Wal-Mart Stores, Inc. (NYSE: WMT) was founded by Sam Walton in 1962. It is the largest retailer in the world and was the largest corporation in the world based on revenue as ranked by the Fortune Global 500 in 2005. It ranked second to Exxon-Mobil in revenue in 2006 Fortune 5000 list.
Wal-Mart’s impact is hotly debated. Specific areas of controversy include the company’s product origins, treatment of employees and suppliers, environmental policies, extraction of public subsidies (corporate welfare), availability of prescription contraceptives at Wal-Mart pharmacy counters, and store impacts on local communities and businesses. [1][2] The controversy is covered in more detail in the Criticism of Wal-Mart article.
Wal-Mart operates retail department stores selling a range of non-grocery products, though emphasis is now focused on the “supercenters” which include more grocery items. Wal-Mart also operates Sam’s Club, a “warehouse club” (similar to Costco and BJ’s) that sells discounted bulk merchandise to dues-paying members.
In addition to its wholly-owned international operations, Wal-Mart owns a 42% stake in The Seiyu Co., Ltd. in Japan, with a proposed 7 million to increase its stake to 50%. This purchase has been approved by Seiyu Group shareholders and The Seiyu will be consolidated into Wal-Mart International in FYE 2006.
In September 2005, Wal-Mart acquired 33.3% of the Central American Retail Holding Company (CARHCO), and in March 2006, increased its holdings to 51%. Wal-Mart Central America was formed from the 375 supermarkets and other store formats, operating in 5 Central American countries: Guatemala, El Salvador, Honduras, Nicaragua and Costa Rica.
In the past, Wal-Mart operated dot Discount Drugs, Bud’s Discount City, Hypermart*USA, OneSource Nutrition Centers, and Save-Co Home Improvement stores. In 1990 Wal-Mart acquired The McLane Company, a foodservice distributor. In 2003 McLane Company was sold to Berkshire Hathaway.
Wal-Mart stock is publicly traded on the New York Stock Exchange under the symbol WMT.
All about Walmart
Commitment
The philosophy that drives diversity at Wal-Mart is a natural extension of our core beliefs: respect for the individual; service to the customer; and strive for excellence. Diversity is a key dimension of our commitment to customers, suppliers, and associates: treat them with fairness and respect, be their advocates, be sensitive to their concerns, value their differences, and serve and support them the best we can.
We are committed to increasing and promoting the sourcing of merchandise and services from minority- and women-owned businesses.
Mission Statement
Our mission is to enhance and integrate our supplier diversity programs into all of our procurement practices and to be an advocate for minority- and women-owned businesses.
What We Expect
All suppliers must have: competitive prices, financial stability, proven success in the marketplace, and offer excellent products and/or services.
Woven into our story you’ll find thousands of suppliers who have created their own success stories through their work with us. Our large number of locations creates an attractive opportunity for suppliers to get their items in front of the nation and the world.
From small independent entrepreneurs to Fortune 500 companies, the benefits of a Wal-Mart partnership are mutual. First, the demand for their products creates jobs and improves the way of life in the communities where those suppliers operate. Then, as suppliers keep up with demand, we can provide quality products and services to our customers at the absolute lowest prices, which, in turn, improves their lives, too.
Reports on standards for suppliers
Wal-Mart established its Ethical Standards program in 1992 and has worked to strengthen and make it an effective tool for improving conditions for workers in our suppliers’ factories that make products sold in our stores.
Wal-Mart does not own, operate, or manage any factories. Instead, we purchase merchandise from suppliers located in more than 60 countries. Our Ethical Standards team is dedicated to verifying that these suppliers’ factories are in compliance with our Standards for Suppliers. These Standards cover health and safety, environment, compensation and benefits, working hours, forced and underage labor, discrimination, compliance with applicable laws and regulations, and the right of audit by Wal-Mart. Our program covers factories from which Wal-Mart directly sources products and suppliers’ factories in five high-risk categories: apparel, footwear, toys, sporting goods, accessories and select proprietary brands.
We audit each of these suppliers’ factories at least once a year. In 2005, Wal-Mart’s Ethical Standards auditors and third party audit firms conducted more than 13,600 initial and follow-up audits of 7,600 suppliers’ factories making products for our stores. We also trained more than 11,000 suppliers and their factory managers to increase their familiarity with Wal-Mart’s Standards for Suppliers and to encourage the use of accepted practices.
Wal-Mart and other international companies work proactively to improve working conditions in developing countries. We find deficiencies exist at the factory level. Globally, some of the most commonly observed problems relate to benefits such as pensions, medical, accident and unemployment insurance not being paid. Other frequent issues include workers not being paid for all hours worked, the use of false books, and incomplete or insufficient documentation.
Rather than discontinue accepting goods from suppliers’ factories where these problems occur, we believe it is better to work for improvement Ð a position widely endorsed by the ethical standards community. If we find that any of our suppliers’ factories are unwilling to correct problems after multiple attempts, we cease accepting products from that factory. For certain serious problems or an uncooperative attitude by such factories, we stop accepting products from them immediately.
Wal-Mart is committed to working with its suppliers on steady improvement of workplace conditions. This requires better production planning and internal supply chain management, educating workers, and training factory managers. We also engage with stakeholders in the ethical sourcing community to identify additional ways to achieve and accelerate improvement.
Full 2004 Report on Supplier Standards PDF
(for broadband users – 43MB PDF), or view parts 1 – 4 below.
2004 Report on Supplier Standards PDF – Part 1
Contains message from Lee Scott, Executive summary, report objectives, background, scope, approach, training, and information on The Ethical Standards Team.
2004 Report on Supplier Standards PDF – Part 2
Contains 2004 program results, global challenges and trends and 2004 direct import violations.
2004 Report on Supplier Standards PDF – Part 3
Contains 2004 program enhancements, unannounced audits, stakeholder engagement, national brand pilot program, proprietary brand program, the Wal-Mart Ethics hotline, and third party service providers.
2004 Report on Supplier Standards PDF – Part 4
Contains 2004 future initiatives, unannounced audits, stakeholder engagement, proprietary brands program, the Wal-Mart Ethics hotline, audit scope expansion, standards for suppliers, color code changes, disapproved factors, underage worker violations, increased ES staff and conclusion.
2003 Report on Supplier Standards PDF
Wal-Mart believes that the conduct of its Supplier Partners can be transferred to Wal-Mart and affect its reputation.
Supplier Standards
Please print and complete this document. Submit the signed document along with the Supplier Agreement.
Instructions on Assessment:
Assignment Brief.
Your employer, WBM&M Management Consultants, has seconded you to advise the Rolland’s Manufacturing Company about the potential impact of securing a Supplier Contract from the Wal-Mart Company. Exploratory talks have already begun with the initial intent to supply clothing products to the UK market through ASDA, Wal-Mart’s UK subsidiary. Within two years it is hoped that this will be expanded to supply Wal-Mart outlets throughout the world with a limited range of medium-priced, high quality outdoor wear.
Three years ago the company was struggling to retain market share in competition with cheaper clothing products being imported into the UK from the Far East. At that time the Board made a strategic decision to move its products upmarket in terms of quality because it felt that it could not compete at the lower end of the market against lower wage economies. Over the last couple of years the Rolland’s Design Team have developed an innovative range of outdoor clothing that is both stylish and technically advanced in terms of the materials used and in the “build quality” achieved in the manufacturing process. More impressively, the new garments can be produced at a very competitive price even though they have many of the all-weather performance qualities of much more expensive outdoor clothing that is currently available. This makes the new products unique in the market and both ASDA and Wal-Mart want to retail the new range of clothing in their outlets.
Even so, early negotiations with the Wal-Mart group have already indicated that Rolland’s may have a problem in sustaining a long-term relationship with such a big player in the retail sector. The attached review (appendix A) was prepared only six months ago and should give an idea of their current approach to managing manufacturing operations. The hard-driving management style is not untypical in this very competitive sector of the economy and has sustained the company for many years as it has grown from its small beginnings to its present size of 300 employees. Although Wal-Mart have been impressed by the products they are less happy with their initial impressions of Rolland’s manufacturing capability, regarding them as being very far from the type of world-class organisation with which they would prefer to work.
Rolland’s have declared an ambition to become a “world-class” manufacturer capable of operating on a global stage. The company has always been regarded as a dynamic, driven organisation and was largely successful in supplying the UK and European markets until the increasing influx of cheaper overseas products began to erode its market share in recent years. The very traditional organisational and management culture that has served it so well in the past now seems ill-suited to its chosen strategy of trying to achieve the type of organisational excellence that would make it the chosen partner of major players in the retail sector. There are real question marks over Rolland’s ability to produce consistently to the quality standards demanded at the premium end of the market, especially at the growing volumes and tight deadlines that are also typically required.
The possibility of becoming a preferred supplier to ASDA and its parent company, Wal-Mart, has focused the minds of Rolland’s Board. Now they wish to address what the implications of such a move would be for their company: on the one hand they expect more business and increased profit potential, on the other, they anticipate increased strain on their manufacturing and supply chain capability.
Your task is to prepare a briefing paper for the Rolland’s Board on the implications of becoming an ASDA and Wal-Mart supplier over the next five years. You should research Wal-Mart to examine how it works with its current suppliers and what it expects of organisations that seek to serve its extensive customer base. Your report should examine what Rolland’s might be expected to do in order to manage its inbound and outbound supply chain to meet Wal-Mart’s exacting standards. Include in your review discussion of the operational issues that Rolland’s would have to address and how they could bring their operations up to the required standards of performance and then maintain these standards consistently over the long term.
Your report should address the following key themes:
1) Lean operation in manufacturing and supply and the growing need for agile responses to market demands.
2) Strategies for managing Quality in every element of Rolland’s supply chain, internal and external, inbound and outbound.
3) The benefits of cross functional approaches within and between organisations.
4) The need for strategic partnerships in modern supply chains.
5) The impact of modern Information Technology to plan and co-ordinate materials flows across global supply chains.
6) The need to manage the environmental impact of manufacturing and supply chain operations and to address other ethical issues affecting organisations operating across international boundaries.
You should demonstrate an appropriate use of theory in your work, but the report must be aimed at the specific situations faced by Rolland’s in its desire to move into this ‘major league’ contract.
Note:
Your report is one of several being considered by the board in its strategic planning process. It is not meant to be a definitive document; rather it is meant to stimulate thought and discussion by the senior management team. There is room for intelligent speculation as well as detailed analysis.
Your discussion document should be presented in the form of a 3000 – 3500 word, structured report and should be submitted to the undergraduate office not later than Tuesday 16th May 2006 at 4.30 p.m.
(You are NOT allowed to exceed the upper word limit. You will be penalized at the rate of a 1% deduction from the mark awarded per 100 words over the upper limit. Referencing and appendices do not contribute to the word count.)
Referencing your work
The Harvard method of referring to publications and of arranging references uses the author’s name and the date of the publication. References are listed at the end of the text in alphabetical order of author’s name. The general format of a journal reference is shown below:
Author/s name and initials are listed first, followed by year of publication in brackets. Then we have the title of article in quotation marks and the journal where article appears written in italics. Finally, we have the volume and issue Number (in brackets) along with the pages where article can be located.
For further information, including advice on how to cite information from the web, access the following website addressing frequently asked questions in relation to the Harvard referencing system.
http://northumbria.ac.uk/sd/central/library/ir/orginfo/
Follow the link to ‘Cite them right’ on the right side of the
Appendix A.
Note: The Board is ambitious to supply the Wal-Mart Company and they are aware of the need to develop their organization to something approaching “world-class” standards in manufacturing and supply chain excellence. Your review is meant to alert them to what this might mean in terms of the company’s operating policies and procedures, including their relationships with their own suppliers.
Rolland’s Clothing Co. Ltd.
The accompanying brief report was a preliminary analysis carried out by a firm of consultants called in to examine the declining profitability being experienced by Rolland’s Clothing Company. John Bored, senior manufacturing consultant, prepared the report.
Rolland’s Clothing Company.
Preliminary findings.
Prior to undertaking a detailed analysis of Rolland’s manufacturing set up it was considered useful to conduct this brief survey of the current situation within their manufacturing unit. The findings are based upon a series of formal and informal interviews carried out on managers and workers within the Gateshead factory. Direct observation of the processes and simple questioning of various operatives was also used.
First impressions
The first visit to the clothing factory was primarily to gain an immediate idea of how well it was organised and run. The overwhelming impression was one of chaos, with work areas being crowded and disorganised and the workforce either being subjected to immense pressure to increase output, or sitting waiting for additional batches to be provided by harassed supervisors and progress chasers.
Even this cursory inspection could identify huge amounts of Work-in-progress (W.I.P.) cluttering up the work area and much of the other available space.
Supervisors and progress chasers were much in evidence checking the batch labels trying to keep track of the many orders currently in the system and also trying to expedite orders that were behind schedule.
Occasionally the factory manager could be heard intervening to push batches through the system in response to customer complaints or pressure. She did this even where it meant physically removing other batches from the assembly units and resetting the machines. When the section workers complained about the double handling and double setting up that this caused, they were told that the customer was too important to be upset and that failure to fast track the orders concerned would inevitably lead to lost orders or no repeat orders.
Although there were many notices exhorting the workforce to “Think Quality!” it was also evident that final inspection had to reject a significant percentage of the completed garments. Some of these were sent for corrective work, some were set aside for sale as ‘seconds’ and some were simply classed as rejects for scrap.
Completed orders were sent to the despatch warehouse, which doubled as the incoming material store, from where they would eventually be forwarded to the end customers. This unit was also overcrowded with materials and showed little evidence of systematic organisation. Many completed orders seemed to have been here for several weeks. Other rush orders were being packaged and despatched almost from the end of the production lines.
Production planning seemed to consist of feeding the orders into the system on a ‘first come, first served’ basis and then rushing around trying to push orders as customers became increasingly irate, or desperate, in trying to get their finished garments out of the factory gates.
One commonly quoted problem area was in the late delivery, or non-delivery, of urgently needed production materials. Some of the rejection problems at the finished goods inspection were directly attributable to material faults that the machinists had failed to conceal by careful selection and sewing. The use of the sometimes sub-standard cloths and incorrect thread types was justified on the basis that it was “that or nothing at all” since replacement supplies were late.
Additional pressure was being exerted on the system by frequent machine breakdowns in the production area. Maintenance staff were often forced to remove sewing machines from the production area for repair, temporarily replacing them with reconditioned old machines from the maintenance stores. These replacement machines were slower and less accurate than the latest models that operators normally use, and caused much friction because they depressed bonus earnings whilst they were in use.
All of the direct production workers were on individual incentive schemes: the more they produced, the greater their earnings. This leads to a certain amount of friction in the allocation of jobs, some of which were regarded as ‘good earners’ whereas others seemed to make the achievement of top bonuses almost impossible. Further animosity was evident in the access to the range of industrial sewing machines in use throughout the production lines. Some of the machinery is ‘state-of-the art’ technology and seems to confer great advantage in increasing earnings, whereas other equipment is distinctly past its best and slows the workers down considerably. Great status seems to be attached to the luckiest workers who are allocated the newest machines, and there is a noticeably competitive air about increasing individual performance so that an operator can progress to the ‘elite’ group who get the best machines.
Management also seem to encourage rivalry between sections by publishing current performance figures on notice boards showing which section is achieving highest outputs.
Staff comments
At first staff were very suspicious of our consultants and consequently reluctant to engage in conversation. When they did eventually begin talking they were constantly checking over their shoulders to see if management or supervisors were observing them.
The supervisors were especially guarded in their comments seeming to regard open discussions about problems as being a sign of weakness or as potentially threatening to them in terms of possible comeback from senior management.
Managers were generally very upbeat and positive with a strong focus on achieving high production. They were all quite aggressive in their attitudes to front line staff, insisting that they had to be driven to reach the demanding production targets. They constantly referred to the declining profitability of the factory and the need to squeeze even higher levels of productivity from the workforce. It seems that only highly motivated and strong-minded individuals had any prospect of reaching manager level.
“Only the best and most dedicated can cut it here as a manager. Sewing machine operatives need firm treatment and clear management if targets are to be met. In the clothing manufacturing business there is no room for sentiment: workers have to shape up or ship out!”
(Quote from a manager.)
Production workers showed a great deal of resentment at the ever tightening production targets and the constant pressure to work harder.
“What’s the point of killing yourself to meet unrealistic targets? Even if you do manage to meet the bonus target management is straight down here cutting the time allowances. And they even have the cheek to complain if there are slight defects on the garments! What do they expect when we are asked to work with poor materials, cheap thread and useless sewing machines? The machine I have to operate is worse than the one I have at home. Whenever I mention these things to the supervisor she tells me to stop complaining and that it is our job to make do with the materials provided. I wouldn’t care but it is obvious from the way
management is always chasing around that they cannot even control the batches of orders in the system. If they could, our lives would be a lot easier; we could get on and reach production targets instead of constantly chopping and changing the batches to let through the rush orders. It seems to me that all of the orders are, or eventually become, rush orders. If you ask me, it is their inability to organise things that causes all of the problems. If its not that it is the Sleeving-In section making so many mistakes that makes our job twice as hard. I don’t suppose that you can blame them though, they are just trying to make their bonus too.”
(Sewing machinist.)
The first line supervisory staff clearly feel that they are caught in the middle between the workers and the management and were almost as frustrated as the production staff.
“I am not sure that I was wise to accept promotion to this job: it is a thankless task. We are constantly being harangued by senior management to achieve higher production and at the same time they are always coming down into the production areas and interfering with the schedules. They think nothing about altering our work schedules at a moment’s notice to push through late orders or special deliveries. If you complain you are told that you have to be flexible and that the customer is king.
The worst part is having to deal with the staff. I didn’t realise how awkward, and how militant they could be until I got this job. Perhaps it was jealousy that I got promoted: they certainly don’t like any social contact now that I am on the other side, so to speak. Not that it bothers me too much: I knew when I took the job that I would have to be quite tough with them – it goes with the territory I suppose.
I guess that I was promoted because I am a little bit more intelligent than the average production worker. They don’t have to think too much do they? All of the key decisions are taken by us because we have the experience and the brains and the motivation to get things done. They seem to be happier when things are going wrong so that they are held up. Can’t they understand that their jobs depend upon us being profitable!”
(A supervisor.)
Overall, the atmosphere throughout the factory is a sort of ‘disinterested briskness’. Staff do their jobs but without enthusiasm.
When the factory manager was questioned about this she seemed quite unperturbed.
“As far as I am concerned, it is quite simple; staff come to work and receive a fair day’s pay – I expect a fair day’s work in return. They do not have to like it as long as they perform their duties. Good heavens, I don’t always enjoy the work and the pressure of this job but I know that it has to be done, so I get on with it. That is why they pay me! It is not complicated, and it does not require us to win their ‘hearts and minds’. As to the gripes and groans you have heard, I am sorry, but we have to be flexible. If everyone works hard and is prepared to be flexible about the machines, the orders and the materials, the whole job will go smoothly. That is what I do and I expect no less from my staff.”
Conclusions
Although this is just a preliminary survey rather than a complete analysis I think it reveals more than enough to justify a more substantial intervention in order to review and develop Rolland’s Clothing and return it to long-term profitability.
John Bored, Manufacturing consultant.
WBM&M Management Consultants
Appendix B.
Examples of research resources .
http://www.asda.co.uk/
http://www.walmart.com/
Blatherwick, A. (1998), ‘Vendor-managed inventory: fashion fad or important strategy?’, Supply Chain Management, Volume 3, Number 1, pp. 10-11.
Hendrickson, M., Heffernan, W. D., Howard, P. H. and Judith B. Heffernan (2001), ‘Consolidation in food retailing and dairy’, British Food Journal, Vol. 103 No. 10, 2001, pp. 715-728.
Siau, K. (2003), ‘Interorganizational systems and competitive advantages- lessons from history’, Journal of Computer Information Systems, Fall, pp. 33-39.
Bloom, P. N. and Perry, V. G. (2001), ‘Retailer power and supplier welfare: The case of Wal-Mart’, Journal of Retailing, 77, pp. 379-396.
Hayes, R. H. and Upton, D. M. (1998), ‘Operations-based strategy’, California Management Review, Vol. 40, No. 4. pp. 8-25.
Kristensen, K. , Juhl, H. J. and Ostergaard, P. (2001), ‘Customer satisfaction: some results for European Retailing’, TOTAL QUALITY MANAGEMENT, VOL. 12, NO. 7&8, pp. 890- 897.
Han, D., Kwon, G., Bae, M. and Sung, H. (2002), ‘Supply chain integration in developing countries for foreign retailers in Korea: The Wal-Mart experience’, Computers & Industrial Engineering, 43, pp. 111-121.
Internet Links:
<http://www.amrresearch.com/Content/Topic.asp?valueid=410&year=2004&month=7&cmbmastertype>=
You may have to register with deloitte:
http://www.deloitte.com/dtt/cda/doc/content/dtt_research_walmarttsunami_062703.pdf
Note:
Wal-Mart is an organisation about which much has been written in various academic journals and textbooks, as well as more mainstream news and business media. Careful research will give you significant insight into their ways of working to maintain their already impressive position as a leading retail organisation.
You can also research the concept of business excellence in supply chain and operations management and what it takes to become a world-class manufacturer capable of delivering quality products to leading retailers.
Credit:ivythesis.typepad.com
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