Case study: WALMART
According to the Fortune 500 top global retailer list that was generated in 2016, Walmart is still by far the largest retailer in the world. It has 10 000 retail stores worldwide and sales of over $480 billion per annum. It is one of the world’s larger employers, with 2.3 million associates globally. (It does not have employees, but associates, as employees have shares in Walmart.) It has achieved this position largely due to its exploitation of all the opportunities and benefits offered by supply chain management. This is especially so in the case of purchasing, where Walmart works proactively with its suppliers to drive down costs so that it can pursue its policy of everyday low prices (EDLP) which has enabled it to gain an increasingly bigger market share.
In 2012, Walmart entered the South African market by acquiring the majority shareholding in Massmart which operates Game, DionWired, Makro, Jumbo Cash and Carry, and Builders Warehouse/Express, among others. Walmart boasts about its global supply chain, which enables it to drive down costs and pass on these savings to its customers in the form the lowest possible price. South Africa’s unions and other retailers opposed the acquisition, arguing that large retailers like Walmart use their buying power to dictate buying terms to producers and suppliers. They feared that this would limit the supplier’s ability to pay decent wages and invest in new products and technologies.
In approving the acquisition deal, the Competition Commission of South Africa required Walmart/Massmart to set up a supplier development fund (SDF) as a precondition to their approval. The purpose of the fund was to boost local suppliers, create jobs, develop emerging farmers to supply Massmart with fresh produce, and to identify small businesses that could be developed to supply reliably to stores in the group. This requirement to develop local suppliers has not hampered Massmart’s ability to procure goods at competitive prices. Massmart corporate affairs executive Brian Leroni stated: “The SDF has improved our supply chain by giving us a more diverse supplier base [not being over reliant on one large supplier]. In a few cases we
To what extent are supplier selection criteria used by Walmart? (5)
How is Walmart able to offer everyday low prices? (5)
What type of relationship, if any, does Walmart have with its suppliers? (10)
Discuss the importance of buyer–supplier relationships and why organisations would create such relationships. (15)
Why is customer service being used as a competitive weapon in the supply chain? (10)
Explain the basic concept of Customer Relationship Management CRM. Use valid examples to support your explanation (15)
Conduct research on a particular manufacturing company and discuss on the following:
Give examples of items or materials that might be kept in inventory at this company under each of these classifications: (8)
• Raw materials
• Finished goods.
• Maintenance, repair, and operating supplies
Explain why the company needs inventory to provide excellent customer service? (12)
Why do companies want to keep a minimum inventory investment? (15)
Explain why the goal of minimum inventory investment conflicts with the goals of excellent customer service and economical factory operation. (5)
Answers to Above Questions on Supply Chain Management
Answer 1: Walmart is known as one of the largest retailers in the world and it accounts for a significant supplier database that allows it to meet the expectations of its end customers. The suppliers are selected at Walmart through a rigorous process to ensure that there is ready availability of supplies whenever required and at lower cost. The supplier selection criteria is therefore highly dependent on factors such as quality standards, cost efficiency, ethical values, use of information technology, diversity and inclusion and many more.
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