Walmart Value Chain Analysis

Value Chain Analysis of Walmart:

Despite all the criticism leveled against Walmart, it is known to have changed the face of retail in US and around the world in many more countries. Known for its cost leadership strategy, Walmart has expanded its international presence quite fast. It has seen rapid growth and the popularity of the brand is due to the matchless deals it provides.   Its more than 11500 units are operational across 28 countries. In 11 of these countries, its e-commerce websites are operational. 

The retail brand employs more than 2.3 million globally. The credit of the growth and financial success of Walmart apart from Sam Walton’s leadership and values goes to successful value chain management. Here is a value chain analysis of Walmart that analyses how the brand has managed activities down its value chain to derive extraordinary value. A value chain includes all the activities involved in the production and sales of the brand from the conception and sourcing of raw material to final sales and service. It is an analytical tool introduced by Michael E Porter of Harvard Business School. Optimizing the value chain can make it more efficient and can help generate sources of competitive advantage for the business.

Walmart value chain analysis

Primary Activities:

Inbound logistics:

 Walmart’s suppliers are thousands of businesses spread globally.  To keep its costs lower than the competitors, Walmart has to depend on it suppliers. Since Walmart buys in bulk from its suppliers, it has no difficulty managing prices. Based on its financial clout and size, Walmart is able to press the suppliers for lower prices. Apart from it Walmart has also focussed on efficient supply chain management and inventory management to manage its supply chain costs. It has made use of technology and apps to manage supply of material and inventory which also helps keeping costs low. The suppliers are responsible for providing materials in real time as per requirement. Apart from it Walmart has also applied a code of conduct for the suppliers. It has focused on managing long term relationships for efficient sourcing and for keeping prices low. It offers its suppliers the potential for high volume purchases in the long term for the lowest prices. This strategic partnership with the vendors has helped it better manage its supply chain. 

Operations:

Walmart operates in the retail sector and this sector has seen a lot of growth during the recent three years. Today, Walmart operates across 28 countries and under 63 banners. It has more than 11500 retail units operational worldwide.   Sam’s club is a retail membership based warehouse club that 662 retail units operational in United States. In US alone, Walmart has 4,692 retail units operational. The number of Walmart Super centers is 3,534 and that of discount stores is 412. There are 48 small format Walmart retail stores and 698 neighborhood markets in US. Today, more than 1.5 million associates are employed across more than 5,000 retail stores of Walmart in US. 

Outbound logistics:

At the core of Walmart’s inventory management technique is a supply chain practice called cross docking.  The products received from the suppliers are cross docked at the distribution centres and then forwarded to the stores. This keeps the inventory and transportation costs low and cuts down on the time needed for transportation and thus eliminates inefficiencies. In this way, the Walmart stores are immediately replenished without having to wait for long periods. This has reduced the costs for Walmart and the benefits can be passed on to the customers. Its more than 150 distribution centres are the hub of activity for its business. These distribution centres serve the stores, clubs and deliver to the customers directly.

Marketing and sales:

Walmart’s slogan is “Save money. Live better”. Its pricing strategy is one of the key elements of its marketing strategy. The everyday low prices strategy has helped it build a reputation of the best price retailer.  However, apart from it Walmart also spends billions on marketing. It advertises and promotes its brand and deals through several advertising channels including traditional and digital channels.   From promotional videos to social media, Walmart uses them all for the promotion of its brands. Apart from it, customer service is also a key part of its strategy that helps create a positive brand image and better reputation.

Support Activities:

Technology:

Walmart has made extensive use of technology for better supply chain management and sales as well as customer service.  From smarter apps for inventory management to ecommerce websites it has used technology to gain efficiency. A number of technological tools are used to keep the managers updated and the stores well supplied. Technology has become indispensable for efficiency in the retail business.

Human Resource Management:

In the past, Walmart has faced severe criticism for its poor Human resource practices. However, things have changed in the recent years. It had faced most criticism over its wage policy. Now, it has improved the minimum wages to more than $13 and is investing $2.7 billion in wages, education and training. Last year, it also promoted more than 200,000 people to jobs with higher responsibility and better pay.

Procurement:

One of the key focus areas at Walmart is procurement. It has managed strategic relationships with its suppliers to keep costs of material lower. These suppliers provide standard products and services as mentioned in the suppliers’ code.  

Firm Infrastructure:

The infrastructure of any organization plays a key role in the success of that firm. Walmart has built a very large infrastructure that includes its management, supply chain, human resources, its distribution and fulfilment centers and more. Apart from excellent management of its technological and financial resources now it is focusing on managing its employees better to be more successful. It has kept increasing its investment in technology and people during the recent years considering their importance for the faster growth and success of the brand.

Sources:

https://www.tradegecko.com/blog/incredibly-successful-supply-chain-management-walmart

http://corporate.walmart.com/suppliers

Abhijeet Pratap

Abhijeet has been blogging on educational topics and business research since 2016. He graduated with a Hons. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. He likes to blog and share his knowledge and research in business management, marketing, literature and other areas with his readers.

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