Page 304 - DMGT501_OPERATIONS_MANAGEMENT

Operations Management

Notes At the center of the business sustainability strategy pursued by Wal-Mart is a shift from
generating additional value through price-based interactions, relationships with nonprofits,
suppliers, and other stakeholders. Through the above networks, Wal-Mart is gaining a
system perspective which helps retailers find ways to address environmental issues. In
exchange for these suppliers addressing the issues, nonprofit network members gain
huge leaps towards their overall missions because of the scale of the operations at Wal-
Mart. Suppliers also enjoy not only the stability that more intimate relationships with
Wal-Mart brings, but also the guidance and support from Wal-Mart’s nonprofit partners.
The Wal-Mart sustainability strategy no doubt looks to be off to a promising start; they
must not become complacent and must press-on carefully in order to make these networks
sustainable and able to expand without interruption. The first thing they need to do is
manage these partnerships carefully in order to keep costs down. They also need to be
able to manage the balance between offering “green” and conventional “non-green”
products in its stores.
Finally, because of the very high number of nonprofits in the network, Wal-Mart must
manage the loss of these partnerships. Individual groups may be unable to get credit for
a large reduction on environmental impact. Over time, these groups’ inability to be able
to demonstrate their impact may cause some problems with their fundraising because
donors will demand more and more data on their performance. These problems could
eventually cause the nonprofit groups to withdrawal from the networks.
Counter-Arguments to Wal-Mart Going Green
While some stakeholders and management become increasingly confident about the new
sustainability initiatives, history dictates that there is reason to worry. Many critics argue
that Wal-Mart’s green initiative is simply unsustainable. As with many companies
attempting to make their business strategy more “green”, upfront costs become unavoidable
and are simply not worth the investment. Wal-Mart will need to spend in upwards of $500
million per year in order to achieve the goals mentioned earlier in the study. The promise
of potential savings down the road does not resonate with consumers, or smaller Wal-
Mart suppliers, the same way it does with big corporations. However, it is important to
note that Lee Scott stated in 2007, “Tangible profits generated by Wal-Mart's sustainability
strategy in the first year of implementation were roughly equivalent to the profits from
several Wal-Mart SuperCenters.” Intangible benefits, such as public goodwill and improved
assurance of supply, are worth much more to the retailer than the profits generated the
first year of implementation.
As Wal-Mart attempts to scale up networks and improve upon “green” initiatives, the
company faces three possible obstacles:

1. Increased Costs
2. A Sub-Optimal Product Assortment
3. Criticism of Factory Labor Conditions.
Wal-Mart must take these challenges seriously because public reputation is on the line as
it makes more and more promises to the public. With increased dependence on a limited
number of selected suppliers, Wal-Mart also may face rising prices from the narrow
supply base, especially in times of limited resources. Also, with fewer suppliers Wal-Mart
may miss opportunities to create innovative products that customers may want but are
not necessarily environmentally friendly. Wal-Mart must continue to innovate while
managing incremental “green” changes to their supply chain management. Each of the
nonprofit partners will continue to push Wal-Mart in choosing product assortment lines.
Contd...

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