Walmart Business Process Reengineering

Business Process Reengineering 
Today, with annual revenues exceeding the budgets of dozens of countries and retail operations in 28 nations, Walmart stands apart in a retailing category by itself, but this company did not achieve this spectacular level of success by resting on its corporate laurels. Indeed, it is reasonable to suggest that the business processes that are currently in place at Walmart only resemble the original strategies used in its single Bentonville, Arkansas store in spirit. The purpose of this paper is to provide a case study of Walmart concerning how it has historically applied the tenets of business process reengineering to achieve and sustain the competitive advantage it enjoys today, followed by a summary of the research and key findings concerning these issues in the conclusion.
Review and Analysis
Facilities, location(s), and capacity
Headquartered in Bentonville, Arkansas (the city of its origin), Walmart (hereinafter alternatively “the company”) operates a chain of retail stores across the country and around the world under the Walmart discount stores, Supercenters, Neighborhood Markets, and Sam's Club warehouse membership clubs in the United States as well as more than 6,300 Walmart stores in 28 countries in 2017 (Walmart stores, 2018). As can be readily discerned from the data set forth in Table 1 below, the company’s has experienced year-to-year growth in its Sam’s Club, discount stores, and neighborhood markets during the period from 2012 through 2017 but with some modest declines noted in the year-to-date data for 2018. The company’s Supercenter format, however, enjoyed strong year-to-year growth during this same period.
Table 1
Number of Walmart stores in the United States: 2012-2018 (year-to-date)
Type
2012
2013
2014
2015
2016
2017
2018
Sam's Club
611
620
632
647
655
660
597
Discount stores
629
561
508
470
442
415
400
Neighborhood
markets
210
286
407
639
667
735
800
Supercenters
3,029
3,158
3,288
3,407
3,465
3,522
3,561
Total
4,479
4,005
4,203
4,516
4,574
4,672
5,358
Source: Walmart stores, 2018
In addition, as of 2017, the company also maintains at least 173 distribution centers in the United States alone that total nearly 130 million square feet in space with plans on the table to include another 4.2 million square feet in the near future (Walmart distribution centers, 2018). Combined with its total retail square footage in the United States of around 775 square feet, Walmart’s operations are almost 1.4 times as large as New York’s Manhattan at 661 million square feet (Walmart distribution centers, 2018).
b. Business strategy
The company’s success to date has been fueled by its overarching cost-leadership business strategy. In this regard, Ferguson (2017) reports that, “Walmart's generic strategy is cost leadership. In cost leadership, the firm's focus is on maintaining low prices of goods and services. Walmart is known for low prices, which is the main selling point of the business” (para. 3). Although the company achieves significant cost savings on its purchases due to its enormous purchasing clout, Walmart is also well known for its focus on keeping human resource costs low, as well as its efforts to reduce waste at every opportunity and streamline its supply chain operations to the maximum extent possible (Ferguson, 2017).
There are some other ways that Walmart achieves a competitive advantage through its cost-leadership business strategy. For instance, according to Schiff and Schiff (2009), cost leadership is also achieved by developing an organizational culture that places a high priority on cost savings as a matter of routine. Effective cost-leadership strategies such as the one used by Walmart are characterized by four main criteria as follows:
· Recognition as the lowest-cost producer in a given industry, without compromise in quality or customer focus;
· Realization of a long-term cost-centric culture where cost consciousness is a strategic and leadership preoccupation across functional lines and independent of the vagaries of financial markets;
· Dissemination of cost information with regard to customer, product, distribution channel, and the like that is timely, understandable, credible, and actionable and is made available to decision makers to fuel continuous improvement; and,
· Aggressive and balanced performance targets are established across the value chain (Schiff & Schiff, 2009).
The extent to which these criteria are satisfied should be the extent to which employees are recognized and rewarded for the efforts and these successes should be communicated organization-wide (Schiff & Schiff, 2009).
To date, Walmart has not only satisfied these criteria, the company is setting the standard for others to follow. For example, Schiff and Schiff (2009) emphasize that, “[Walmart’s] blend of cost consciousness and customer focus across their value chain, including key suppliers, is part of what's sustaining them as a leader in this challenging economy, especially for retailers” (p. 36). It is especially noteworthy that Walmart’s organizational culture has consistently placed a high priority on satisfying these four main cost leadership criteria, even during the Great Recession of 2008. In this regard, Schiff and Schiff (2009) add that, “Wal-Mart's cost leadership achievement was built, established, and embedded in their culture during the ‘good times’ that preceded the [2008] recession and not as a reaction to it” (p. 37). This success is all the more impressive given the bewildering array of products and services offered by the company in the United States and abroad and the supply chain challenges these represent as discussed further below.
c. Types of products or services offered
The company offers tens of thousands of consumer products, including sporting goods, baby products, electronics, groceries, computers and peripherals, households goods, clothing for the entire family and a myriad of others – many of which are featured in all or most of its country-specific retail stores. In addition, the company also provides a wide array of services, including digital photo, pharmacy and financial as well as its Walmart Family Talk Wireless service through a partnership with T-mobile (Washington, 2017).
d. Target markets
The company’s main target markets are comprised of lower- and middle-class consumers in each of the countries where it competes (Schiff & Schiff, 2009).
e. Supply chain characteristics
The company’s supply chain is regionally centralized in the United States but varies in configurations in the different countries in which it competes internationally (Schiff & Schiff, 2009).
3. Analysis of the business process(es) that need improvement
Notwithstanding the company’s vast global operations and supply chain network, pinpointing any specific business processes that need improvement represents a daunting enterprise, but it is possible to identify some areas in which Walmart could achieve better results at present and improve future outcomes, including most especially its human resources management (HRM) processes. Moreover, the company appears to be well situated to improve its HRM processes given its current and recent financial performance. For instance, as shown in Figure 1 below, the company’s net sales worldwide since 2006 have largely experienced year-to-year growth.
Figure 1. Walmart's net sales worldwide from 2006 to 2018 (in billion U.S. dollars
Source: Statista, 2018 at https://www.statista.com/statistics/183399/walmarts-net-sales-worldwide-since-2006/
Some critics charge, however, that the company has managed to achieve this enviable track record of success at the expense of its human resources, most especially in countries where there are little or no relevant minimum wage laws but including the United States as well. For example, the company currently has more than 2.1 million employees globally, with 1.4 million of them in the United States alone, accounting for a remarkable 1% of all American employment (Blodget, 2016). These figures mean that even modest increases in wage levels would have correspondingly severe effects on its net profits.
Nevertheless, the company has recognized the need to provide its American employees with higher pay and better perquisite packages because of the serious blows these criticisms have had on its brand and corporate reputation. In this regard, Walmart recently announced that it is raising the starting wage and minimum hourly wage rates for all of its employees in the United States to $11 an hour (Walmart to raise wages, 2018).
The company is also expanding its maternity and parental leave benefits, implementing a new initiative to help employees adopt children, as well as offering a one-time cash bonus for employees who quality of $1,000 (Walmart to raise wages, 2018). Beyond the foregoing, Walmart has also used its information technology expertise to good effect in providing its American employees with yet another benefit. For example, Walmart recently offered its employees in the United States an app that allows them to receive their wages before their next scheduled payday in order to avoid the usurious interest charged by payday loan companies (Cockery, 2017).
4. Identify and evaluate the effectiveness and efficiency of at least two options for improving business performance through BPR and associated technology needs.
Option 1: Reduce costs by eliminating the least profitable products and brands. The company has already announced its goal of reducing operational costs by 6%, and while it is clear that part of Walmart’s appeal is its ability to offer a wide choice of products and brands, every additional item costs the company cumulatively so it should eliminate the least-popular brands, product sizes and types from its inventory (Smart business processes, 2018). One of the company’s lesser but still up-and-coming competitors, Aldi’s, uses this cost-leadership strategy to maintain the lowest possible costs.
Option 2: Identify which products should be further discounted. By determining which types of products the targeted consumers most need discounted, Walmart can increase its overall sales by drawing more consumers into its retail stores (Smart business processes, 2018).
5. Recommend a technology for improving business performance based on your case analysis. Consider the human resource implications of your solution. Justify your recommendation.
Given its vast experience with social media, Walmart should launch a new global social media platform, “WalBook,” and create new positions to maintain and monitor this platform on a continuous basis to respond to consumer comments and provide feedback concerning consumer questions. The WalBook platform would provide all of the same types of features currently offered by Facebook but would include promotional information concerning the company’s corporate social responsibility activities around the world as well as community-level initiatives that are tied to users’ ZIP code or other location identifier. The consumer-generated information posted on WalBook could then be mined to identify the most recent trends in consumer preferences by geographic location.
Likewise, Walmart employees would be rewarded based on their voluntary participation levels in sharing content on the Walbook platform that could help drive views by consumers, making this a valuable incentive program that is closely aligned with its existing HRM and marketing strategies. For example, Walmart already uses consumer data gleaned from various social media platforms to identify trends in consumer preferences and even target individual consumers based on their most recent posts. In this regard, van Rumenam (2014) reports that, “Walmart uses the information consumers share on Twitter to send personalized coupons to (potential) customers by monitoring what consumers are saying [and] the moment someone tweets about let’s say beer and pizza, Walmart sends a discount coupon for those products at their local store” (p. 47). Certainly, Walmart is not alone is using this strategy, but the company has managed to do so in ways that have avoided many of the criticisms that have been heaped on Mark Zuckerberg’s Facebook in recent months for privacy violations.
Conclusion
While there may be other retailers that surpass the company’s current size and economic clout in the future, the research showed that there has never been a corporate giant like Walmart. Indeed, Walmart is essentially in a category by itself, but the company is still vulnerable to the same types of threats that are shared by its major competitors, including downturns in the global economy, disruptive new technologies, and the ever-present vagaries of consumer tastes and preferences. Nevertheless, the research also showed that Walmart has experienced consistent success with its cost-leadership business strategy even during tough economic times, a fact that clearly reflects the effectiveness of this approach as well as the core appeal of its products and services to budget-conscious consumers. While it is reasonable to suggest that there are still some people in countries where Walmart operates that have not visited the company’s stores by dint of inordinate affluence or abject poverty, it is also reasonable to conclude that the overwhelming majority of the world’s population has not only heard of Walmart, they are eager to shop there as well.


References
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Cockery, M. (2017, December 13). Walmart, criticized for low wages, will let workers take pay before payday. Boston Globe. Retrieved from https://www.bostonglobe.com/business/ 2017/12/13/walmart-criticized-for-low-wages-will-let-workers-take-pay-before-payday/5nubYu0VT6EoED6hGDkomM/story.html.
Ferguson, E. (2017, March 25). Walmart’s vision, mission, generic and intensive strategies. Panmore Institute. Retrieved from http://panmore.com/walmart-vision-mission-statement-intensive-generic-strategies.
Schiff, J. B. & Schiff, A. I. (2009, November). Cost leadership for the current challenge. Strategic Finance, 91(5), 35-39.
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Walmart stores. (2018). Statista. Retrieved from https://www.statista.com/statistics/269425/total-number-of-walmart-stores-in-the-united-states-by-type/.
Washington, T. (2017, September 26). What kind of service does Walmart provide? BizFluent. Retrieved from https://bizfluent.com/info-8296998-kind-service-walmart-provide.html.