¶ … Wal-Mart) Integration - Causal Chains and Strategy
Wal-Mart Integration - Causal Chains and Strategy
Walmart's emergence as a global leader of mass merchandising and discount retailing is attributable to the company's continual pursuit of excellence in supply chain management, logistics, advanced reverse logistics processes and an exceptionally strong analytically-driven corporate culture. Walmart openly admits in their filings with the Securities and Exchange Commission (SEC) and in their annual reports that they have their own satellite network, often renting the majority of transporters on satellites circling earth today to transport sales-out, promotion results and pricing analysis from each store directly to its headquarters in Bentonville, Arkansas (WalMart Investor Relations, 2013). Walmart's data-centric culture resembles the Untied Parcel Service (UPS) from the perspective of supply chain planning, execution and optimization (Alghalith, 2005). Walmart also invests heavily in the areas of advanced material handling technologies including Radio Frequency Identification (RFID) to continually improve the accuracy and speed of performance in all distribution centers (Powanga, Powanga, 2008).
The balanced scorecard (BSC) approach is a very useful tool for galvanizing the many functional areas of an organization together in pursuit of a common vision and mission. Combining learning and growth, internal business processes, customer and financial objectives, measures, targets and actions into a unified strategy eliminates distractions and keeps an organization focused on its vision, mission, sort and long-range objectives (Kaplan, Norton, 2001). The BSC approach is also indispensable for enabling a thorough causal chain analysis of an organization, which can quickly highlight areas for process performance improvements (Kaplan, Norton, 2001). The BSC framework and causal chain analysis is especially well suited for Walmart as supply chain management's many process areas have a high degree of variability and dependence on other departments throughout the company (Park, Min, Park, 2011). This analysis progresses through a balanced scorecard analysis of Walmart based on learning and growth, internal business, customer and financial perspectives. Table 1 provides a consolidated analysis of Walmart Operations based on previous analysis of each of these four vital functional areas of Walmart. Please see the Appendix to see the individual tables for learning and growth, internal business perspective, customer perspective and financial perspective. Table 1 is the foundation of casual chain analysis completed in this analysis as well.
Consolidated Analysis of Walmart Operations and Casual Chain Analysis
The BSC framework architected to analyze Walmart performance is balanced between their supply chain and logistics expertise that rivals the United Parcel Service (Alghalith, 2005) and the company's intensive reliance on analytics and metrics. Marketing at Walmart is based on thorough customer analysis using advanced predictive analytics software in conjunction with intensive research into the personas, or aggregate representations of their customer segments (Frazier, 2006). Continual supply chain performance, logistics and pricing improvements are the highest priorities for Walmart, all galvanized around keeping the loyalty of the Price Value Shopper. The distribution of customer segments by customer loyalty is shown to the right.
Table 1: Consolidated Analysis of Walmart Operations
Objective
Measure
Target
Action
Financial
Increase inventory turns
Increase store profitability
Reduce employee turnover
25% in all Supercenter locations
10% through more effective pricing
10% in Supercenters
Expected level of performance: eight times a year
Expected level of performance: 10% Gross Contribution Margin
Expected level of performance: 10% less personnel turnover
Improve internal reporting and analysis and reduce slow-selling products from the mix of all items carried.
More effective price management with specials and coupons to drive up sales and increase customer purchases.
Increase the use of personnel management policies and programs to motivate employees to stay instead of leave; increase the use of compensation and performance raises, recognition programs
Customer
To increase same store sales within the Value Shopper segment
To increase more shoppers in the Price Value Shopper segment nationally
To reduce churn in all customer segments
25% over the next 90 days and sustain this performance level yearly
Increase 2% more shoppers to the Price Value Shopper segment
10% by increasing bundling on electronics and apparel
Expected level of performance: four times a year
Expected level of financial [performance gain: 18% of total sales in most profitable, loyal customer segment
Expected level of performance 10% reduction in churn will lead to a 1% increase in Return on Sales
Using analytics, determine the best possible mix of products to attract Price Value Shoppers back into stores so they will purchase more often
Recruitment through referrals and participation coupons for existing Price Value Shoppers to recruit their friends and family
Reduce churn by offering more discounts and bundles on the most popular product for the Price Value Shopper. Provide coupons for food and clothing for this segment to drive cross shopping in other stores...
sales-out data for the Price Value Shopper segment
(%) of stock-outs reduced on 100 best-selling products to the price Value Shopper segment
Packaging waste reduction of 35% through recycling and reverse logistics re-use
Reduce inventory carrying costs 20% (admin costs of holding inventory)
Increase inventory turns by 20% through better logistics coordination with top 100 CPG suppliers
Measure impact of operations performance improvement through the use of on-time delivery metrics; gross margin improvement attained through inventory mix optimization and more rapid inventory turns
Expected level of performance: Monthly
Expected level of performance: measured on a quarterly basis
Expected level of performance: Monthly
Measuring forecast accuracy for the Price Value Shopper segment involves defining their most-purchased items and measuring forecast performance monthly relative to sales-out data across all stores.
Using reverse logistics to better manage the highest volume commodity products partnering with Procter & Gamble, Unilever, and other consumer packaged good companies to reduce inventory carrying costs; reverse logistics increases recycling efficiency, reduces inventory carrying costs; increases inventory turns by adding greater accuracy and precision to forecasts
Begin supporting mixed palate mode shipping from top 100 CPG suppliers who provide majority of consumable, commodity-based products for the Price Value Shopper
Learning
Train all supply chain managers in advanced optimization techniques including lean process improvement relating to inventory management
Increase pricing accuracy through the use of advanced analytics and metrics
Reduce turnover of supply chain and logistics experts
Per Supercenter Inventory Turns
Gross Margin on Most Sold Products
Reduction in employee turnover
15% improvement in inventory turns per superstore within 6 months
Increase gross contribution margin by 10% on the 100 most commoditized products
20% reduction in employee turnover in the supply chain, logistics and distribution center operations areas of Walmart.
Provide Six Sigma Black Belt training internally to provide opportunities for employees to gain greater mastery of this area; measure and reward on-the-job performance increases
Increase training on advanced analytics applications from IBM, SAS and other vendors who provide price optimization technologies
Offering Six Sigma Black Belt training and certification will also help with this specific objective, as will paying bonuses to those managers who deliver the greatest gains in supply chain performance.
Over the last decade Walmart has continued to pursue a demand management-based supply chain strategy that is increasingly defined by forecasts and less by purely theoretical optimization strategies (Zhu, Singh, Manuszak, 2009). Lessons learned from failures in Germany and South Korea (Christopherson, 2007) and the turn-around in international operations as evidenced by their success in China (Ming-Ling, Donegan, Ganon, Kan, 2011) served to further validate a very customer-centric demand management supply chain strategy. As a result, as the Price Value Shopper goes in terms of demand forecast, so go much of the focus and prioritization within the Walmart supply chain. This makes supply chain responsiveness to all customer, especially, the Price Vale Shopper, a very high priority. Figure 1, Causal Chain Analysis for Increasing Supply Chain Accuracy and Speed takes into account the high priority of keeping the Price Value Shopper loyal and also alleviating stock-outs with a major factor in shoppers in discount retailers going to other stores (Rosenblum, 2004). This is the most strategic aspect of the Walmart business model, hence its analysis as a casual chain analysis.
Figure 1: Causal Chain Analysis for Increasing Supply Chain Accuracy and Speed
Figure 1, Causal Chain Analysis for Increasing Supply Chain Accuracy and Speed illustrates how Walmart can quickly use investments in training supply chain managements in advanced optimization techniques to drive greater pricing accuracy. This strategy is consistent with their internal culture that places a high value on analytics (Duke, 2010). It is a strategy that addresses the inherent complexities of operating a business model that is highly dependent on supply chain performance, pricing optimization and flawless retail execution to keep costs at a level of generate positive gross margins (Park, Min, Park, 2011) (WalMart Investor Relations, 2013). The training is used as a catalyst for driving internal business improvements in forecasting accuracy with the goal of 30% improvement in key segments, with the Price Value Shopper being by far the most critical. Long-term this will lead to…
