Walmart is having a hard time with its new supply chain strategy
Filed in archive Point of view on April 30, 2007
The company has been known for more than 40 years as a master of retailing in low cost segment and many of the innovations in supply chain management such as CPFR, Bar Code or RFID were pushed by this company: Yes, we are talking about Walmart but it seems that glory days are over!
Realizing that low-end of the market is becoming saturated, the company started to pursue a new operations strategy since two to three years ago: Becoming a one-stop source for people's retailing needs. The company opened new stores on the crazy rate of almost one per day to penetrate into new areas and increase the sales. At the same time, stores added to their offering and didn't limit themselves to low cost products.
Apparently the new strategy hasn't worked out well and according to the Business Week article "Wal-Mart's Midlife Crisis", the new stores are now so close to each other that the company has ended up competing with itself. The company also encountered a lot of challenges regarding the service. During the last year, 25% of Wal-Mart's stores failed to meet minimum expectations of cleanliness, check out times, product availability and so on.
The reason is not that hard to guess: Wal-Mart has never been a player with differentiation strategy; the company is master of low-cost retailing but doesn't know how to forecast the demand, and how to run marketing campaigns and how to sell high-margin products.
In order to clean the mess, Wal-Mart brought John E. Fleming from Target and appointed him as Chief Merchandising Officer. Fleming believes things can be improved: "We will get it fixed".
What do you think? What should Wal-mart do with its supply chain?
Tags: wal mart supply chain strategy operations target retailing cost reduction busines week fleming 2007
Vote for Walmart is having a hard time with its new supply chain strategy:
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Rating: 7.75 out of 4 vote(s) cast.
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Response from:
Eric Joiner
(05/01/07 6:05pm)
Response from:
Randy
(05/11/07 8:43am)
I really think Target has raised the bar for low cost retailing. They're combining low cost, good design, and a killer marketing campaign. The fact that WM hired senior management from Target further illustrates the point.
Response from:
ehsan ehsani
(05/11/07 11:27am)
Well, I agree with the point that Target has made some improvement but the still have a long way to go. According to Bloomberg, Target is still performing below average industry.
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Clearly expansion is going to have to slow down, AND I think wal*mart stores are just too big. Its frankly difficult to navigate a million square foot big box store that is more like a distribution center than a store. It is stressful just to find everything.
The checkout experience remains a problem as well as finding enough staff . I do like WM's newest effort allowing buying online then pick up from the store. Assuming I can pay online, this would be a convenience.
Keep it up dude.
Eric