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RUNNING HEADER: QSO-330 FINAL PROJECT

QSO 330 Final Project Tracy Gonzales February 20, 2021 Southern New Hampshire University

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Walmart China made some drastic changes in its supply chain movement. This paper contains an observation of Walmart China’s supply demand forecasting and sourcing. It evaluates suppliers and constraints for both and explains many recommendations. Warehousing and transportation are evaluated and constraints and recommendations are made. Walmart is one of the world largest retailers. They realized how crucial it was to have a centralized demand forecast strategy in their China supply chain. Walmart decided it was impractical to ship all products directly to the store considering they carried 15000 to 20000 stock keeping units (SKU). (Johnson, 2016). They made a decision to consolidate their products at a distribution center reducing supply chain costs and distribution costs. (Johnson, 2015). Walmart had to made a distribution center for perishables which transferred “products directly for the receiving area the outbound area for shipping.” (Johnson,2015). The distribution saved money for Walmart and their customers. Not only was money saved but customers were satisfied when what they wanted was in stock. Distribution centers helped with demand forecasting, but there were some constraints. One constraint was that they charged warehouse fee for suppliers and it cost a lot and service was terrible. (Johnson,2015). This led to not having enough product to fill a truck and needing to wait weeks to send an order out, which then led to empty shelves. Another constraint in the China market is the difference in cultures. When the stores in China were visited, they found they were not offering things some of the fresh food that the Chinese enjoyed. (Jacobs, 2018). Walmart Chinese believes in local sourcing. (Walmart China Factsheet, n.d.). In 2018 they wanted to start constructing a new perishable DC in Dongguan. (Johnson,2015). They operated 7 days a week with two shifts and had the ability to ship “150000 cases per day, with an average value 0f $24.50 per case.” (Johnson,2015). Walmart’s perishable went from localized to

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centralized from 2012 to 2015. They went from 0-28 regional buying offices, 280-2658 suppliers, 3%-60% distribution volume, 0-11 distribution centers, 72-416 store coverage, 583312000 daily average cases, 5-12 category coverage, and fully manual to partially automated system. (Johnson,2015). This are example of improvements made to sourcing in China and led to higher sales and customer satisfaction. Some improvements need to be made to Walmart China’s sourcing. “Walmart China believes in local sourcing with over 95% of their merchandize coming from local sources. Estimated say that Chinese suppliers make up to 70-80 percent.” (Factsheet, 2016). This sort of sourcing is positive for the Chinese culture, but it does not look into other avenues of sourcing. This may cause the Chinese Walmart to miss out on revenue from profitable products. Another sourcing improvement would be to build more DC. With Walmart China’s being locally sourced it could become difficult to vet suppliers. The most important part of dealing with suppliers is to keep some kind of report card. This would mean having documentation if the supplier is on time and their product is in good order. The person in charge of sourcing should get reviews from other customers of their suppliers. If a supplier is not working out then they need to be replaced. Walmart made its move in China in 1996. They have come a long way since their start when it comes to transporting goods in their China Walmart stores. One issue with transporting goods was that every village was designed to be self-sufficient and moving goods from one city to another required approval of local officials. (Trunick, 2006). “When Wal-Mart started in China, there were 21 documents for every purchase. Every store had to write its own purchase orders by hand and issue checks.” (Trunick, 2006). This issue later improved with suppliers using Retail link and online portal used in the U.S. Later the problem with transporting was

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Walmart China would not send shipments out unless trucks were full and sometimes, they would order more than needed in order to have products on-hand. This would leave shelves empty or too much product on hand and not enough space. (Johnson, 2015). This made it difficult to stock stores properly. Recommendations for Walmart China issue with villages was addressed by with its retail link, but another recommendation for this situation is increase steady suppliers. Walmart should make sure they include a larger number of transportation vehicle in their fleet. They need to work on building their own transportation organization they do not need to rely on suppliers bringing in goods. They are already building distribution centers (DC). In the U.S Walmart has taken steps to using railways instead of trucks in order to save money in transporting. (Bearth, 2019). They have decided having their own fleet is advantages in the states. This would be very helpful in China. Walmart China decided it needed to centralize its distribution and reduce suppliers. They did this by working with suppliers. Lesley Smith a senior vice-president in charge of in charge of supply chain management said “We have a total of 20 DC locations for perishable and dry goods.” (Johnson, 2015). She also stated that they use staple stock and cross dock methods. Cross docking means uploading from incoming vehicle and sending then directly to out bound trucks. (Wal-Mart: Cross Docking and Supply Chain Success, 2017). The staple stock method keeps the popular stuff on hand and ships from a warehouse. Cross docking helps keep warehousing costs down and staple stock keeps popular things on hand that ships often. Walmart invested 100 million to build a fresh food distribution center. (Berthiaume, 2019). “They passed the Brand Reputation through Compliance Standard Certification (BRCGS) making them the first retail industry to obtain certification.” (Berthiaume, 2019). They are keeping up with

QSO-330 FINAL PROJECT volumes they have now, but the need to be prepared for growth. They need to add more distribution centers before they grow anymore. Some constraints for location of distribution centers in China is lack of space in China. Land is costly and in larger cities leaving rural areas open for building. The need to make sure they have perishable goods accessible in order to prepare for more stores. Walmart has made some preparations in China for hazardous material issues. They are requiring suppliers to allow inspections for emissions, wastewater discharges, and management of toxic substances and hazardous waste. (Wal-Mart Ramps Up Standards for Suppliers in China, Around the Globe, 2008). They are looking for ways to stop hazardous material from entering their facilities. That is one way they are trying to improve. In order to prevent hazardous material in warehouse and proper disposal is to offer special training to employees. They should store anything construed as hazardous in special section or special warehouses. Walmart has worked hard to improve transporting and warehousing in their China stores. They added distribution center assisted in improving their situation. They work with the locals to supply what they need and work with helping control hazardous waste situations. They have made many changes and still need to make more if they want to stay profitable. Walmart China’s warehousing recommendations could be decided by looking at past warehousing that has been successful so far. The direct to store volume from suppliers was reduced, centralized shipment through DC was increased, and a fresh food DC was established. (Johnson, 2015). The Dongguan DC which was replacing Guangzhou and Shenzhen because they were running out of room was an important step because it was in central China and a strategic location. (Johnson, 2015). This location allowed the Walmart China to cover 126 stores. Staple stock and cross dock were the two options being used in Walmart China. When

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QSO-330 FINAL PROJECT using staple stock, they found inventory could be held longer and cross docking had the advantage of a smaller building footprint. (Johnson, 2015). Cross docking would require 24000 square metres where staple stock building would need 35000 square metres. (Johnson, 2015). Both methods should be used with cross docking used for non-perishables and staple stock used to get perishables to their designated area. Walmart China has a limit on space, so more things should move up in the warehouse in order to store more non-perishable. The need to keep a close eye on what comes into the warehouse and what goes even with more space. Since Walmart China is 95% locally stocked the best method would be cross dock which takes less space. (Walmart in China: Market entry case study, n.d.). Walmart discovered that investing in technology is innovator in keeping track of inventory and restocking shelves. (Lu, 2018). If they want to keep up in China then it is important to invest in a warehouse management system. The system should help with space because they would not have excess with the correct warehouse management system. Walmart has made tremendous changes to its Walmart China’s forecasting, sourcing, transportation and warehousing. The changes have helped them improve the way they do things in China. They are more efficient and organized improving profits. Walmart China’s supply chain structure has been improved and is continually improving. This evaluation has looked into strengths and weaknesses of their supply chain. Walmart went from not being able to keep stores in stock or having too much stock. They improved on this with centrally located distributions centers for both perishables and non-perishables.

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Bearth, D. P. (2019, February 27). Walmart Expands Private Fleet Delivery, Adds New Intermodal Service. Retrieved February 7, 2021, from https://www.ttnews.com/articles/walmart-expands-private-fleet-delivery-adds-newintermodal-service Berthiaume, D. (2019, July 8). Walmart dramatically increases supply chain commitment in China. Retrieved February 7, 2021, from https://chainstoreage.com/operations/walmartdramatically-increases-supply-chain-commitment-in-china FACT SHEET: Walmart's Made in America Pledge. (2016, June 27). Retrieved January 24, 2021, from https://www.americanmanufacturing.org/press-release/fact-sheet-walmartsmade-in-america-pledge/#:~:text=Walmart China “firmly believes” in,percent for American-made products. Johnson, F. (2015). Walmart-supply chain transformation, 1-9. Retrieved January 20, 2021, from Walmart China—Supply Chain Transformation - QSO-330-J3598 Supply Chain Management 21EW3 (snhu.edu) Jacobs, H. (2018, May 01). Photos reveal what it's like to shop at Walmart in China - which is shockingly different from the US and struggling to compete. Retrieved January 24, 2021, from https://www.businessinsider.com/walmart-in-china-most-popular-internationalsupermarket-photos-2018-4#when-you-walk-in-there-is-an-attendant-shouting-that-dayspromotions-a-not-unusual-occurrence-in-chinese-stores-from-the-first-few-steps-in-thestore-it-feels-like-a-low-quality-retailer-the-ceilings-are-low-the-aisles-tight-and-thelighting-low-quality-5 Lu, C. (2018, October 4). Walmart's successful supply chain management. Retrieved February

QSO-330 FINAL PROJECT 21, 2021, from https://www.tradegecko.com/blog/supply-chain-management/incrediblysuccessful-supply-chain-management-walmart Trunick, P. (2006, January 6). Wal-Mart Reinvents Itself in China. Retrieved February 7, 2021, from https://www.mhlnews.com/global-supply-chain/article/22041225/walmartreinvents-itself-in-china Wal-Mart: Cross Docking and Supply Chain Success. (2020, May 21). Retrieved February 7, 2021, from http://flatbedtruck.services/cross-docking/wal-mart-cross-docking-supplychain/ Walmart China Factsheet. (n.d.). Retrieved January 24, 2021, from http://www.walmartchina.com/english/walmart/#:~:text=Over 95% of the merchandise,China associates are Chinese nationals. Walmart in China: Market entry case study (n.d.). Retrieved February 21, 2021, from https://daxueconsulting.com/wal-mart-in-china/ Wal-Mart Ramps Up Standards for Suppliers in China, Around the Globe. (2008, October 22). Retrieved February 7, 2021, from https://www.greenbiz.com/article/wal-mart-rampsstandards-suppliers-china-around-globe

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