analysis walmart
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CHAPTER IV
ANALYSIS
4.1 Operational management analysis
Walmart is one of the biggest retail company in the whole world. Just like their slogan
said “saving money, live better”, they are famous for selling goods in low price but they still able
to get high profit each year. According to Wikinvest.com on July 2015, Walmart has gross profit
of $130.02 billion. But what makes them to be able to get high profit by selling the goods with
low price? The answer is that they are focus on developing cost structure that makes them
possible to sell products with a minimum price. Walmart is famous because of their creative and
brilliant idea to make the effective and efficient supply chain management so that they can cut
some costs.1
1 Tradegecko, “Incredibly Successful Supply Chain Management: How Does Walmart Do It?” http://www.tradegecko.com/blog/incredibly-successful-supply-chain-management-walmart. (accessed September 11, 2015)
There are some strategy that they used to cut some costs. The strategy includes
cut/decrease the links in the supply chain, vendor partnership, cross docking and innovative
technology. 2These strategies have given Walmart advantage. The following are the explanations
of the Walmart’s strategies:
4.1.1 Cut or decrease the links in the supply chain
Walmart has been able to cut some costs because this strategy. For the start,
Walmart removing some chain links. Instead of buying some goods from other vendor,
they starts buying goods directly from the manufacturer. For example, Walmart buys t-
shirts from directly from the manufacturer in Bangladesh. Bangladesh is the second most
important garments producers. Walmart take the t-shirts directly from Bangladesh instead
of buying from another vendor that buy their t-shirts in Bangladesh. First, if they take it
directly from Bangladesh, they will be able to buy the t-shirts cheaper than buying from
another vendors. The manufacturer in Bangladesh will become responsible for managing
their products in Walmart warehouses. As the result, Walmart will be able to expect
almost 100% order fulfillment on the t-shirts. This strategy has make the Walmart supply
chain become more effective.
4.1.2 Vendor partnership
Just like the name of the strategy, vendor partnership is relying on the
communication and relationship network. In simple term, it is mean that vendor
2 Tradegecko, “Incredibly Successful Supply Chain Management: How Does Walmart Do It?” http://www.tradegecko.com/blog/incredibly-successful-supply-chain-management-walmart. (accessed September 11, 2015)
partnership is a collaboration of the supplier and Walmart. Basically, it a strategy based
on the company’s trust. Walmart think of strategic sourcing to find products that is sold
with the best price by the supplier while they ensure they will can meet the demand. They
will be establish the partnership with the vendors by offering them long term and high
number of purchases in exchange for giving Walmart benefits such as low price and
fulfill the demands. For example, Walmart has make promise with B company. The B
company promise that they will provide all the products that they need with the minimum
cost for about $1 per product. But in exchange, Walmart has to purchase minimum
500,000 products each month for 10 years. By making a deal like that, both of the
company could get profits. With this strategy, Walmart and the vendors will be able to
corporate and able to work like a single firm.
4.1.3 Cross docking
Cross docking is a strategy to manage the inventory efficiently. Walmart will
directly transfer the product from truck trailers without extra storage. They unloading
items from the incoming trucks and loading those products directly to the outbound
trucks with no storage between. In other words, they supplier will be delivering the
products to the Walmart’s distribution (place where the product is crossed docked and
then distributed to the stores) and they will be stored, repackage, and then distributed
without keeping the inventory.3 Usually, all of those process are finished in less than 24
hours. Time is really important in running this strategy. By using this strategy, it really
3 Tradegecko, “Incredibly Successful Supply Chain Management: How Does Walmart Do It?” http://www.tradegecko.com/blog/incredibly-successful-supply-chain-management-walmart. (accessed September 11, 2015)
helps Walmart to cut some costs such as inventory cost, transportation costs, reduce
transportation time and make the whole system become efficient.
4.1.4 Innovative technology
The innovative technology always has been an important aspect to make the
system become more efficient and affective. Innovative technology also play a big role in
Walmart system and help them to reduce cost and time. Technology help Walmart to
accurately forecast demand and predict inventory levels so there are no cost needed for
saving extra product/ inventory. For example, Walmart has use the Universal product
code bar codes. This technologies has help them to collected, analyzed and devised retail
link of the store level information. Then through the global satellite system, the retail link
is connected with the analysts who forecast the supplier demands to the supplier network.
They will show the real time sales data from the cash registers and to Walmart
distribution centers. In addition, the supplier and the manufacturer within the supply
chain try to match their demand using collaborative planning and every link in the chain
is connected through technology and connected into a central data base, store level point
of sale system and satellite network. 4
Technology also could help Walmart by tracking or create highly efficient routes
and scanned the product efficiently so that they will be able to reduce time needed to
deliver the goods that is needed by the store. Recently, Walmart has used radio frequency
identification tags (RFID). The use of the RFID is that numerical codes can be scanned
from distance to track pallets of merchandise. This technology proven to be effective by
researcher at the University of Arkansas. They said that there are a reduction of 16% in
out of stocks since they implement the RFID technology in the supply chain. The other
use of technology also to manage customer and give service response to them. With
technology, we are easily communicate to the customer and asked feedback about their
company. 5
Despite they have a great and creative strategy to cut some costs by cut or decrease the
links in the supply chain, vendor partnership, cross docking and using innovative technology,
Walmart also cut some costs by giving the employee low salary. The fact that they have given a
low salary to the employee makes people think badly about the Walmart. If think about all the
strategy that Walmart have, it all could not be realized if there are no human resources that
4 Tradegecko, “Incredibly Successful Supply Chain Management: How Does Walmart Do It?” http://www.tradegecko.com/blog/incredibly-successful-supply-chain-management-walmart. (accessed September 11, 2015)5 Ibid.
support the process. For the simplest example is in the cross docking strategy. Imagine that there
are not enough workers or no workers that work to help in the process such as repackage the
product, loading the products and distribute the products, the product will nor arrived on time to
the store. The employee is also expected to not make a mistake because a single mistake could
cause millions dollars loss. By this example, we notice that human resources play a crucial role
in running the business. That is why, Walmart should have taken care the employee more.
According to the payscale.com on July 4 2015, the hour pay for $7.58 - $11.42.6 It is
considered as a low pay and it is still not exciding to the federal poverty level ($7.58 x 34 hour x
52 weeks = $13,401.44) that is $14,720 (for Alaska) or $13,550 (for Hawaii). 7In addition,
Walmart also did not give any benefits to the employee. This certainly give disadvantage to
employee. Many Walmart worker has actually tried to file some complaints to the firm, but they
were stopped in the middle of it. If however they tried to file complaints, they will be put into
disciplinary act such as disciplinary hearing, work hour reduction, or even dismissal from the
company.
Walmart has treated the employer unfairly in many ways. Just like we said before, each
strategy that they used require a human touch to finish their work. In the distribution center, they
has overwork the employee so that causing many injuries to them. They actually had to move
about 400 boxes each hour by hand. They also had to work in hard environment such as a very
high room temperature (120˚F), low security, etc. in fact, they also work under pressure because
of the company demands to work quickly and efficiently. Moreover, they are not giving any
benefits such as health insurance to the employee that works in distribution center. In other
6 PayScale, “Average Hourly Rate for Wal-Mart Stores, Inc Employees” http://www.payscale.com/research/US/Employer=Wal-Mart_Stores,_Inc/Hourly_Rate. (accessed September 11, 2015)7 ASPE, “2015 Poverty Guidelines” http://aspe.hhs.gov/2015-poverty-guidelines. (accessed September 11, 2015)
words, Walmart is not only torturing the employee physically but they also torture their workers
mentally.
Even if it is not directly, but Walmart has also gives pressure to the supplier’s worker.
Because of the agreement between the companies, the employee are pressured to finish their
product on time to meet the total demand. According to Uni Global Union, some manufacturer
employee such as t-shirts manufacturer in Bangladesh is pressuring their employee to meet the
target. They are forced to work overtime without getting a good pay. Bangladesh textile workers
are among the lowest pay in the world. Their minimum wage per month is about $38 and it is not
enough to make a living (they work 80 hours per week). In addition they also have a bad
working environment which accident are commonly happened. Even after the largest fire
accident that happened in 2012 (117 people died in the accident), Walmart still refuses to pay
more to upgraded the working environment in Bangladesh.
This act should be stopped by Walmart. Everyone knows that cutting cost is crucial for
Walmart. They have to get the cheapest price to be able to achieve their mission which “saving
money, live better”. But to take advantage in people’s need is not ethical and they had restricted
the employee rights to get what they deserve. It is obvious that the employee deserve more pay.
Without them, Walmart could not achieve their goals and gain many profits.
"Incredibly Successful Supply Chain Management: How Does Walmart Do It?"
Incredibly Successful Supply Chain Management: How Does Walmart Do It?
Accessed September 10, 2015. http://www.tradegecko.com/blog/incredibly-
successful-supply-chain-management-walmart.
"2015 Poverty Guidelines." ASPE. May 31, 2015. Accessed September 10, 2015.
http://aspe.hhs.gov/2015-poverty-guidelines.
"Average Hourly Rate for Wal-Mart Stores, Inc Employees." Wal-Mart Stores, Inc
Employer Wages, Hourly Wage Rate. Accessed September 10, 2015.
http://www.payscale.com/research/US/Employer=Wal-Mart_Stores,_Inc/
Hourly_Rate.
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