The Case Study Company: Wal-Mart
The Case Study Company: Wal-Mart
The Case Study Company: Wal-Mart
Contents
Executive Summary..................................................................................................................................1
1.0 Introduction..........................................................................................................................................4
1.1 Purpose..............................................................................................................................................4
1.2 Objectives..........................................................................................................................................4
1.3 Scope.................................................................................................................................................4
1.4 Limitations.........................................................................................................................................4
1.5 Wal-Mart At A Glance........................................................................................................................4
2.0 Wal-Mart’s Business Model and Strategy.......................................................................................6
3.0 Analyzing People, Organization and Technology- Success Factor & Current Issue................7
3.1 Inspirational Leader...........................................................................................................................7
3.2 Issues in Wal-Mart’s Human Resource Management........................................................................8
3.3 Retention Policy.................................................................................................................................9
3.4 RFID in Supply Chain Management....................................................................................................9
4.0 Chain Model-Understanding the Process.....................................................................................10
4.1 Upstream –Procurement, Logistics and Distribution.......................................................................11
4.2 Mid and Down Stream: Outlet/ Stores Inventory Management and RFID.......................................12
5.0 RFID System in Wal-Mart Value Chain- Implementation and Risks.........................................13
6.0 Recommendation.............................................................................................................................15
7.0 Conclusion.........................................................................................................................................15
Reference List.........................................................................................................................................16
Appendix
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The Case Study Company –Analyzing Wal-Mart Inc
Executive Summary
The report analyzes Wal-Mart Inc Stores on its business environments and
operations specifically in United States. Firstly, is to understand the history and its
current market position. Wal-Mart is a giant retailer in the United States worth billions of
dollars that sells general merchandise. It was founded by Sam Walton after World War
2 in Arkansas. Currently they are the number one corporation in the world.
The third section is to analyze the people organization and technology issues.
Inspirational leader such as Sam Walton understands the concept of human behavior
which turns out to be the core foundation of Wal-Mart corporate culture. Despite
criticism and allegation regarding low wages, non unionized and poor health care plans,
Wal-Mart has a good retention policy to keep and grow good employees. Wal-Mart often
uses and promote new technology such as RFID.
Wal-Mart Value Chain is a demand based model that places the consumer in-
front forefront. Wal-Mart deals with their supplier and has an excellent replenishment of
inventory. With the use of RFID, managers and can track inventory inside or outside the
stores. Therefore, inventories are kept based on demand and not the traditional
production capacity. RFID has significantly improved the operations in Wal-Mart and will
be a practice in the near future by other organizations.
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The Case Study Company –Analyzing Wal-Mart Inc
1.0 Introduction
1.1 Purpose
The purpose of this report is to conduct a critical analysis of Wal-Mart Stores Inc of
its business environments and its operation in United States.
1.2 Objectives
1.3 Scope
In this report, secondary data will be used such as journal articles, websites, text
books, theories and other electronic sources.
1.4 Limitations
The sources that are used are prone to inaccuracy. Personal opinions by
observation will be applied through certain parts of the report which might lead to
biasness.
Wal-Mart Stores Inc is an American well known discount store in the retail industry
that operates worldwide. Almost everything can be found in Wal-Mart stores and it has
everything a homemaker can ever think of. It is arguably the largest retail chain that
deals with millions of product ranging from furniture’s, clothes, groceries, books, movies,
electronic, jewelries, baby products and much more. Affordable price range coupled
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The Case Study Company –Analyzing Wal-Mart Inc
with aggressive brick and click strategy has lead to wide acceptance for Wal-Mart in
towns and cities alike. In 2008, Fortune 500 announced that Wal-Mart is the world
largest corporation with revenue exceeding USD 378.9 million leaving its direct
competitors like Target, Costco, Best-Buy, Albertsons and Sears far behind [ CITATION
CNN08 \l 1033 ]. In 2010, this mega retailer retains the world number one corporation
knocking out Exxon Mobil with revenue over USD 408.1 million [ CITATION CNN10 \l 1033 ].
Wal-Mart is currently led by three key people, the CEO; Mike Duke, Executive
Chairman; H. Lee Scott and Chairman; S. Robson Walton. They have over 2 million
workers operating in 6500 stores worldwide. In United States alone, it has 3800 stores
with each store as close as sixty kilometers each [ CITATION Zoo06 \l 1033 ] . Wal-Mart
Stores consists of three different traditional retail formats, Supercenters, Discount
Stores (SAM’s Club), and Neighborhood Markets, all of which operate in the U.S, and
its online retail format, Walmart.com.
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and pallets[ CITATION Wal09 \l 1033 ] . It gives special-members price where the main focus
is to create a network of distributors and partners to coordinate supply chains and high
value merchandise[ CITATION Wal09 \l 1033 ] . However, Cascio (2006) discovered that,
Wal-Mart has the power to squeeze its supplier which is willing to provide high value
and low cost merchandise. Therefore, members are able to make huge savings and
provide opportunities to improve their business profitability. For small business, every
penny counts, Sam’s Club continues to indulge members by working closely with their
suppliers
The models above reflect their business to fulfill the needs of the organization,
enhanced relations with customers and end users in achieving success.
3.0 Analyzing People, Organization and Technology- Success Factor & Current Issue
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The Case Study Company –Analyzing Wal-Mart Inc
Porter (1985) described value chain analysis as “firm collection of activities that
are performed to design, produce, and market to deliver its product” [ CITATION Sha07 \l
1033 ]. Wal-Mart focuses on the lowest cost imperative to maintain lower price align with
goals of SCM to “increase throughput while simultaneously reducing both inventory and
operating expenses”[ CITATION Bla08 \l 1033 ]. The primary activity includes procurement,
distribution, logistics and inventory management. They use their customer
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as the forefront - a pull strategy which the demand from customers is the basis
for production by Wal-Mart suppliers. Thus they don’t produce based on the traditional
production capacity but determined by accurate short term forecasts of customers
demand. This method is similar to Li & Fung & Dell Computers models as they
manufacture based on demands. It reduces the marketing expenditure of advertising
and promoting if products are overstock.
Wal-Mart’s purchases all the goods right from the supplier without 3 rd party
involvement. Bases on figure 1, the suppliers will either send directly to Wal-Mart
centralize distribution centers or to individual stores if they are nearby with the outlet.
Wal-Mart has distribution centers in different parts of United States. “Each centre serves
approximately 150 stores and supplies 80% of the inventory to individual
stores”[ CITATION Bla08 \l 1033 ]. To enhance significant control during delivery, Wal-Mart
uses their own private truck to the distribution centers. “Wal-Mart uses fast and reliable
transportation system by outsourcing more than 7000 truck companies” [ CITATION Bla08 \l
1033 ]. The drivers hired are all very experienced and product tracking can be done to
monitor the movements and make prediction of arrival using RFID system.
Once the product arrives to these centers, they are processed through practice
called cross docking. Here, they are processed and then loaded onto trucks to be
shipped directly and immediately to stores. “The distribution centers do not operate as
warehouses; no product inventory is stored at these facilities” [ CITATION Bla08 \l 1033 ].
Thus they are used to ensure a consistent readiness of stocks and safety stocks. This
system reduces handling & storage of finished goods, to eliminate the role of distribution
centers & stores. Cross-docking the system shifted from “supply chain” to “demand
chain” where explains the pull supply chain. These centers are uses RFID technology to
segregate products, update information, identifying pallets that can be access by most
employees by their mobile system also known as Texlons / Magic Wands. Wal-Mart
tries to minimize their inventory level through Just-In-Time activities to avoid stock-outs.
The outlets are than able to operate on a continuous replenishment with shorter lead
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times and accurate forecast[ CITATION Bla08 \l 1033 ] . These best practices have improved
level of efficiency and able to satisfy customer needs.
4.2 Mid and Down Stream: Outlet/ Stores Inventory Management and RFID
Once the products arrive at individual stores, it will be stored and display at the
shelf area. It’s stored above shelf area where it will be retrieve if products on shelf run
out. When a product is purchased by a customer, the RFID reader at check-out
counters will read the purchase and be sent to the Electronic Data Interchange (EDI)
System called Retail Link[ CITATION Bla08 \l 1033 ]. The information will be passed to the
suppliers, accounting information system, Texlons Devices and CRM information
system. “Wal-Mart shares real time information with suppliers for better ordering
accuracy, and transparency throughout the supply chain, particularly inventory visibility
and for invoicing and payments” [ CITATION Bla08 \l 1033 ]
Data’s that are sent to the Customer Relationship Management will be used for
data mining to make forecast. Marketing managers in Wal-Mart used data-mine
technology to develop replenishment plans for their suppliers and adjust the
composition of market baskets in individual stores [ CITATION Sha07 \l 1033 ] . They also can
learn about the behavior of their customers of their purchase decision and sending
pattern. Therefore they can plan for peak seasons, to ensure that the right materials,
supplies and personnel are in the right place at the right time. This statement suggest a
range of metrics that might be used “to track customer service by a supplier, including
percentage on-time deliveries, percentage of complete deliveries and percentage of
deliveries with acceptable qualities”[ CITATION Sha07 \l 1033 ].
If a product is low in stock, the EDI system will alert the store manager to make
purchases through Texlons device. At the same time, the data will be sent to suppliers
to alert them to start production. Simultaneously, the data also is sent to the accounting
system will than make confirmation for the request purchase. Once the request has
been approved, supplier can start to distribute. To improve the time of product arrival,
passive RFID that are place can transmit the current location to Wal-Mart’s EDI system.
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This bring great comfort to managers to exactly know where the product whereabouts
and able to inform the customers the actual date the product will be available.
RFID is a method to capture data about a single object without using human to
read the data. The implementation of RFID tags at pallet and case level, Wal-Mart is
able to “identify and track the products as it arrives at their warehouses until shelving at
the giant retailer”[ CITATION RFI05 \l 1033 ]. Wal-Mart believed that it will be a common
technology in the next decade, like the barcode as it was popularized by them in the
early 80’s[ CITATION Smi05 \l 1033 ]. However, there are not many business are willing to
switch from the existing barcode system due to the cost which may disrupt Wal-Mart
implementations. Generally, barcode is imbedded with the product packaging or
designs are relatively free. Although Wal-Mart is leading the future of this technology, it
is forcing suppliers to burden much of the cost.
There are several key benefits that Wal-Mart and the suppliers can obtain. RFID
can reduce out-of-stocks; make automated order fulfillment, improved inventory, product
tracking, reduce shrinkage and improve product delivery time by providing visibility into
the location of goods with RFID tags. It is all about “tracking” whether it inside or outside
of Wal-Mart, the need to know the product whereabouts is important. Smith (2005)
describe that this as a smart technology because it allows management to program the
device to watch out for theft. For example if a large amount of product moving out the
shelf, it will send a signal to a nearby camera to alert security to ensure these items are
not stolen. According to Wal-Mart’s CIO Linda Dillman, RFID has increase the efficiency
in the supply chain where they have been able to restock RFID-tagged items three
times as fast as non-tagged items[ CITATION RFI03 \l 1033 ].
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manufacturers which reduce the utilization of new material. Therefore Wal-Mart is not
only focusing on financial benefits but the ecosystem as well.
There also some risk associate implementing RFID technology, mainly privacy
issues and cyber terror. It is possible for competitors to steal information regarding
shipments, logistics companies, cost & sensitive information etc. Since the power
source comes from the reader not the tag, hackers can easily infiltrate sensitive
information through this passive tags. According to Smith (2005), Wal-Mart has made
their tag with limited range to read and write capability for security purpose. Privacy
issues in United States are taken very seriously by consumer advocacy groups. Their
concerns were that once the consumer leaves the store, that the tag can still be
monitored. They believe it will be an invasion of privacy as large corporation can
monitor their activity. According to Smith (2005) there are researches done to create
blocker tag at consumer level, but the result is still unknown. Therefore, Wal-Mart
should revise these factors before any further allegations in the future.
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6.0 Recommendation
With huge savings on fuel emissions, Wal-Mart and suppliers are able to cut
more cost. This is an opportunity for Wal-Mart to improve the wages system and health
care benefits of their employee. Instead of paying millions of dollars in law suit and out-
of-court settlement, they can pay extra to their employees. This can motivate employees
and in return they can give extra service to the customers. By doing this, in the long run,
it will become a win-win situation for both parties.
7.0 Conclusion
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Reference List
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Appendix
Source : Zhu, T., Singh, V. & Manuzak, D. (2009) Market Structure and Competition in the Retain
Industry. Journal of Marketing Research. 453-466.
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Wal-Mart Discount Stores: 51000 to 224,000sqf Wal-Mart Super Centre: 98,000 to 261,000sqf
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The Case Study Company –Analyzing Wal-Mart Inc
1. Adcox v. Wal-Mart Stores, Inc., et al., Case No. 04-00633, United States District Court for the Southern
District of Texas, filed 11/09/04
2. Armijo v. Wal-Mart Stores, Inc., et al., Case No. 00-01540, 1st Judicial District Court for the State of
New
Mexico, filed 09/18/00
3. Bailey v. Wal-Mart Stores, Inc., Case No. 00-01398, Marion County Superior Court for the State of
Indiana, filed 08/17/00
4. Barnett v. Wal-Mart Stores, Inc., Case No. 01-2-24553-8, King County Superior Court for the State of
Washington, filed 09/10/01
5. Basco v. Wal-Mart Stores, Inc., Case No. 00-03184, United States District Court for the District of
Louisiana, filed 09/05/00
6. Bayardo v. Wal-Mart Stores, Inc., et al., Case No. 07-00349, United States District Court for the District
of Nevada, filed 03/19/07
7. Brogan, Pam, et al. v. Wal-Mart Stores, Inc., et al., Case No. 07-00214, United States District Court for
the Southern District of West Virginia, filed 04/03/07
8. Brogan, Tammy, et al. v. Wal-Mart Stores, Inc., et al., Case No. 05-C-0047, Strafford County Superior
Court for the State of New Hampshire, filed 02/17/05
9. Brown, Lisa v. Wal-Mart Stores, Inc., Case No. 05-L-85, 14th Judicial Circuit Court for the State of
Illinois, filed 06/20/01
10. Brown, Shanaia v. Wal-Mart Stores, Inc., et al., Case No. 07-010417, United States District Court for
the Eastern District of New York, filed 04/05/07
11. Campbell v. Wal-Mart Stores, Inc., et al., Case No. 06-01172, United States District Court for the
District of Nevada, filed 09/20/06
12. Carter v. Wal-Mart Stores, Inc., et al., Case No. 02-CP-15-626, Court of Common Pleas for the State
of South Carolina, filed 07/31/02
13. Cole v. Wal-Mart Stores, Inc., et al., Case No. 06-00003, United States District Court for the District of
Montana, filed 01/13/06
14. Connatser v. Wal-Mart Stores, Inc., et al., Case No. 07-02239, United States District Court for the
Western District of Tennessee, filed 04/04/07
15. Curless v. Wal-Mart Stores, Inc., et al., Case No. 05-00277, United States District Court for the District
of Wyoming, filed 10/26/05
16. Deas v. Wal-Mart Stores, Inc., et al., Case No. 06-00052, United States District Court for the Eastern
District of Virginia, filed 04/03/06
17. Evans v. Wal-Mart Stores, Inc., et al., Case No. 07-00074, United States District Court for the District
of South Carolina, filed 01/09/07
18. Faverty v. Wal-Mart Stores, Inc., Case No. 02-08-4704, Court of Common Pleas for the State of Ohio,
filed 08/02/02
19. Gilles, et al. v. Wal-Mart Stores, Inc., et al., Case No. 06-00519, United States District Court for the
District of Indiana, filed 03/31/06
20. Grey v. Wal-Mart Stores, Inc., et al., Case No. 06-02293, United States District Court for the District of
Kansas, filed 07/14/06
21. Gross v. Wal-Mart Stores, Inc., et al., Case No. 04-01029, Commonwealth of Kentucky Circuit Court
for the State of Kentucky, filed 09/24/04
22. Hale v. Wal-Mart Stores, Inc., Case No. 01-218710, Circuit Court of Jackson County, Missouri, filed
08/15/01
23. Hall, Nancy v. Wal-Mart Stores, Inc., et al., Case No. 05-01099, United States District Court for the
District of Nevada, filed 08/12/05
24. Henderson v. Wal-Mart Stores, Inc., et al., Case No. 06-01569, United States District Court for the
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37. Luce v. Wal-Mart Stores, Inc., et al., Case No. 05-01019, United States District Court for the District of
South Dakota, filed 05/11/05
38. Mathies, et al. v. Wal-Mart Stores, Inc., et al., Case No. 07-00483, United States District Court for the
District of Oregon, filed 03/30/07
39. McFarlin v. Wal-Mart Stores, Inc., et al., Case No. 05-00094, United States District Court for the
District of Alaska, filed 04/07/05
40. Montgomery v. Wal-Mart Stores, Inc., et al., Case No. 03-00537, United States District Court for the
District of Mississippi, filed 12/30/02
41. Mussman v. Wal-Mart Stores, Inc., et al., Case No. 01-27486, District Court of Clinton County, Iowa,
filed 06/05/01
42. Nagy v. Wal-Mart Stores, Inc., et al., Case No. 01-00854, Circuit Court of Boyd County, Kentucky,
filed 08/29/01
43. Nolan, et al. v. Wal-Mart Stores, Inc., et al., Case No. 06-00777, United States District Court for the
Northern District of Ohio, filed 04/04/06
44. Olinger v. Wal-Mart Stores, Inc., et al., Case No. 06-14055, United States District Court for the
Eastern District of Michigan, filed 09/14/06
45. Parrish v. Wal-Mart Stores, Inc., et al., Case No. 05-00236, State Court of Chatham County, Georgia,
filed 02/17/05
46. Pedro, et al. v. Wal-Mart Stores, Inc., et al., Case No. 07-10638, United States District Court for the
District of Massachusetts, filed 04/04/07
47. Penn v. Wal-Mart Stores, Inc., et al., Case No. 06-06045, United States District Court for the Eastern
District of Louisiana, filed 09/15/06
48. Phelps v. Wal-Mart Stores, Inc., et al., Case No. 07-00243, United States District Court for the
Southern District of Illinois, filed 04/04/07
49. Pickett v. Wal-Mart Stores, Inc., et al., Case No. 03-05945, 13th Judicial District Court for the State of
Tennessee, filed 10/22/03
50. Poha v. Wal-Mart Stores, Inc., et al., Case No. 05-00697, United States District Court for the District
of Hawaii, filed 11/01/05
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