Operations Management Profile Essay

Abstract 

Walmart ranks as one of the largest public corporation, employing over 2 million employees. The business slogan is “Save Money. Live Better” and its mission statement centers on affordability where it seeks to give the ordinary people the same thing as rich people and its vision is built on becoming a worldwide leader in retailing. Walmart’s operation management focuses on the transformation of the production and operation inputs into outputs that meets the needs and expectation of the customers when distributed. The operation strategy at Walmart is to provide value to its customers through its competitive priority “Low prices, Everyday”, based on low inventory levels and short flow times. The operation structure links communication between stores while the short flow times is facilitated by a faster transportation system. The enabling technologies and processes for Walmart’s operations structure are based on satellite and EDI for linking communications between stores. The fast transportation system at Walmart is facilitated through cross-docking and focused location. The performance of Walmart is reinforced by its internal strengths of logistics ad low cost that envisions a one-stop shopping. It has focused on increasing inventory as a measure of overall performance. The highly efficient replenishment practices enable the store to have high inventory returns of 7.6 by 2003 from lows of 3.2 in 1973. Another addition, to Walmart organizational efficiency under the resource-based view is the ‘Scan ‘N Pay (SNP) model. This model ensures the suppliers maintain ownership of merchandise until they are finally sold by the store. The development of these process and their management is a long-term effort based on the reality of the specific business environment. However, operation process management can be an effective and efficient method of enhancing organization performance by integrating business quality and discipline management in the respective business. Walmart can improve the performance of the business by focusing on improving its service quality along with the lower cost of high-quality goods while maintaining high operation efficiency. This can be done based on three parts that include batch control, at the strategic level, packaging level at the tactical level and at the operation level; it includes packaging supply and completing routines.

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Introduction

Walmart ranks as one of the largest public corporation employing over 2 million employees. It is a family-owned business founded by Sam Walton and incorporated in 1969. Its shares were traded on the New York Stock Exchange in 1972. Currently, the company has over 8000 stores in 15 countries. It operates in different brand names in Mexico and also operates as Walmex, Asda, in the UK and Best Price in India (Walmart Inc., 2018). The slogan of the firm is “Save Money. Live Better”. Its mission statement centers around affordability where it seeks to give the ordinary people the same thing as rich people and its vision is built on becoming a worldwide leader in retailing. The operation management at Walmart focuses on the transformation of the production and operation inputs into outputs that meets the needs and expectation of the customers when distributed.

Therefore, the operation strategy at Walmart is to provide value to its customers through its competitive priority “Low prices, Everyday”, based on low inventory levels and short flow times (Walmart, 2018). The operation structure links communication between stores while the short flow times is facilitated by a faster transportation system. The enabling technologies and processes for Walmart’s operations structure are based on satellite and EDI for linking communications between stores. The fast transportation system at Walmart is facilitated through cross-docking and focused location (Walmart, 2018).  

Topic Statement

The study seeks to understand the operation strategy at Walmart that enables it to attain its mission of everyday low price, its cultural adaptation, and the training of employees at Walmart to align with its operational strategy. The perpetual growth of Walmart in the last couple of decades have been driven in a large part of the operation strategy at the departmental store firm. There is an efficient supply management system that allows for the growth of the firm even in the financial crises. 

This study will analyze Walmart’s supply chain management, focusing on the scope of integration at the company, the operation and distribution strategy at the firm. The study will evaluate the impact of these strategies at the firm and assess the areas that can be improved. Business performance is enhanced through a professional process approach that can be achieved through improved operational management. The performance of the business processes affects organization competitiveness and its sustained success (Anttila & Jussila, 2013). The process performance management at Walmart plays a vital role in attaining and sustaining the efficiency of the organization’s business performance. The success of a firm such as Walmart is anchored on different fronts that include operational management, product performance, financial and market performance as well as customer-focused performance. These dimension of organizational performance are based on the operational management that is in place. The operational management at Walmart will be analyzed under its capacity planning, product, and service factor, and the methods used in supply chain management.

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Methodology

Conducting research in operation management entails getting “real-world” knowledge of operation systems and describing how they operate in order to identify the gaps and improve them (McCutcheon & Meredith, 1993). The current study uses case study research methods, a common research method in operational management studies. It is a qualitative research approach bearing the inherent qualitative research characteristic of an in-depth examination of a phenomenon (McCutcheon & Meredith, 1993). 

The method is not subjective and the researcher lacks control of the events occurring in the study. Since the case study research focuses on the current condition, it becomes plausible to understand the existing operation management at Walmart and formulating methods of improving it. This is done without manipulating the subjects as it happens in action research. The study will seek to describe operational management at Walmart to build a plausible explanation of the success of the firm and link the operational management strategy to the antecedents of the success of the firm. In order to generalize the study findings, the case study will have a considerable depth such that the findings can be compared with those from other studies. The case research methodology will use description to substantiate the researcher’s deductions on the operation management at Walmart and its link to the success of the firm. Since the study examines an ongoing business operation, it does not allow the researcher to control the variables such that the outcome is affected.  

Results

Process diagram to improve operational management at Walmart Inc.

The key component of Walmart Inc.’s operation management in its supply management include vendor partnerships, distribution management, cross-docking and use of technology and integration in its processes. Technology and integration are utilized in Walmart distribution management where it lowers holding and ordering cost. The RFID is in line with the ‘Just in time, JIT’ strategy where Walmart can keep track of the inventory and reorder as soon as the inventory levels go down. The RFID improves customer service, minimizes the labor cost for the firm while eliminating manual efficiency, improving operation efficiency at Walmart. It eliminates the out-of-stock situation and inventory shrinkage at the firm, thereby improving customer experience through reliability of the firm. This supply management allows Walmart to order in small batches at a higher frequency enabling the firm to gain profitability. The use of radio frequency identification keeps track of goods at any given time and eliminates the physical counting of inventory. The supply chain management can be superior in that it allows efficient supply chain and the firm can have different deals with different customers, enabling it to have different service policies at a reasonable cost.

Discussion

Walmart’s founder, Sam Walton, implemented a range of strategies anchored on resource-based view to gain a competitive advantage over Walmart’s best competitors. A number of policies were borrowed from companies and interwoven the Walmart organization structure. In resource-based view, the Barney’s VRIN framework are demonstrated in Walmart’s general administration, human resource management, technology development and finally procurement (Barney et al., 2011). Competence in the store was gained through the adoption of innovative technologies that placed the store at a competitively high competitive advantage than its rivals. There was massive investment in information technology that initiated an IT-driven transformation of retailing starting in the 1950s. Essentially, the information systems enabled the firm to “know where every item was at all times” through setting up of automated distribution centers. These centers were linked to stores and suppliers via computers. The automation, together with the installation of a private satellite network in the 1980s to create channels of communications between the stores and the suppliers, enabled Walmart to reduce the inventory-taking lags from months to real-time. This demonstrates the intensification of resource utilization to achieve competence (Bowman & Ambrosini, (2007). Information technology was a technological asset that Walmart deployed to position the business in the market (Teece et al., 1997). Essentially, technology as a resource is made valuable, rare, inimitable as well as non-substitutable in the running of the firm. It is implemented through POS (Point of sale) systems as well as through a private satellite system.  

Walmart’s procurement system entails dealing directly with suppliers by by-passing intermediaries in a typical manufacturer Walmart customer’s sequence. Walmart has also implemented an electronic data exchange that ensures the manufacturing output of the suppliers are leveraged to the needs and demands of the Walmart stores. Under human resource management, Walmart ensures the VRIN framework is adhered to by ensuring there are close engagement practices between the company and its employees. This creates a strong organizational culture with tightly controlled compensation schemes. Walmart has created a unique organizational structure that operates in three business segments. This positions the firm to reach ideally all customer segments in its target market. The three segments include Walmart stores (supercenters, discount centers, and neighborhood markets), Walmart international, and SAM’s club. SAM’s club, unlike the other two business segment, sells merchandise in large quantities.

While the inbound logistics are facilitated by an electronic data exchange (EDI) and a vendor managed inventory (VMI) continuous assessment, the outbound logistic are implemented in a hub and spoke system as well as cross-docking. The distribution strategy as an intangible resource in resource-based theory adopts a saturation strategy premised under cross-docking. Cross-docking enables transfer of items from inbound to store-bound trucks without storing the items in the distribution stores. These systems are designed to make the logistics in the distribution process efficient. The corporate traffic department at Walmart enabled the coordination of trucking capacity by both common carriers and Walmart fleet so as to attain the saturation strategy. A Retail Link private exchange provides suppliers with a point-of-sale data on the trends and inventories of their products specific to each Walmart store. The competitive advantage of this distribution system has enabled Walmart to outpace its competitors by having real-time retail data for a large number of suppliers. This logistical advantage afforded Walmart a supply management scheme that could enable it to feed off demand chain. Manufacturing can be scheduled to meet the demand in the market. The efficiencies in the logistical resource-based competitive view can enable Walmart to negotiate with its main suppliers on the size and locations of their factories (Barney & Arikan, 2001). 

Recommendation

In order to improve the performance of the business, Walmart Inc. should focus on improving its service quality along with the lower cost of high-quality goods while maintaining high operation efficiency.

Figure 1:  proposed model

The above-proposed model is based on three parts that include batch control at the strategic level, packaging decisions at the tactical level, and at the operation level it includes packaging supply and completing routines. The batches can be organized under brand control and order control. Batch control ensures there are less frequent changes in the packaging since brands are dedicated to certain packing sides. The supply chain management is determined by the customers who set the rules for vertical integration. Process management is an incredibly complicated concept requiring the implementation of business practices that put a strain on the radical changes in the organizational structure and culture (Grant, 1996; Landler & Barbaro, 2006). The development of these processes and their management is a long-term effort based on the reality of the specific business environment. However, operation process management can be an effective and efficient method of enhancing organization performance by integrating business quality and discipline management in the respective business. 

Conclusion

The marketing activities are centered on everyday low prices (EDLP) under the slogan “save money, live better”. These are reinforced by Walmart’s internal strengths of logistics and low cost that envisions a one-stop shopping. Walmart has also focused on increasing inventory as a measure of overall performance. The highly efficient replenishment practices enabled the store to have high inventory returns of 7.6 by 2003 from lows of 3.2 in 1973. Another addition to Walmart’s organizational efficiency under the resource-based view is the ‘Scan ‘N Pay’ (SNP) model. This model ensures the suppliers maintain ownership of merchandise until they are finally sold by the store. Through these efficiencies in organization and operations, Walmart has accrued distribution cost as low as 2-3 % compared to competitors 4-5%. Concisely, Walmart has achieved competence through the deployment of research-based view where it has emphasized on Barney’s VRIN framework to have a competitive advantage over its rivals in the market. This has proved to be more advantageous for Walmart as opposed to market positioning strategies. The firm has created value in its human capital resources as well as in its distribution efficiencies.