Under cost pressures, businesses review their center competencies and outsourced more activities such as warehousing, accounting, human resources, data handling, security, and logistics for distribution, travel, stock control. As businesses are more globalized, companies realize in-house procedures are not efficient to emerging markets any longer because of costs and various organization systems as well.
Outsourcing could backfire when service quality, staff turnover, production, information security concerns are not satisfied one another.
2. History and characteristics of the business
1) Type of product and service
Wal-Mart Stores, Inc. . was found by Sam Walton in 1962 and presently 8, 416 stores and club locations in US and 14 countries use more than 2. 1 million associates, offering more than 176 million customers annually.
The Group's principal activity is the operation of retail stores in various types planned into three divisions: Wal-Mart Stores U. S. contains Discount Stores, Supercenters, and Community Markets, walmart. com, Sam's Team a chain of warehouse golf clubs which sell groceries and standard goods), and Wal-Mart International.
They sell a multitude of general goods from apparels, groceries, gadgets, household supplies, motor vehicle products plus more at low prices and offer customer-oriented services at stores.
2) Customer requirement
As the advertising slogans "Low prices every day" and "Saving people money so they can live better lives", the main reason to do shopping at Walmart for customers is low prices. However the customers are now varied so only low prices can not gratify the customers' needs.
The requirements of customers can be characterized as below four.
Customers want to be treated properly
- Creating a fun and friendly shopping environment with kind and helpful employees
Customers want to buy what they want at cheaper price with good quality
- Keeping prices as low as possible and down the expenses of operations
Customers want to find what they want at the store
- Display diverse items as many as possible
Customers want to save the perfect time to get what they need
- Check frequently all items are stayed in stock.
3) Business culture
The unique culture has helped make Walmart one of the world's most successful companies and it has been developed out of three main beliefs as below.
We treat everyone with value and dignity : A culture of respect
- They call employees as Affiliates and treat people as resources of new ideas.
Were in business to satisfy our customers : A culture of customer satisfaction
-They work hard to make every customer feel pleasant and add value to what the customer gets.
We strive for excellence in every that people do : A culture of ongoing improvement
- They keep focused on making improvement and never be happy with present.
The famous Wal-Mart cheer signifies the culture as a main symbol and it is a constant reminder to associates to the fact that the customer is the reason they do the business enterprise.
10 Feet rule for greeting and helping customers within 10 foot and Sundown rule to give same-day customer service are also cases of showing how they value the clients.
4) Strategy
(1) Everyday low price
Low costs are crucial to its overall online marketing strategy which is the key competency to be the most successful retailer in the world.
Walmart is focused on buying direct and very watchful for your steps from wholesaling, marketing, transportation, and supply-chain management to reduce costs.
(2) The family store and huge range of merchandise
They supply the everyday needs of every relation and carry most of the items needed for home especially on consumable items mostly on essentials not high priced lines with offering quality to customers. In average Wal-Mart store, there are definitely more than eighty thousand singular items and it offers customers the diversity to look and convenience of one stop shopping.
(3) Private label merchandise
In 1991, Walmart first launched its brand Sam's Choice and Great Value two years later. The sales of its private label brands are now around 40 percent of total sales. Store brands have become an essential part of Walmart's global growth strategy.
(4) Programmed systems for distribution and inventory
Walmart was main retailers to make use of electronic digital scanners for point-of-sale (POS) at check out and accepted Universal Product Code (UPC) for products handling. They used EDI (Electronic Data Interchange) for transmitting requests and receiving invoices with manufacturers electronically as the first retailer in the industry.
Now Wal-Mart uses radio regularity id (RFID) microchips that replace bar codes and security tags with a combination technology that costs less overall.
Increase
Sales
Reduce
Costs
Reduce
Retail rices
< Productivity loop >
5) Value
Integrity : No Rest, cheat, steal, to be faithful,
Respect : All employees should be reputed no matter their positions, genders, races and religion
Teamwork: Depend and cooperate together
Communication: listening and communicating in both directions
Excellence: make an effort to improve and change to be better
Accountability: In charge of personal actions
Trust: action in a manner to engender the trust with customers, suppliers, fellow associates.
6) Current industry challenges
(1) Rivals - Niche Big package stores
Big merchants including Home Depot, Costco, Focus on, Kmart, yet others in US have increased and they are growing fast and concluding the difference between them and Wal Mart is still by far the largest operator. Some of them are included as specialty stores such as Home Depot for do-it-yourself, Best buy for Consumer Electronics, Staples for office materials. Toys R Us and Petsmart are also followed as the fads and needs of narrowed and specialised market.
(2) Controlling international source chains in international management
Cheap imports from Asia shifted the energy balance between discounters and domestic suppliers in US. After successful access into food retailing in home market, Wal Mart converted their guidelines to international expansion in later 1990s.
(3) The change of customers' needs
The main customers of Walmart shop for staples on a budget, however, its customers want more than the cheapest prices. Particularly clothes, home furnishing, and consumer electronics don't attract customers because customers want trendier design and better quality for these items. It is critical to liven up these product lines that have higher income compared with grocery store through product advancement with suppliers.
7) Other vital areas (why the OR choose outsourcing as a strategy)
(1) IT outsourcing to India
Wal-Mart's motto is to lower out the center man, and his profit percentage, and go direct and until recent years refused to utilize packaged applications instead of home-grown apps for IT part. Yet it was reported assessing a company process outsourcing (BPO) contract in India potentially worthwhile up to $500 million over next couple of years for procurement, logistics and inventory, payroll, and more in '09 2009.
UK's Tesco and North american specialty retailer Home Depot, have been outsourcing assignments to Indian alternative party service providers to support their existing IT systems and also develop newer applications. Tesco for instance, helps you to save over $60 million yearly by outsourcing its IT assignments to India.
(2) Processing outsourcing in China
Because of affluent manpower and high efficiency, Walmart has searched suppliers in China who can provide cheaper prices. Weighed against US made products, it is cheaper and Walmart thought we would make their private label products in China. A lot more than 70% of its products are Made in China and Walmart has designed to improve the import the merchandise from their Chinese suppliers to attain its strategic goal keeping people money.
3. An in depth process flow chart of procedures on the pattern of outsourcing, competitive border, advancement for supply chain outsourcing. Include Process activities, time used, roles, duties.
Walmart has approximately 6, 000 suppliers and 80% of these are from China.
TCL, a Chinese language company, is the greatest producer of tv on the globe and the vast majority of their US exports go to Walmart and African american & Decker a power tool maker and one of suppliers to Walmart no more runs any factories in america and have plants in Mexico, the Czech Republic, and China.
Below process flow is an example of businesses process between suppliers in China and Walmart US.
Chinese Sub supplier
Chinese Sub supplier
Chinese Sub supplier
Walmart US
Consolidator in China
Chinese supplier
US supplier
in China
Distribution center in US
US supplier in US
Retail store
De
consolidator in US
Customer
Order, replenishment, QC, product, design info
Consumer response check
Order, replenishment, QC, product, design info
Inventory check
Supply chain
Activity
Process
Chinese supplier
Producing
Receive requests from Walmart US, manufacture products, program production
US company in China
Producing
Receive purchases from Walmart US, check inventory with sub suppliers, routine production
US supplier in US
Producing
Receive requests from Walmart US, produce products and send it to syndication center
Consolidator and
de-consolidator
Transportation
Manage vehicles and shipment
Shipping and delivery
Distribution centre in US
Warehousing
Distribution
Check and stock all item in from suppliers, send requested what to stores, advise inventory position to Walmart US.
Inventory management
Retail store
Managing
Acquiring
Receive, stock, and display items. Check quality, Sales and marketing, Submission a purchase to Walmart US, Customer support. Quality management
Walmart US
Planning
Managing
Plan and forecast needs, source and contact suppliers for positioning orders, Manage whole move and information of items from suppliers to customers
Information management, Procurement
< Operations process between suppliers in China and Walmart US>
Walmart comes with an extensive data source for determining items sales trends, controlling the replenishment of each store's inventory called Retail Website link own developed databases system. It allows suppliers to gain access to and show data about sales and items in stock.
For managing and managing the freight move and inventory from the entire supply chain, they use RFID (Radio Rate of recurrence Recognition) technology for conserving delivery time and costs. Below example shows how RFID is utilized for tagged items in resource chain move during delivering products.
Manufacturer
Consolidator
Deconsolidator
Distribution Center
Retail Store
Inventory info
Picked
Loaded
on truck
Inland carrier
Unloaded
Loaded on drayage
Ocean carrier
Loaded on ship
Unloadedfrom ship
Unloaded from drayageship
Loaded on truck
Inland carrier
Unloaded from truck
Stored
Picked
Loaded on truck
Inland carrier
Sold
Taken off shelves
Moved to shelf
Putaway to backstore
Unloaded from truck
Walmart contact each provider directly for inserting orders to save lots of time and costs so that it is correct and fast to have response for inserting requests. Especially the suppliers in China offers lower prices than local manufacturers so it also plays a part in its efficient resource string management.
Its circulation centers are well-known for useful inventory management using RFID and RetailLink database so Walmart minimizes related cost of holding and shortage. RFID technology help Walmart to find the location of a product from when it's manufactured to when it is stocked at a distribution center and it is great for control the movement and even forecast demands.
4. Determine current problems, weaknesses and obstacles faced making reference to current techniques. (based on No. 2)
1) Backfire of Lower price
Walmart's good deal authority has been confronted with quality problems because some Chinese language suppliers make substandard products and then meet lower prices. The issues have come to leading in US and China that Chinese manufacturers are pressed to the corner to keep costs bottom and many quality promises of unsafe items within US store.
Walmart is a huge company and its small action make a difference to economic situation of one or more countries and there are many claims that its resource chain incurs the increased loss of American careers to low-wage countries such as China.
Following are some facts which show how Walmart did for outsourcing in China. 2)
Wal-Mart imports $22 billion of Chinese language goods, making Wal-Mart the #1 importer of Chinese language goods
Wal-Mart, if it were its own country, would be China's sixth greatest trading partner
Wal-Mart boats American jobs overseas, both immediately and by pressuring American suppliers to go offshore
Wal-Mart lobbies for free-trade contracts that make it easier for companies to dispatch American jobs overseas
Because of the growing trade deficit with China, the U. S. has lost an estimated 1. 8 million careers since 2000
5. Suggest some changes in operations for supply string outsourcing to overcome the experienced problems, weaknesses and troubles. Advice should be justified with sufficient theories and practical examples.
1) Costs, quality and customers - Quality management
Walmart has obeyed its goal Lower prices since its establishment faithfully for client satisfaction.
Yet, they ignore the most crucial thing for his or her business, the client.
The present Walmart just stacks the merchandise from China needed a detailed quality check and specializes in conserving costs at every method until retailing.
Customer will be completely satisfied with the merchandise of good quality and low priced not only low priced and the fads of Walmart customers are modified to more complex for fine designed items and less concern about costs. 3)
Good product quality makes a company stay competitive and profitable over time and gives following benefits.
Better competiveness
Better reputation
lower marketing costs
Increased profitability in the long term
Increased sales
Less costs for solving quality problems -> Lower costs
The quality problems can be resolved with applying guidelines of Total Quality Management.
TQM principles
Suggestions
Top management holds primary responsibility for product quality
Top management give first concern on Quality not Costs
Quality of a Product must be based on the customers' expectations
Listen to customers and improve customer services
The development systems and methodologies must be synchronized with high quality standards
Reset high quality specifications for many suppliers to observe
Quality requires worker involvement and is also the responsibility of most employees in any way degrees of the organization
All suppliers and employees are had a need to take more obligations for quality
Every worker must strive to "obtain it right the very first time. "
Timeliness and accuracy and reliability for quality should be emphasized
Quality must be constantly checked so that problems can be quickly determined and solved.
Consistent quality management should be executed
All functions of the organization must highlight on ongoing quality improvement to accomplish strategic goals
Quality improvement should be linked with strategic goals
Companies must be sure high quality inputs by collaborating with suppliers with TQM programs
A company and suppliers need to comprehend TQM specifically and cooperate.
2) Managing suppliers - Supply chain management
Outsourcing has many advantages, however, it offers cons such as second-rate quality as well since it has gone out of company and sometimes hard to regulate.
Chinese suppliers of Walmart have produced quality problems and maybe it's improved within supply chain management after renewing Quality principles.
To make effective supply string activities, information posting and exact communication are essential.
Walmart uses Radio Occurrence Id (RFID) and implement a collaborative planning, forecasting, and replenishment (CPFR) program, beginning a Just-In-Time Inventory Program by any means aspects in source chain within Walmart. These systems should be more about data showing on a global basis and it'll allow suppliers to reduce their overall costs and will be offering efficiency in source chain.
For better quality and performance, multi-sourcing for same product in various countries can be an option. If the issues are not improved, sourcing new distributor is inevitable and it'll save time for finding reliable one. Outsourcing in countries that have similar culture or no terminology barriers will be better to control.
6. Determine the required resources needed to put into action changes.
1) HR resources
Intense tournaments among other big field suppliers makes Walmart give attention to cheap to compete in the market. But their main aim is not for customer but themselves to make more income. Top management transformed their eyes to their financial status from client satisfaction. To survive in the industry is essential for a firm but it is not correct in conditions of long run business. They have to go back to basic to gratify customers with good quality products and revel in them with pleasurable shopping. The original idea is not seen, the continuing future of company is not bright any longer. Top management should realize the importance of long-term partnership and proper alliances with suppliers to make goods found customers' demands mutually.
2) IT structure
When suppliers are not close to a corporation, they need to discover a way to talk frequently.
Advanced technology helps outsourcing to be swift and exact in supply chain and Walmart is a leading dealer of using cutting edge technology in their business.
But aside from logistics, inventory, replenishment planning sales, they have to develop new system for communication for increasing quality, variety, customization of products, employee involvement, a flexibility in work functions. The system also can be outsourced to professional IT providers to get more detailed objectivity and sustainability.
7. Talk about all expected results to be achieved with the changes made.
Wal-Mart is one of the better supply chain operators at this time which by using a supply string management system steadily against its competition and they don't even stop changing. They have got very reliable system to do the business.
Now Walmart needs to opt to change for next thing and it generally does not mean to give up "everyday low price" strategy their core competency. They need to find their own way to charm to customers again using their visions and business goals.
If Walmart focus on customer satisfaction to solve current problems about quality and costs, the best box stores will advantage customers, individuals, even the economy with the innovated management.
Following are expected results when the changes have made from six aspects; Within organization, within resource chain, company and offer chain, outside of organization, products and customer.
Note
1) Wal-Mart cheer
Someone in the front An organization in response
"Give me a W" " W"
"Give me an A" " A"
"Give me a L " " L"
"Give me a squiggly" "squiggly" (means the celebrity between WAL and MART on emblem)
"Give me a M" " M"
"Give me an A" " A"
"Give me a R" " R
"Give me a T" " T"
"Exactly what does that spell" "WAL-MART"
"I can't hear you!" "WAL-MART"
"Whose Wal-Mart could it be?" "It's my WAL-MART"
"Who's number 1?" "The customer! Always! Umph!"
2) http://letters. wakeupwalmart. com/dia/organizationsCOM/wakeup/campaign. jsp?campaign_KEY=1914
3) http://www. msnbc. msn. com/id/7901047/
