that they have purchased online (Johnson and Mark 10). The firm’s click and collect free pickup services are intended to lure customers into purchasing additional products once they visit the retailer’s physical stores. As the CEO, I would complement the company’s click-and-collect free pickup services with home delivery to fulfill a wide range of online shoppers’ needs. Increasing Walmart’s online presence and introducing last-mile delivery will also enable the retail giant to leverage its online supply chain initiatives, such as Project One Touch and Omni Channel, to increase its competitive e-commerce edge.
As Walmart’s CEO and President, I would also establish and implement cross-functional teams to improve the company’s procurement and inventory-keeping departments’ efficiency. Currently, Walmart only utilizes cross-functional supply chain management in its distribution department through its cross-docking initiative. Cross-docking keeps Walmart’s transportation costs low and reduces transportation time by eliminating efficiencies in distributing the company’s products (Johnson and Mark 12). However, Walmart’s procurement and inventory keeping processes are convoluted by numerous steps that make them cumbersome and costly. Establishing cross-functional teams in Walmart’s procurement and inventory keeping departments will enable the company’s supply chain to achieve time-reduction targets and cross-boundary ownership of procurement and inventory problems. The move will also allow for extreme integration of functions in the departments, thus, creating flexibility, which is integral for the efficient supply chain management. The establishment of efficient procurement and inventory keeping processes at Walmart through cross-functional teams will enable the company to properly handle its surplus products, minimizing wastage due to expiry dates.
Johnson, P. Fraser, and Ken Mark. “Walmart: Supply Chain Management.” HBR Store, 8 July 2019, store.hbr.org/product/walmart-supply-chain-management/W19317