Walmart Case Study

 Walmart – A Case Study

Walmart as we know it today evolved from Sam Walton’s goals for great value and great customer service. “Mr. Sam,” as he was known, believed in leadership through service. This belief that true leadership depends on willing service was the principle on which Walmart was built, and drove the decisions the company has made for the past 50 years. So much of Walmart’s history is tied to the story of Sam Walton himself, and so much of our future will be rooted in Mr. Sam’s principles

Walmart boasts over 11,700 stores and serves about 270 million customers. Its business strategy is mainly based on “being competitive in terms of assortment, differentiating with the way people access, leading in terms of price, and delivering an incredible experience with the motto of EDLP (Every Day Low Prices).”

Historically, Walmart is known for its two main business keys:

  • One-stop shopping
  • Every Day Low Cost (EDLC) or Every Day Low Price (EDLP)

The company primarily operates on a business model with 3 vital units:

  • Walmart U.S. (making about 64% of its net sales)
  • Walmart International (making about 24% of its net sales)
  • Sam’s Club (making about 12% of its net sales)

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Walmart U.S.

From the day it started and to until now, Walmart U.S. is one of its biggest segments, which successfully operates in all the fifty states across United States along with Puerto Rico & Washington D.C. The 2018 net sales contributed to about 64% from the U.S. alone.

Walmart International

Apart from the U.S., Walmart International operates in 27 different countries, which comprises 3 major categories:

  • Wholesale
  • Retail, and
  • Others

These three categories have multiple formats, which include:

  • Supermarkets
  • Supercenters
  • Warehouse clubs
  • Hypermarkets
  • Ecommerce

Sam’s Club 

This is another important unit of Walmart, which consists of only membership-based warehouse clubs that operates across 44 states in the United States along with Puerto Rico and its e-commerce. It’s a crucial component in terms of operating income, as Sam’s Club generated about 12% of its net sales in 2018 .

History – The Road to Walmart

walmart history

Let’s get into the history of walmart;

  • 1914- The history of the U.S. retailer giant began with Sam Walton, who was born in Kingfisher, Oklahoma.
  • 1945- Walton served in the military for a few years of his life. He finished this service and moved to Iowa and then Arkansas.
  • 1945-1950- He gained retail experience, and this helped him to operate his variety store.
  • 1950- He moved to Bentonville and opened “Walton’s 5&10”.
  • 1962- Finally, on July 2nd, he opened his first Walmart store in Arkansas.
  • 1967- The family-owned business had spread out to a full-scale organization with 24 stores. They earned $12.7 million in sales.
  • 1969- The company’s name was changed to Wal-Mart, Inc. on October 31st
  • 1970- The name was changed again to Wal-Mart Stores, Inc. The company started trading stock as a publicly held company.
  • 1972- The organization was listed on the New York Stock Exchange, and the price of the first share was $16.50/share.
  • 1980- The family established the Walton Family Foundation as they reached $1 billion in annual sales. It was faster than any other company at that time, which showed that the business model of the company was soaring and working efficiently.
  • 1983- The organization converted from cash registers to a computerized point-of-sale system, which enables effective and efficient checkout.
  • 1987- The most crucial private satellite communication in the U.S. was installed. It linked all the operationsof the business model of Walmart through voice, data, and video communication.
  • 1993- $1 billion sales week
  • 1997- $100 billion sales year
  • 2009- $400 billion annual sales in the year
  • 1992- The founder of the company, Sam Walton, passed away.
  • 2018- The organization is a worldwide retail giant and has its presence in many countries.

Business strategies of Walmart

business strategies

Walmart has kept in mind very well 4p’s of marketing mix;

  • Price
  • Place
  • Product
  • Promotion

Pricing Strategy

  • Wal-Mart does not offer overpriced products. They believe in offering lowest prices to attract customers and focus selling in bulk.
  • Wal-Mart’s procurement strategies allow keeping their prices low.
  • Use of universal barcoding creates an efficient supply chain and helps to the lower prices.product

Place

Walmart utilizes intensive distribution strategy;

  • Door-to-door deliveries
  • Walmart has a powerful e-commerce platform.
  • An organized distribution centers
  • High-end IT systems

Product

Walmart offers wide range of products from furniture, groceries, appliances, hardware, health goods, beauty products, wellness, sports to entertainment.

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Promotion

It is composed of sales promotions, advertisements, public relations, and personal selling.

  • Walmart advertises on websites and newspapers.
  • Sales promotions through discounts and special deals.
  • Personal selling, on the other hand, happens directly at its stores, where the sales persons persuade the buyers to try package deals or new products.

Walmart store uses popular slogans, which are connected to low prices. A few examples include “save money, live better,” “the lowest price store,” “everyday low price,” etc. It applies the strategy of “diversified advertising media” to promote. This includes from social media, billboards to TV ads and websites

Walmart Supply Chain practices

Supply chain practices

Walmart is in the large supply chain and logistics industry. Walmart have invested in the latest technology solutions to ensure to offer their customers the lowest prices products.

Walmart’s supply chain is much optimized as it has innovated its supply chain by reducing the number of complex links in the supply chain. They started procuring products directly in bulk from the manufacturers and transferring it to stores and kept no further link in between. Thus Walmart is successful in meeting customer orders on time. This innovation has helped Walmart in achieving success at a fast rate by keeping distribution cost at an exceptionally low rate. Reducing the number of links has helped in making the products reach customers on time, in perfect form and quality (reducing the impact of the environment on the products). This is an example of successful Six Sigma implementation.

Reliable inputs and strategic supplier partnership

Walmart has always strategically maintained partnership and relationship with trustworthy suppliers who can supply products as and when the demand arises. They have maintained long term relationship with the vendors and promised them to purchase large amount of products from them in return of low prices for their products. In this way Walmart ensured reliable inputs and they can meet the demand of the customers despite slight fluctuations in demand forecasting. Walmart’s vendor management is long-lasting because there is a win-win situation which ensures both the supplier and the buyer benefits. Regular communication and on-time sharing of information with their vendors is a major key to success of Walmart. Walmart has collaborated successfully with its suppliers over years and ensured demand fulfilment timely.

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Cross-docking “a great strategic decision”

Keeping the low cost of operations helps Walmart in keeping the cost of products low and its benefits for the customers as they have to pay low prices for everyday products. Cross-docking helps Walmart in keeping fewer inventories in stock and spending less cost on warehousing. Directly transferring goods from inbound or outbound trucks or rails and loading them into incoming truck rails and sending them to the stores, eliminating the need for warehousing. This decision leads to bringing down transportation cost, timing, warehousing cost, excess inventory and increases efficiency of the supply chain and inventory management.

Technology innovation

Walmart reached its pinnacle of success by constantly innovating its operations and mechanisms of performing day to day activities. Technology is used by Walmart to predict accurate demand rate of consumers, efficient customer relationship management, keeping a track of the flow of goods along the supply chain, predicting inventory level and correcting and minimizing its errors. Walmart has strategically implemented technology in everyday operations and inventory management. This helps to cut down operating expenses and increase its profit over years. The main technologies used by Walmart to maintain its supply chain management cost effectively are as follows:

Use of Universal Product Code: It brought about a massive change in retail Chain Corporation. These barcodes help to collect and interpret the store level information immediately. This helped in conducting proper operations of business. This helps in keeping track of inventory in the store and process customer demands as well. It added value to Walmart because now the need for manual data entry is eliminated.

Retail Link: helped Walmart to connect the demand forecasting analysts to the vendor network as well to the center of Walmart’s distribution sites. This is extremely helpful to all the producers and vendors to accurately forecast the consumer’s demand pattern according to historical data which are already and accurately perform the order fulfilment activities via the satellite network.

RFID (Radio Frequency Identification Tags): After the recent developments that took place in the field of technology, Walmart adopted the use of RFID. Now both the vendors and Walmart can supervise inventory management. This has facilitated the tracking of the flow of goods along the supply chain from distance very easy. It is better than the Bar Codes as it is capable of storing more data than it.

RFID and smart tags make the operations of Walmart very efficient as timely transfer of information about the stocks in the store track is done and it ensures that none of shelves will be empty and products are provided to customers as and when needed by them. Because of it none of the products go out of stock in any store of Walmart. This helps in bringing down the bullwhip effect and moreover it does not incur the cost of excess inventory. There has been a reduction (Jhanwar Vaishnavi, et al., 2019) International Journal of Advance Research, Ideas and Innovations in Technology.

Walmart Distribution Centers

Walmart boasts more than 150 distribution centers and is the main hubs of its business. Its distribution operation is world’s one of the most prominent activities, servicing clubs, direct deliveries, and stores to the customers.

Its transportation alone has an incredible fleet of 61,000 trailers, 7,800+ drivers, and 6,100 tractors.

  • Walmart’s distribution network ships dry groceries, general merchandise, and perishable groceries with other categories to its consumers on a daily basis.
  • It has six disaster distribution centers, located strategically across the country. Each is stocked with adequate products to provide immediate response to the struggling communities during a natural disaster.
  • Every distribution center measures over 1 million sq.ft and has more than 600 personnel unloading as well as shipping on 200+ trailers on a daily basis.
  • Each distribution center is built across a radius of 150 or more miles and can hold 90 — 100 stores in it.

Why are they so successful?

Walmart is successful due to:

  • Collaboration way of working

Walmart was the first company to introduce Universal Product Code for barcodes where store level information was then collected and analysed to help improve operations. Further, Walmart created their database, through which they were able to see real-time sales data from cash registers straight to their distribution centres. Walmart adopted the collaborative approach of sharing information with stores, distributions centres and suppliers. It helped the organizations to improve forecasting, managing inventory and marketing of their products.

  • Innovative way of working

As there are lot of competitors in the market, therefore,  Walmart has to work in an innovative ways. Walmart has some tough competition, with retailers such as Amazon touting low prices and fast delivery, they had to figure out a way of competing with an essentially seamless customer experience.

Earlier this year, Walmart expanded its click and collect service to 30 new markets and it’s pickup service to 60 US markets at 400 locations. Walmart is constantly seeking out new ways of driving new revenue, and they adjust their supply chain accordingly.

It’s fair to say that Walmart doesn’t take its competition lying down, and although it has a lot to learn in the eCommerce space, it’s going in the necessary direction to drive growth in this area. 

Walmart has used distribution channels to supply their goods to the stores which reduces time and cost of transportation. Six Sigma implementation minimizes unnecessary activities and Just-in-time (JIT) means meeting the demand at the correct time. Six sigma is important for continuous improvement of the product/ services. Use of technology in supply chain reduces labour cost, increase value creation and long sustainability.

References

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