Walmart Stores in China Case Study

1. Why do customers patronize Wal-Mart China stores?

A. Wal-Mart realized through third party studies and internal research that the Chinese customer were significantly more cost-sensitive than those in other countries and that there existed a strong, established culture of frequently shopping around to find the absolute lowest prices. Through these studies, Wal-Mart also realized that customer satisfaction level greatly influenced customer loyalty in China. The greatest determinant of this satisfaction was made up of perceived value.

The perceived value is composed of three sub factors: (1) Product price, (2) Relative price and (3) Promotion.

The other factors for customer satisfaction in descending order of its importance are Image, Merchandize, Shopping environment, Service, Check-out process and Store policy. Wal-Mart thrived for offering quality merchandise at the lowest price and with best customer service possible. Wal-Mart also had a reputed image as a foreign supermarket chain in China.

Due to all these favorable factors customers patronized Wal-Mart China stores.

2. What are the distinguishing features of Wal-Mart China’s distribution system? How does it achieve relatively high availability with similar levels of stock (week’s cover) to other companies?

A. The Wal-Mart distribution system in China was quite different from distribution system in United States. In United States 90% of the total store sales passed through Distribution Centers (DC) while only 40% of Wal-Mart China’s sales were supplied via its DCs.

Fresh products such as bread, fish, vegetables and fruits, some electronic goods and high value items were supplied directly to Supercenters (SC) by suppliers. Another feature of Wal-Mart China’s distribution system was that the incoming shipments from suppliers arrived in diverse range of trucking and loading configuration while Wal-Mart outsourced standardized trucking fleet for all of its DC-DC and DC-SC shipments.

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The shipments from suppliers sometimes had no use or very little use of pallets and so all loading and unloading was accomplished by hand using a 3PL provider.

The Wal-Mart achieved relatively high availability with similar levels of stock as most of the shipments to stores were through Direct Store Delivery (DSD) and the lead time for DSD were generally only a few days while shipments supplied via DCs required several weeks from the time the order was placed on the supplier due to poorer transportation infrastructure.

3. How should sustainability be incorporated in vendor selection and evaluation?

How could vendors be encouraged to participate in Wal-Mart China’s sustainability initiatives? A. In order to ensure sustainability, the vendor selection and evaluation has to be thoroughly changed from the old way of thinking. In the old supply chain the vendor selection was based on lowest labor rate but in new supply chain the vendor should be located in close proximity to the user in order to reduce the number of miles traveled, cost and carbon footprints of parts and products.

Also vendor must be selected based on worker and environmental responsibility to reduce risk of brand erosion and interruption of supply. The vendor evaluation should be based on how much is the energy efficiency of vendor’s product and processes and does vendor makes efforts for reducing carbon footprints from its product and processes.

The vendors can be encouraged to participate in Wal-Mart China’s sustainability initiatives by making long contracts for purchase of their products if they align to sustainability issue. Also the vendors can be given technology know-how and education for reducing carbon footprints from its products and processes and supporting them to install such systems into their environment.

4. How can Wal-Mart improve sustainability in its distribution and retail operations?

A. Wal-Mart can improve sustainability in its distribution and retail operations in many ways which are as follows (1) Minimizing the transportation, (2) Using energy efficient products in distribution and retail operations like using hybrid diesel-electric trucks and refrigerated trucks to cut carbon footprints, (3) Using biodegradable products in packaging, (4) Avoid using hazardous substances in the product and processes, (5) Educating everyone in the organization about how can one reduce his carbon footprints and also publishing the innovative ways in which someone has managed to reduce carbon footprints, (6) Making sustainability an important objective of the company, (7) Using renewable energy as much as possible, etc.

5. How should Wal-Mart China relate to the government and employees in advancing sustainability?

A. The Wal-Mart China work in co-operation with the government and employees in advancing sustainability. The best practices known by Wal-Mart should be shared with government and employees to reduce carbon footprints. Also Wal-Mart should abide by the regulations of the government pertaining to sustainability and also Wal-Mart should voluntarily adopt best practices which lead to greater sustainability. The employees should be trained for reducing carbon footprints resulting from their actions and should be rewarded to encourage them to continue addressing sustainability issues.

6. In your opinion, what are the key lessons from this case study for supply chain managers?

A. In my opinion, the key lessons from this case study for supply chain managers are: (1) The supply chain managers should address the sustainability issues and should look at the entire supply chain to make the supply chain more energy efficient and sustainable. (2) The supply chain managers should know that profits and margins are important but should not be obtained at the price of environmental degradation. The preservation of our environment is first and foremost thing. (3) Also there are tangible and intangible benefits to the organization for addressing sustainability issues. Addressing sustainability issues and increasing supply chain efficiency are both one and the same i. e. you increase efficiency of supply chain in addressing sustainability. Case Study by Ritesh Limbasiya.