Wal-Mart Harvard Case Solution & Analysis

As Johnnie Dobbs, Wal-Mart’s executive vice-president (EVP) of logistics, where would you spend your money or focus your energy?

There are three initiatives that would be evaluated in terms of their favorability for Wal-Mart’s future prospects. Global Sourcing, Multi-channel Strategy and Project One Touch are the three areas that need to be evaluated by Johnnie Dobbs in terms of their effectiveness for Wal-Mart’s supply chain.

Global Sourcing is an effective initiative for consolidating purchasing especially as Wal-Mart’s US and local country buying groups will be merged to form global merchandizing centers. This is an effective move towards globalization as it will open avenues for Wal-Mart’s interaction with key suppliers in global markets.  Additionally, this is a move towards achieving better cost concessions since Wal-Mart would be able to avail purchasing economies of scale at an optimal level.

However, a greater focus on the ‘Global Sourcing’ initiative could have its downside too.  Wal-Mart may be able to cater to larger developed markets through this initiative in the form of higher margins and lower costs but the fact that smaller markets could get ignored in the long run indicates that further investment in global merchandizing centers could lead to a lower potential in the latter regions. Bulk purchasing may limit Wal-Mart’s focus in terms of customizing products for smaller markets since smaller volumes would not allow an optimal utilization of these global merchandizing centers.

Project one touch could be an area that can be explored further by Johnnie Dobbs. Not only has this initiative brought down costs by approximately $2 billion, it has also improved in-store inventory management. In addition to this, Wal-Mart is creating further convenience for associates since they can unpack merchandise from the warehouse which would eventually be helpful in lowering labor costs in stores.

The multi-channel strategy seems to be the most complex project out of the three initiatives under consideration and therefore requires further emphasis. As per the recent trends, co-ordination between the off-line and online operations is needed to improve sales.  Wal-Mart is aiming at motivating the hourly sales force to promote online sales, in addition to taking responsibility of order fulfillment for online customers. By lowering the cost of online ordering in the form of free delivery for online orders, Wal-Mart is encouraging growth of sales from the online channel. By integrating the off-line and online channels in the form of giving customers the convenience of picking up orders from stores, Wal-Mart is not just increasing convenience for its customers but is also lowering its own overheads by saving up on shipping costs to customers for online orders.

It should be noted that in addition to managing current orders in stores, this multi-channel strategy would lead to an increase in traffic in-stores especially as Wal-Mart stores would now be order fulfillment centers. This business model would require a greater focus for an effective management of logistics since Wal-Mart would have to offer the same convenience and efficiency that it offers in its channels individually. The order two initiates have been discussed in terms of how they do not currently need to be expanded since global merchandizing centers would limit growth to developed nations and ‘Project One Touch’ has a focus on in-store inventory management. The integration of multiple channels needs to be the main focus for now to continue with smooth operations in addition to market development since the online market would be encouraged to buy directly from Wal-Mart.

As Johnnie Dobbs, what recommendations would you make to the chief executive officer (CEO)?  Where do you see opportunities for Wal-Mart in its global supply chain?

Wal-Mart’s low cost strategy and its effective supply chain management has been a source of competitive edge over years. An integrated supply chain which is working in collaboration with strategic supplier relationships and Wal-Mart’s direct participation in inventory management and quality assurance is a source of sustained competitive advantage for Wal-Mart but the external environment still presents certain threats. For instance, the emergence of online retailers has increased competition for Wal-Mart along with offering a greater level of convenience to customers in contrast to an in-store shopping experience. Furthermore, niche players like dollar stores have managed to enter the low cost zone and reliance on discounted...................................

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