Walmart Operations Management: Supply Chain Strategies

Introduction

This paper examines the operations management aspects and tactics of Walmart, one of the world's largest retailers. The company's supply chain and distribution network can and should be leveraged to gain the highest possible competitive advantage and profitability. However, there are significant limitations and tradeoffs inherent in the methods commonly used to achieve those goals. The strategies discussed in this paper include reducing the number of suppliers, disintermediation, coopetition, outsourcing, and offshoring. While reducing costs and keeping operations as simple as possible are generally considered sound business practices, there are real risks in taking that overall approach too far.

Supplier Reduction and Risk Management

Regarding the overall number of suppliers, the general preference for simplicity and streamlining suggests that fewer suppliers are better. However, the calculus is not nearly that straightforward. If problems arise with one — or the few remaining — suppliers, and an outage or shortage of the supplied goods occurs, the consequences for the receiving company can range from a minor inconvenience to a significant catastrophe. As such, regardless of how many suppliers a firm uses, there needs to be a meaningful level of risk and contingency planning in place. The goal is to determine in advance — rather than during an emergency — what will be done if and when a supplier issue arises. Failing to plan accordingly would be a serious miscue on the part of Walmart or any other business.

Keeping things simple is generally sound practice, but there are real risks to making operations too basic or streamlined. In some cases, a degree of complexity is a necessary evil (Dedrick, Xu, & Zhu, 2008).

Disintermediation and Outsourcing

The rules and principles that apply to reducing the number of suppliers are largely the same as those that govern disintermediation — the practice of cutting out middlemen within the supply chain or other business networks. A concrete example for Walmart would be if the company were processing payroll checks through a third-party provider in coordination with its bank, and then decided to bring payroll operations in-house. There could be meaningful cost savings associated with using a third-party payroll vendor, but there are also significant tradeoffs — including the time required to produce payroll and deliver checks to employees compared to having those capabilities available on-site.

Using a third-party payroll check company is itself an example of outsourcing. It can be advantageous in terms of cost savings, but as noted above, tradeoffs are always present (Doh & Taylor, 2012; Lin & Chen, 2015).

Conclusion

As with many concepts and tools in the retail, manufacturing, and other industry spheres, they can all be used too much, too little, or just enough to be effective yet without conceding possible advantage. Commonly held principles such as corporate social responsibility, shared advantage, and pro-American stances often bring firms together when it counts, but they remain competitors at the end of the day. Furthermore, Walmart absorbs a disproportionate share of public criticism for these business practices, yet it is one of many firms doing essentially the same thing — it simply happens to be the largest player in the market.