Silly Walmart And Other Stories.
First, I would like to talk about the Walmart article. It seems to suggest that Walmart got almost everything right in its supply chain:
from demand forecasting to ensure that adequate quantities of inventory got to
its store locations, to good inventory management practices ensuring timely
resupply orders – all operations optimized to laser-like precision. But… in the
end it failed to foresee or plan for how its staffers would actually get the
merchandize languishing in backrooms to the shelves? Hmm.
The causal relationship between out of stock and layoffs developed
in the article is flimsy at best and not very well developed. How much of the
stock out costs that have been calculated in the article can be traced solely
to the inadequate staffing at stores, right at the end on the downstream end of
the supply chain, and how much of it can be attributed to other factors? The
comments section for that article was very interesting. One of the comments was
by a Walmart store manager explaining how stock outs occur most frequently at
the beginning of the month when low-income families get their SNAP (Supplemental
Nutrition Assistance Program) benefits, which would seem to suggest that these
stock outs occur due to product flying off the shelves. This creates a problem
where there isn’t enough staff on hand to rapidly replenish the shelves from
the back room. This is a problem, but then I suppose most businesses would like
to be in a position where they have to rapidly replace product on their
shelves. As one meme would have it:
Going off on a tangent, the Walmart website says that, “today,
Walmart operates more than 11,000 retail units under 69 banners in 27 countries”
(
http://corporate.walmart.com/our-story/our-business/locations/).
It would have been interesting if the author of the article had commented on
whether there was a similar trend in other locations around the world. With
locations in Africa and South East Asia, where labor costs would be lower, I imagine
it would not be as big a problem as here in the United States.
Summing up on the Walmart article, in my opinion, it is
somewhat naïve to assume that an organization like Walmart, known to be smart
about its supply chain planning, using optimization methods that factor in
variables like shortest delivery routes, would overlook something as simple as
investing another $448 million in additional staff at the stores for a return
of $ 1.29 – 2.58 billion.
Moving on to the article on building flexible supply chains
for uncertain times, with its emphasis on having an agile, dynamic, proactive,
collaborative and responsive supply chain planning process that revolves around
a low-response time decision-making process that responds quickly to demand
volatility by having cross functional teams, that provide a cohesive and
organization-wide, holistic response to changing market dynamics and price
fluctuations across supply chain components, made for sensible reading. Mostly –
except for the advice to “…deal with changing conditions by making production
processes more flexible—shifting manufacturing locations quickly as shipping
costs change, for example.” Written in March 2009, with the global crisis of
2008 still underway, and with most organizations engaged in aggressive cost
reduction strategies, this sage’s advice to them, about potentially investing
millions in moving capital equipment around or setting up new manufacturing locations
is a bit hard to swallow.
Furthermore, this article and the article, Ten Ways To Improve Inventory Management,
for me, overlook a critical factor – critical for any supply chain that is
global at least. And that is the relationship between international trade
dynamics and inventory management – how one impacts the operational
effectiveness of the other.
In The World Is Flat, Thomas
L. Friedman talks about globalization forces and technology as one of the great
enablers that flattened the world, making it more interconnected and
transparent across borders. There are other factors which have contributed to
the globalization drive. The work done by organizations such as the World Trade
Organization, United Nations Conference on Trade and Development, World Bank,
along with the evolution in global trade in terms of bilateral and regional
trade treaties, free trade agreements and the rationalization of tariff
structures (which have traditionally been used as a tool of trade regulation by
countries, geared towards protectionist policies). All of these factors
combined have given us a world where trade across borders – the movement of
goods and, today, even services, has become more fluid.
Resultantly, organizations have been able to take advantage
of expanding globally, and by extension, taking their supply chains across
borders to take advantage of economies of scale made possible due to labor
differences – both in cost and productivity. However, there still remain many
impediments to a truly free global market, unconstrained by borders. Different
rules and regulations surrounding import / export requirements, inefficiencies
in say port operations, geopolitical uncertainty, border delays, inadequate infrastructure
and even blatant and ubiquitous corruption, are just some of the factors that
play a major role in hampering the free flow of goods and services through
global supply chains – and by extension have a cascade effect on how nimbly
organizations with global supply chains are able to plan and manage their
inventories.
