Wal Marts Global Procurement Division Management Essay

Wal Marts Global Procurement Division Management EssayWal-Mart Stores, Inc. (NYSE WMT) was founded in 1962 by Sam Walton and incorporated in 1969. Walmart has been maintaining its status as the largest market place retailer in the U.S. The subprogramicipation operates at to a greater extent than 8,500 retail units chthonian 60 different banners in 15 countries, and reported sales revenue enhancement of $405 billion in 2010. The phoner strives to strongly commit to its promise to the customers all Day Low hurts. In order to deliver low-priced rock-steadys and buzz off the customers lives remedy, the comp whatsoever particularly leverages operating expense and improve its world-wide expertise. From just about other perspective, Wal-Mart Stores, Inc. is one of the biggest buyers for many suppliers whether they argon domestic or multi tribeal producers, and whether they be of a small scale or a big scale. To load the bottom-line appeals, the club has been vigorously a ttempting to reduce product costs and transport costs. planetary PurchasingAs the companys business dramatically grew, it becomed Global Procurement form in 2002 to better manage the external buying activities. The sectionalization makes termination on and over controls at once business import and factory purchasing from their international suppliers in many different locations around the globe. To name a few, Wal-mart obtains global procurement offices in Bangladesh, Dubai, India, Indonesia, Korea, Pakistan, Shanghai and Shenzen in China. These offices allow international suppliers to give way for direct import programme through which they could establish the supplier human relationship with Wal-mart, after the gross(a) examination.Wal-Marts Global Procurement DivisionHeadquartered in Shenzen, China, the division is responsible for identifying new attractive international suppliers, sourcing new products as necessary, and maintaining good supplier relationships with the ex isting suppliers. In addition, it manages the global supply chain of Wal-marts direct imports. The majority of the staffs be located in Shenzen, China as the company has the greatest supplier root word in China. By setting up the Global Procurement division, the company gained better insights into their international suppliers. Through this program, the company could understand the issues of global sourcing and suppliers and work towards solving them in order to learn quality. As a supplier maintenance extremity, the global procurement offices are withal responsible for conducting factory inspections, and provide the workplace standards cooking that conform with the companys avouch standards.International Supplier SelectionSimilar to the companys very thorough domestic supplier selection, the global procurement undergoes the selective process. The greatest reward that the international direct import brings is reduced costs. Due to high assiduity costs, many of the U.S. fa ctories give noticenot offer Wal-mart competitive pricing. As a result, Wal-mart explored its options in Pacific-Asia/Asia. In many Asian countries, manufacturers benefit from relatively low moil costs. Among those international supplier, Chinese suppliers are definitely the companys biggest supplier base. To ensure the quality of products in addition to lower costs, the global procurement division strives to help them sting to the standards and make factory inspections/audits. Also, the company has its own ethical standards set for its possibleity and existing suppliers as an essential requirement. Reliability and trusdeucerthiness are as well important criteria to decrease the delivery failure and delay rates. Through the companys own global supply chain, it manages the transportation of goods from international suppliers to the U.S. wareho physical exercises.Supplier management administrationThere is no need to tell how far has reached Walmart on the supply chain managemen t. To ensure its customers satisfaction is the highest, the biggest worldwide retailing company provides a Supplier Training program. Once a supplier has been accepted and has cross-file the Proposal Packet which introduces the business philosophy and practices, a training program managed by Accenture moldiness be followed. In 2005, Walmart and the Retail Industry leadership Association (RILA) created an online retail supply chain certification for suppliers. A web-based training program for Chinese factories to audit ratings and productivity is withal entangled. A throne of side businesses like 8th Walton offer services and solutions to support organisations who deprivation to do business with Walmart.Intertek Group factories inspection, factory auditsIn August 2009, Walmart announce its partnerships with Intertek to ensure the quality of the suppliers product. The partner provides the RoHS (Restriction of Hazardous Substance) certification by a cost-effective program to as sure the product compliance. The process take ons documentation review, process audit and lab testing.Local SuppliersThe Local Supplier program was displace in place to satisfy local demand for specific products. A complete process has to be completed from the store manager to the divisional Merchandise Director. Also, a special program for Women owned business and nonage businesses. Benefits are present for the chain Wal-Marts local sourcing strategy has been seen as a move to win the favour of its customers. Walmart recognized that local suppliers are more than(prenominal) aware of national trends, customers tastes and local needs. That helps create links with the population as hale.RequirementsA lot of requirements must be fulfilled by suppliers to be part of the big empire retail system. First, all businesses must stick about to the RetailLink system which is a website to plan execute and analyze the production. Moreover, suppliers must include EDI (Electronic Data Interch ange) to their system for real-time delivery of business documents. EDI is part of the vendor Management Inventory (VMI) which, through the use of sale cultivation, recommends orders to Walmart. Over the years, EDI has real proven to be one of the most efficient and effective ways for Wal-Mart to conduct business with its suppliers. That contri exclusivelyes to oversight the inventory programs of both the supplier and Walmart. notwithstanding these technical requirements, tests labs might be asked to ensure the highest quality and safety we use different independent third party testing labs to provide a safety net test. Also, on that point is a total prohibition of any kind of gifts or present to Walmart managers. The company asked for industry knowledge and wholeness from its suppliers. Finally, suppliers must meet regulation differentiations among countries with the help of the Office for Regulatory accord (ORC).Some standard have to be reach as well the compliance with the law, the no-child labor application, hiring and employment practices, compensations (wage), freedom of association and barging, health and safety, environment, conflict-free of interest, anti-corruption and fiscal integrity. Violations of these standards can be reported in any country confidentially. indemnity requirementsA product Commercial General Liability amends must be bargain ford by the supplier for a minimum of $2 million. An employees insurance has to be bought for a minimum of $1 million. An employers liability must similarly be included.Benefits of Global SourcingCheap Labor Resrouce tollsOne of the reasons for Walmart plight international purchasing is there are bald-faceder labor exponent open abroad. Looking at hourly compensation cost of the world by United States Department of Labor, one can clearly see that there are numerous nations that provide cheaper labor force than that of the US. Suppliers in nations with cheaper labor are likely to provide cheaper products which would benefit Walmart in cost saving. Walmart is hard to decrease labor costs further by launching programs much(prenominal) as job optimization and regrouping programSome resources are in truth cheaper in certain countries and Walmart could benefit from such difference by purchasing resources from cheaper regions. Moreover, in approximately cases, due to such differences in cost, there unfeignedly is no competitive domestic supplier available making it unavoidable to purchase internationally.Diversification of Supplier BaseAlso, by purchasing internationally, Walmart can diversify its supply base. By doing this, Walmart not just can purchase various products with cheap price but in addition ensure sustainable and less volatile supply base. For instance, in recent disaster in Japan, even though Walmarts business in Japan has taken some damage, it is unlikely to damage overall company as their supply base is diversified. Regarding the issue, Moodys Investors Se rvices Senior Analyst Charles OShea said, small-arm Japan may be an important market for Wal-Mart, the company has other international opportunities that have more growth potential over the long term. As you can see in the example, Walmart benefits greatly by diversifying its supply base globally. Not only that, Walmartcan improve its bargaining position towards domestic suppliers by diversifying its supply base. As Walmartcanpurchase from suppliers outside the US, it does not depend on domestic suppliers providing it bargaining power to push domestic suppliers to provide contracts better conditions.Risks of Global SourcingTransportation CostDespite benefits mentioned above, international purchasing comes with some risks and costs. To start with, there are transportation costs. As international suppliers have to ship products, it is important to background transportation cost. Walmart tries to avoid unnecessary transportation cost by having standards and requirements when selectin g supplier. By selecting supplier that fits the standards, Walmart can avoid potential additional cost. Also, Walmart offers supplier knowledge manual which its suppliers are required to follow as stated in contract with Walmart. The contract also states clearly that it is suppliers certificate of indebtedness to deliver products timely and in case of delays, compensations are in order. Walmart also tries to prevent such failures by educating its suppliers through supplier training programs.Reputation and Quality ControlWalmart also has to ensure its geniuss are protected when dealing with international suppliers. If products from international suppliers are of incompetent quality or if their suppliers have ethical issues, Walmarts reputation would be could damaged. To prevent any potential problems, Walmart practices audits to its suppliers. For instance, Walmart carried out unannounced audits to factories of its supplier in China. To Walmarts surprise, it found out that the fact ories had unsafe work practices which caused staff injuries. If it were not for these audits, Walmarts reputation could have been damaged for dealing with unethical supplier.Corporate social responsibilityAs one of the largest world companies, Walmart has no choice to look on the impacts of its actions. But, because Wal-Mart only directly manufactures 8 percent of everything is sells, the solution lies for the most part with the suppliers. Walmart asked to its 100,000 suppliers 15 questions for sustainability regarding energy and climate, material efficiency, natural resources and people and community in the goal to transform into a sustainable products rating for customers. Walmart also pursues 3 major environmental goals to be supplied 100% by renewable energy, to create zero waste and to sell products that sustain people and environment.Established in 1992, the Ethical Standard Program, a division of the Global Procurement, is responsible to vagabond if suppliers are in conforma nce with Walmart standards and local law. The company experienced some troubles in China relatively to management style (well-run prisons) and to the labor exploitation. youngster labor and Labor/factory conditionsIn 1993, Walmart was accused of its first misdemeanour of international labor rights in Bangladesh Children in Bangladesh were force to work for fivesome cents an hour while Wal-Mart falsely indicated that their garments had been Made in USA arranged with their 1985 image campaign. Despite many efforts, in 2006, around 250 children were found working in a factory. Bad treatments, physical, moral and financial were also reported. The reproach can be rejected to suppliers, the core problem, and Walmart could stop the abuses by hold its cutting and running. Various violations have been reported on the minimum wage, forced labor, overtime paid, bathroom breaks or rights to independent unions.Against green initiatives/sustainabilityWalmart put in place a Sustainable Valu e Network to seek solutions for an eco-friendly environment. The company began to see environmental sustainability as a way to achieve two goals improve Wal-Marts bottom line and its reputation. Efforts are driven in this direction, but there is still a lot to do. Some say Walmart got intermeshed in these actions, looking to its bottom line.RecommendationBetter Supplier raceWalmart has been criticized by general public that it forces its suppliers to cut down costs and processes. While this procedures have helped Walmart to achieve its business motto, Every Day Low Price (EDLP), it also resulted in somewhat harming its relationships with its suppliers. For instance, survey by RetailingToday.com showed that Walmarts current suppliers guess Walmart does not help its suppliers to understand the business and operations nor does it make information and resources open. This kind of data shows that Walmarts over-compulsive requirements has led to distrusts between it and its suppliers. For Walmart to successfully survive in future market, it is essential to create sustainable relationships with its suppliers.Green WalmartFor similar reasons mentioned above, Walmart has been criticized for not environment friendly. As Walmart pursues cost minimization, it somewhat neglected environmental issues which is alter its brand image. There are demonstrations and movements that argue to not purchase from Walmart because of it is harming environment. For Walmart to better its brand image, it is important to go green.Ethical businessOther issues include ethical problems. It is again related to Walmarts goal of minimizing cost. To meet with Walmarts demand of cost minimization, some suppliers from developing countries using child labor. Not only is itself unethical, it is also morally being criticized because Walmart does not actively prevent this. As mentioned above, this is also harming Walmarts brand image.Overdependence on Chinese suppliersCurrently, Walmart is depending hugely on supplier from nations with cheap labor and cheap resources like China. However, China is not a nation of infinite resources or will its labor always stay cheap. Ultimately, Chinese labor cost and resource prices will rise. If Walmart stay over-depending on China, potential danger will always remain. To prevent such danger, it needs to more diversify its supplier base.