Page 301 - DMGT501_OPERATIONS_MANAGEMENT

Unit 13: Supply Chain Management and JIT

Notes
business model to strengthen supply chain management processes by “going green” was
a strategic decision that positively impacted Wal-Mart’s growth, distribution techniques,
and corporate identity. His knowledge of distribution systems and push for sustainability
has transformed the company into an eco-friendly powerhouse that continues to cut costs
and remain at the frontier of distribution systems technology.
Background

Wal-Mart leadership has done well to put the right people in the right seats on the bus to
drive the company forward. Founder and original Wal-Mart CEO Sam Walton strategically
chose his successor David Glass to lead the company in 1988. Art Turock claims that “the
most impactful decision Sam Walton made during his reign was to select and develop
successors equipped to lead Wal-Mart to the next level of complexity” (Turock, 2004).
From 1988 to 1999, CEO David Glass transformed the company from just a retailer into a
retail distributor, using technology to develop Walton’s original goal while staying in
line with his core values. While Sam Walton built his strategy on low prices to the masses,
CEO David Glass enhanced his growth strategy through the use of technology.
Sophisticated technology boosted supply operations such that Wal-Mart’s efficient retail
stores became the manifestation of a fast and flawless distribution business. When Glass
succeeded Walton, he believed that “technology would ultimately drive this business to
be the size that it is” which was the fundamental difference that set his approach apart
from that of Walton’s (Turock, 2004). The late 80s and 90s began a technology boom, with
the computer industry making rapid advancements. Glass identified this as a strategic
opportunity to enhance business and distribution at an early stage in development.
Emphasizing visibility through the sharing of information with suppliers, Glass reframed
the company strategy in terms of how to be the low-cost operator and low-cost leader by
focusing on logistics and distribution. A more advanced distribution system would move
product faster and more efficiently, allowing Wal-Mart to maximize use of their suppliers
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.
Contd...

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