Page 171 - DMGT206_PRODUCTION_AND_OPERATIONS_MANAGEMENT

Production and Operations Management

Notes as well as internal distribution lines. Glass used cutting edge technology to create a logistical
competitive advantage in “an industry with high volume, inelastic pricing, fragmented
market share, and inefficient distribution” (Turock, 2004). Because of David Glass’ work,
Wal-Mart’s supply chain and distribution system is now regarded as the most efficient and
remains their primary competitive advantage in the retail industry.
Going Green
Requirements
Lee Scott took control of Wal-Mart in 2000 with a newly adopted strategy of making
logistical processes more economically friendly. “Green” logistics, at its core, means
implementing a system that can independently monitor overseas suppliers to make sure
they meet social and environmental standards. Though the push for becoming
environmentally friendly is important, a global company like Wal-Mart must consider
the transformation’s effect on the bottom line. Lee Scott saw the two goals as intertwined:
“being a good steward of the environment and being profitable are not mutually exclusive.
They are one and the same” (MSNBC, 2005). Scott provided an example by calculating that
improving fuel mileage efficiency in the trucking fleet by one mile per gallon would save
more than $52 million per year. The move toward sustainability also integrated Corporate
Social Responsibility (CSR) into Wal-Mart’s business model. Ideally, this CSR policy would
function as a built-in self-regulating mechanism where Wal-Mart could monitor and ensure
their adherence to laws, ethical standards, and international norms. This CSR policy would
be a way for the company to embrace responsibility for the impact of their activities on
the environment, consumers, employees, communities, stakeholders and all other
members of the public sphere.
The Next Level

Wal-Mart has attempted green initiatives before, but Scott’s plan is different and has the
potential for success based on many reasons. In the past, Wal-Mart dealt with environmental
issues defensively rather than cooperatively, proactively, and as opportunities for profit.
In 1989, in response to letters from customers about environmental concerns, the company
launched a campaign to convince its suppliers to provide environmentally safe products
in recyclable or biodegradable packaging. However, this large-scale effort was met with
some skepticism from commentators who believed that it was intended to generate benefits
for Wal-Mart at the expense of its suppliers. Nevertheless, the company did earn some
goodwill among environmentalists as the first major retailer to speak out in favor of the
environment. When vendors claimed they had made environmental improvements to
products, Wal-Mart began promoting the products with green-colored shelf tags. It should
be noted that although Wal-Mart promoted these products, the company did not actually
measure or monitor the improvements. Regardless, the company sold as many as 300
products with green tags at one point. By the early 1990s, the green tag program disappeared
altogether, and environmental issues slipped off of the Wal-Mart’s list of strategic priorities.

The new sustainability strategy needs to be deeply embedded in Wal-Mart’s operations
and supply chain management to meet the ambitious goals set in 2005. In the words of Lee
Scott, “We recognized early on that we had to look at the entire value chain. If we had
focused on just our own operations, we would have limited ourselves to 10 percent of our
effect on the environment and eliminated 90 percent of the opportunity that’s out there”
(Plamback, 2007).
Wal-Mart’s leadership must therefore evaluate the entire value chain as a means of
implementing sustainability through distribution systems. Creating metrics for analysis

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