Introduction: (Major Facts)Ever since Wal-Mart started it has taking off not only nationally but internationally, especially over the past ten years. Wal-Mart has become the world’s largest and probably the most powerful retailer to this day, having the highest sales per square foot. The major keys to Wal-Mart’s success is due to their inventory turnover, operating profits, providing discounted prices to their customers, and of course their supply chain.
Through all of those, Wal-Mart says that it focuses on change, technology, and effective management to lower cost all across the board. Wal-Mart’s incredible supply chain, as shown in the case with its seafood, but with all of its products is where most of their ability to lower product costs and become highly competitive, pretty much controlling in the market.
Braking down their supply chain, primary areas that make such an efficient process is their integration with suppliers, manufacturing, warehousing, and distribution to stores. Having four key components, vendor partnerships, cross docking and distribution management, technology, and integration. Throughout the case we see all of these areas come into play, in the end showing how efficient the process really is, only to have a margin of $0.05 per pound of fish but still making money. Problem Statement: (Major Problem)
•The company’s volume of seafood business was growing at roughly 25 percent per year. •Wal-Mart’s goal was to get its suppliers to adopt the MSC’s certification program so that the company could transition to selling 100 percent MSC certified wild-caught seafood by the end of 2011.
•Compliance to ensure that products were managed sustainably from “boat to plate.” •The direct cost of MSC certification ranged from $50,000 to 500,000 and was paid for by boat operators and processing plants. •On average, certification took one to two years to complete. •Manish Kumar, CEO of the Fishin’ Company, Wal-Mart’s majority supplier of frozen fish fillets in the US had embraced the program even though it added significantly more complexity, time, cost, and effort to his job without increasing near-term profits. •Under the fishery management plans developed by this entity, commercial fishing of wild salmon was only allowed by operators with entry permits and only within a limited season.
The length of the season changed every year to ensure that a sufficient number of each type of wild salmon returned to spawn. •The Fishin’ Company, buying directly from these commercial boat operators, faced a highly volatile market in which prices typically fluctuated by 30 percent within a season and supply could be unexpectedly cut off by an early close to the season. •Kumar estimated that during a season, the average price of a pound of wild pink or chum salmon might be approximately $1.00 per pound. Problem Solving: (Possible Solutions/Alternatives)
To accomplish its goal, Wal-Mart would have to work through its suppliers to increase the number of fisheries and processing plants in the MSC certification program. Kumar felt that his efforts were helping to secure and expand his business with Wal-Mart in the long term. With the MSC certification, again looking into the long run, Walmart is looking to improve its image which has been a problem in past years. Wal-Mart was said to be frauds, in that they were promoting one thing, but behind the senses they were really not doing all of that to cut cost. Taking these extra actions now could prevent a lot of problems in the future and secure good business relations for Fishin’ Company with Wal-Mart. Because as everyone knows, having Wal-Mart as a customer can make your business huge, but at the same time you are easily replicable. Another action that Kumar took was to monitor the inventory levels of his fish products in the 35 Wal-Mart Distribution Centers and 1,820 Super Centers that he supplied, and made shipments to the distribution centers in time for Wal-Mart to replenish its inventory in the super centers and to prevent stock-outs. Using technology to make the operation almost run itself, also cutting more cost in the long run. In class we had talked about how in supply chain one thing that should always be experimented with is change. Next in the options, the case went over decisions that Kumar looked into, and that’s what you have to be doing, it probably should have been done more here. Of course only said in the case, prices were compared from Alaska to China to process the fish, but that’s only two options, I would have looked into a lot more than that. Options: (Choice and Rationale)
According to the article, the options seemed to be pretty cut and dry. First being to ship the fish to china to get processed and then shipped back to the United States. The second would be to process the fish in Alaska, but there were two primary disadvantages to this approach. 1.“The average labor rate per processing employee per month in Alaska was roughly 2,000 verses in China it was only $200,”
2.“The fishin’ company used the same processor in China for many different types of fish, which came from different parts of the world at different times throughout the year.” a.“If Kumar worked with an Alaskan processor just for his Alaskan salmon, he could not guarantee when and how much processing capacity he would need, so he would end up being required to pay a higher price. He also might face processing delays during peak periods within the salmon fishing season that would potentially degrade fish quality.”
Like I said before, if I was a supplier to Wal-Mart, the most powerful retailer and knowing the amount of fish I would be bring to a processing plant, I would have shopped around a lot more than that. Being an international company, two options seems way to short, I would have expected a list. And maybe there was, this could have been the two that he had narrowed it down to and the article only talked about these two, but I don’t know. Decisions: (Implementation / The Action Plan)
It seems to the article that Kumar is still supplying both fishes, one from Alaska and the other farmed grown from Chile. At the end it stated that both products leave a $0.05 per pound profit for Kumar. If I were him I would keep doing the same for the time being and the information provided here. Even though the farmed salmon was available year round, in any quantity that Kumar needed, he still purchased the fish in large enough quantities to fill a shipping container to take advantage of significantly lower ocean freight charges.
Having the Alaskan fish sent to China for processing, I know it’s a ton of more work and shipping, but the difference in cost of employees is way too high to pay that. What I would change is to keep on doing what we talked about, always experiment and look for change. Keep looking for a closing processer that could have it worth Fishin’ Company wild to give them the business. I know some will say to just cut the Alaskan salmon and one sell the salmon from Chile, but I would argue that would be a mistake. With the way people are going these days, customers want their food fresh and not ground in a foreign company just to save a couple of bucks. Conclusion
“Kumar estimated that his pre-tax net profit margins were less than $0.05 per pound on both products, with the wild salmon retailing at $4.50 per pound and the year round farmed salmon retailing for $6.00.” That is really hard to work with, but shows how organized their supply chain is. Wal-Mart’s supply chain management strategy has provided the company with several sustainable competitive advantages.
Everything from lowering product cost, reducing inventory carrying cost, improving in store variety and selection, and highly competitive pricing for their customer. The lower prices are simply what keep their customers coming back time and time again. This strategy has helped Wal-Mart become a powerful force in a competitive international market.