Essay On A Systems Approach

Retail super-giant Wal-Mart has fought its way to becoming the world's largest company. Wal-Mart’s legendary supply chain technology has allowed them to break the three-day barrier that some economists in the eighties felt that it was unbreakable. In other words, Wal-Mart is often able to replenish items on the Wal-Mart shelf in less than three days – not from the central warehouse to the shelf, but from the manufacturer to the shelf. With quick and reliable 2-day turn around, Wal-Mart is able to maintain lower levels of inventory and still meet customer demand. These lower inventory levels result in either a reduced floor plan with lower carrying costs and lower interest expense – or a greater diversity of products on the store shelves.

Walmart’s approach means frequent, informal cooperation among stores, distribution centres and suppliers and less centralized control. The company’s supply chain allowed consumers to effectively pull merchandise to stores rather than having the company push goods onto shelves by tracking customer purchases and demand. Through the use of universal product codes, implementation of Retail links at the store, use of RFIDs and smart tags, suppliers and manufacturers within the supply chain synchronize their demand forecaste under a collaborative planning, forecasting and replenishment scheme, and every link in the chain was connected through technology that includes a central database, store-level point-of-sale systems, and a satellite network. As per report, there was a 16% reduction in out-of-stocks with the use of RFIDs and pointed out that the products using an electronic product code were replenished three times as fast as items that only used bar code technology. These strategies have made Walmart to be the dominant force over other competitors with information and technology helping its supply chain strategy attain greater

The Organizations have evolved over the years and from the Concept of people management they slowly have moved towards the concept of System managements and this is how an organizations needs to aim to grow and to succeed in growing complex market environment.

Walmart claims that its mission is centered on helping people live better which not only applies to customers and associates, but also to the workers who make their products. Furthermore, all the products that Walmart offers to its customers are supposedly verified whether they are produced with dignity and respect for workers. In order to be accepted as Walmart’s supplier there are standards and obligations expected from suppliers. Following section examines closely what are the key standards that according to Walmart prevail within its global supply chain (Walmart, 2012).

When the ‘bricks and mortar’ store based retailing is considered, Walmart employs different methods of supply chain. Vendor management inventory is one of the methods run down by Walmart for an efficient

One way is by making information readily available to both the company and the suppliers through online systems. This allows information to be transmitted quickly and products to be made efficiently. The purchasing and distribution activities of Wal-Mart are also parts of the value chain that are very efficient. They try to centralize their purchasing as much as they can. This basically gets rid of the middleman, which then saves money. An automated distribution center will further increase the efficiency of Wal-Mart’s value chain. Wal-Mart also is sure to keep labor costs to a minimum. By making sure the costs of their value chain are low, Wal-Mart is able to be a low-cost industry leader.

To begin understanding how organizations learn from and adapt to change it is important to understand the concept of systems thinking. “Systems thinking is the process of understanding how various systems influence one another within a complete entity (or larger system) (“Are You Living in a World of Chaos,” 2016). Senge uses the example of a rainstorm to explain these relationships because it is only when we consider the different events that occur before, during and after the storm will rainstorms make any sense (Senge, 1990, p. 6). Systems thinking is important for leaders to comprehend because it involves looking at the effects decisions might have across a business or organization. As I discovered during this 8-week course, there is a cause and effect relationships to our actions and it is important for leaders to pay close attention to the effect their decisions have across an organization.

In business, three major strategies comprising of cost leadership, differentiation, and focus strategies exist. The focus strategy emphasizes on providing services and products to a specified buyer group or market segment within a given geographic market. The differentiation approach is often defined as provision of services or products that are perceived to be unique in the market place. Wal-Mart emphasizes on the long-term strategy of cost leadership. Through this strategy, the company ensures that it offers customers with quality products at relatively lower prices than other providers in the industry. Through overall cost leadership strategy, Wal-Mart has been offering better quality products at a lower price than any competitor can offer. For the organization to achieve this goal, it has developed long-term supply chain management, which ensures that products are made available to the market at the required time (Enz, 2010).

Additionally when choosing suppliers, Wal-Mart has the upper hand because “Wal-Mart will only pay the most competitive prices” (Ehring 4), meaning that if Wal-Mart finds a supplier that will give them a lower price, the current suppliers will lower their prices to match it (price matching). One aspect of Wal-Mart that sets them apart from other corporations is how they manage their relationship with their suppliers. Wal-Mart is a dominant force and has become such an important account for their suppliers that they have managed to eliminate Supplier Power therefore they can pursue achieving their goals and concentrate purely on their Cost Leadership Strategy, which serves the consumer with "Everyday low prices."

4. Relations with Suppliers- Wal-Mart has in place a system that helps to achieve their goal of lower prices. This Information Technology system includes computers, networking, and internet that cuts inventories and waste and helps with speedy delivery. This system also helps Wal-Mart to keep in constant contact with suppliers by transferring the data that suppliers need so they know what Wal-Mart needs. Wal-Mart also works with suppliers to improve their production and squeezes the best prices out of its supplier. The video referred to Wal-Mart as the customer’s agent. All of this focus Wal-Mart puts on suppliers reduces costs and lowers prices. Wal-Mart’s technological/logistical leadership remains unmatched by competitors (Web, 2005).

Walmart.com has an alliance with the master of retail process: Wal-Mart. Having the best process and infrastructure when it applies to supply chain is definitely a competitive advantage. Walmart.com can take advantage of back end operations and inventory management processes through its alliance with Wal-Mart.

Walmart is equally ranked among the highly valuable companies, in terms of market value, as well as the biggest grocery retailer where it generates more than 51% of its sales from the grocery business. This paper explores Walmart’s operation management with regard to supply chain characteristics, global business operations, production processes, the company commitment to quality and excellence, inventory methodologies, operational planning and movement towards lean processes (Massengill, 2013).

This report provides the analysis and examples of inventory management system and forecasting methods of Walmart. Methods of analysis and evaluation include Walmart strategic vendor partnerships, fewer links in supply chain, cross docking, and technology. Results of methods mentioned show Walmart accruing a high inventory turnover ratio of 8.1 (Bloomberg). In comparison to other retailer on regional and global scale Walmart hits industry highs with 71.9% in market share

1We would like to thank Shiming Deng for his valuable contributions to the preparation of this manual.

Discussion Question: Which parts of the value chain does Wal-Mart target in order to achieve a low-cost advantage over its rivals? Answer: Wal-Mart has an extensive real-time information sharing network with vendors to make the supply chain much more efficient. It targets purchasing, store delivery, procurement practices that leverage the company’s relative buying power, investment in a large fleet of trucks for distribution of inventory, optimization of the product mix, use of security systems, preferred real estate rental and leasing rates, and lowering labor costs.