HALF A CENTURY OF SUPPLY CHAIN MANAGEMENT AT WAL-MART1

HALF A CENTURY OF SUPPLY CHAIN MANAGEMENT AT WAL-MART1

Ken Mark wrote this case under the supervision of Professor P. Fraser Johnson solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality.

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Copyright © 2012, Richard Ivey School of Business Foundation Version: 2013-11-12

INTRODUCTION

James Neuhausen was a U.S. stock analyst tasked with preparing a recommendation on what his firm, a large U.S. investment house, should do with its stake in Wal-Mart Stores, Inc. It was an unseasonably warm day in early February 2012, and Neuhausen was reviewing his notes on the firm. Wal-Mart, the world’s largest retailer, was trying to recover from a series of missteps that had seen competitors such as Dollar Stores and Amazon.com close the performance gap. Competitors had copied many aspects of Wal-Mart’s distribution system, including cross-docking product to eliminate storage time in warehouses, positioning stores around distribution centres and widespread adoption of electronic data interchange (EDI), to manage ordering and shipping from suppliers. Neuhausen stated:

Wal-Mart is believed to have one of the most efficient supply chains in the retail world. What impact will the increasing variety of product, store formats and the growing importance of international stores have on the way it distributes product? What improvements to its supply chain does the company need to make in order to continue to stay ahead of competitors?

Last year, Wal-Mart suffered nine consecutive quarters of declining same store sales. Procter & Gamble’s Chief Executive, Robert McDonald, pointed out that part of the problem was that there were execution issues at Wal-Mart’s U.S. stores.2 More nimble competitors such as Dollar General are rolling out small format stores that are eating into Wal-Mart’s share. In the online space, Amazon.com has become a major threat. Wal-Mart has also changed over the years and it now operates a variety of store formats under 60 different banners around the world. International sales hit US$109 billion in fiscal year 2011, more than a quarter of its business. Can its supply chain keep up and still deliver efficiency gains?

1 This case has been written on the basis of published sources only. Consequently, the interpretation and perspectives presented in this case are not necessarily those of Wal-Mart or any of it employees.

2 http://operationsroom.wordpress.com/2011/03/07/is-wal-mart-losing-focus/,

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