Walmart’s Operations Management: 10 Strategic Decisions & Productivity

Walmart 10 decisions of operations management, strategic decision areas, productivity measures, retail business case study analysis
A Walmart store in Clinton, Maryland. Walmart Inc. successfully addresses the strategic concerns in the 10 decision areas of operations management, optimizing efficiency and productivity. (Photo: Public Domain)

Walmart Inc.’s operations management involves a variety of approaches that are focused on managing the supply chain and inventory, as well as sales performance. The company’s success is significantly based on effective performance in retail operations management. Specifically, Walmart’s management covers all the 10 decision areas of operations management. These strategic decision areas pertain to the issues managers deal with on a daily basis as they optimize the e-commerce company’s operations. Walmart’s application of the 10 decisions of operations management reflects managers’ prioritization of business objectives. In turn, this prioritization shows the strategic significance of the different decision areas of operations management in the retail company’s business. This approach to operations aligns with Walmart’s corporate mission statement and corporate vision statement. The retail enterprise is a business case of how to achieve high efficiency in operations to ensure long-term growth and success in the global market.

The 10 decisions of operations management are effectively addressed in Walmart’s business through a combination of approaches that emphasize supply chain management, inventory management, and sales and marketing. This approach leads to strategies that strengthen the business against competitors, like Amazon and its subsidiary, Whole Foods, as well as Home Depot, eBay, Costco, Best Buy, Macy’s, Kroger, Alibaba, IKEA, Target, and Lowe’s.

The 10 Strategic Decision Areas of Operations Management at Walmart

1. Design of Goods and Services. This decision area of operations management involves the strategic characterization of the retail company’s products. In this case, the decision area covers Walmart’s goods and services. As a retailer, the company offers retail services. However, Walmart also has its own brands of goods, such as Great Value and Sam’s Choice. The company’s operations management addresses the design of retail service by emphasizing the variables of efficiency and cost-effectiveness. Walmart’s generic strategy for competitive advantage, and intensive growth strategies emphasize low costs and low selling prices. To fulfill these strategies, the firm focuses on maximum efficiency of its retail service operations. To address the design of goods in this decision area of operations management, Walmart emphasizes minimal production costs, especially for the Great Value brand. The firm’s consumer goods are designed in a way that they are easy to mass-produce. The strategic approach in this operations management area affects Walmart’s marketing mix or 4Ps and the corporation’s strategic planning for product development and retail service expansion.

2. Quality Management. Walmart approaches this decision area of operations management through three tiers of quality standards. The lowest tier specifies the minimum quality expectations of the majority of buyers. Walmart keeps this tier for most of its brands, such as Great Value. The middle tier specifies market average quality for low-cost retailers. This tier is used for some products, as well as for the job performance targets of Walmart employees, especially sales personnel. The highest tier specifies quality levels that exceed market averages in the retail industry. This tier is applied to only a minority of Walmart’s outputs, such as goods under the Sam’s Choice brand. This three-tier approach satisfies quality management objectives in the strategic decision areas of operations management throughout the retail business organization. Appropriate quality measures also contribute to the strengths identified in the SWOT analysis of Walmart Inc.

3. Process and Capacity Design. In this strategic decision area, Walmart’s operations management utilizes behavioral analysis, forecasting, and continuous monitoring. Behavioral analysis of customers and employees, such as in the brick-and-mortar stores and e-commerce operations, serves as basis for the company’s process and capacity design for optimizing space, personnel, and equipment. Forecasting is the basis for Walmart’s ever-changing capacity design for human resources. The company’s HR process and capacity design evolves as the retail business grows. Also, to satisfy concerns in this decision area of operations management, Walmart uses continuous monitoring of store capacities to inform corporate managers in keeping or changing current capacity designs.

4. Location Strategy. This decision area of operations management emphasizes efficiency of movement of materials, human resources, and business information throughout the retail organization. In this regard, Walmart’s location strategy includes stores located in or near urban centers and consumer population clusters. The company aims to maximize market reach and accessibility for consumers. Materials and goods are made available to Walmart’s employees and target customers through strategic warehouse locations. On the other hand, to address the business information aspect of this decision area of operations management, Walmart uses Internet technology and related computing systems and networks. The company has a comprehensive set of online information systems for real-time reports and monitoring that support managing individual retail stores as well as regional market operations.

5. Layout Design and Strategy. Walmart addresses this decision area of operations management by assessing shoppers’ and employees’ behaviors for the layout design of its brick-and-mortar stores, e-commerce websites, and warehouses or storage facilities. The layout design of the stores is based on consumer behavioral analysis and corporate standards. For example, Walmart’s placement of some goods in certain areas of its stores, such as near the entrance/exit, maximizes purchase likelihood. On the other hand, the layout design and strategy for the company’s warehouses are based on the need to rapidly move goods across the supply chain to the stores. Walmart’s warehouses maximize utilization and efficiency of space for the company’s trucks, suppliers’ trucks, and goods. With efficiency, cost-effectiveness, and cost-minimization, the retail company satisfies the needs in this strategic decision area of operations management.

6. Human Resources and Job Design. Walmart’s human resource management strategies involve continuous recruitment. The retail business suffers from relatively high turnover partly because of low wages, which relate to the cost-leadership generic strategy. Nonetheless, continuous recruitment addresses this strategic decision area of operations management, while maintaining Walmart’s organizational structure and corporate culture. Also, the company maintains standardized job processes, especially for positions in its stores. Walmart’s training programs support the need for standardization for the service quality standards of the business. Thus, the company satisfies concerns in this decision area of operations management despite high turnover.

7. Supply Chain Management. Walmart’s bargaining power over suppliers successfully addresses this decision area of operations management. The retailer’s supply chain is comprehensively integrated with advanced information technology, which enhances such bargaining power. For example, supply chain management information systems are directly linked to Walmart’s ability to minimize costs of operations. These systems enable managers and vendors to collaborate in deciding when to move certain amounts of merchandise across the supply chain. This condition utilizes business competitiveness with regard to competitive advantage, as shown in the Porter’s Five Forces analysis of Walmart Inc. As one of the biggest retailers in the world, the company wields its strong bargaining power to impose its demands on suppliers, as a way to address supply chain management issues in this strategic decision area of operations management. Nonetheless, considering Walmart’s stakeholders and corporate social responsibility strategy, the company balances business needs and the needs of suppliers, who are a major stakeholder group.

8. Inventory Management. In this decision area of operations management, Walmart focuses on the vendor-managed inventory model and just-in-time cross-docking. In the vendor-managed inventory model, suppliers access the company’s information systems to decide when to deliver goods based on real-time data on inventory levels. In this way, Walmart minimizes the problem of stockouts. On the other hand, in just-in-time cross-docking, the retail company minimizes the size of its inventory, thereby supporting cost-minimization efforts. These approaches help maximize the operational efficiency and performance of the retail business in this strategic decision area of operations management (See more: Walmart: Inventory Management).

9. Scheduling. Walmart uses conventional shifts and flexible scheduling. In this decision area of operations management, the emphasis is on optimizing internal business process schedules to achieve higher efficiencies in the retail enterprise. Through optimized schedules, Walmart minimizes losses linked to overcapacity and related issues. Scheduling in the retailer’s warehouses is flexible and based on current trends. For example, based on Walmart’s approaches to inventory management and supply chain management, suppliers readily respond to changes in inventory levels. As a result, most of the company’s warehouse schedules are not fixed. On the other hand, Walmart store processes and human resources in sales and marketing use fixed conventional shifts for scheduling. Such fixed scheduling optimizes the retailer’s expenditure on human resources. However, to fully address scheduling as a strategic decision area of operations management, Walmart occasionally changes store and personnel schedules to address anticipated changes in demand, such as during Black Friday. This flexibility supports optimal retail revenues, especially during special shopping occasions.

10. Maintenance. With regard to maintenance needs, Walmart addresses this decision area of operations management through training programs to maintain human resources, dedicated personnel to maintain facilities, and dedicated personnel to maintain equipment. The retail company’s human resource management involves training programs to ensure that employees are effective and efficient. On the other hand, dedicated personnel for facility maintenance keep all of Walmart’s buildings in shape and up to corporate and regulatory standards. In relation, the company has dedicated personnel as well as third-party service providers for fixing and repairing equipment like cash registers and computers. Walmart also has personnel for maintaining its e-commerce websites and social media accounts. This combination of maintenance approaches contributes to the retail company’s effectiveness in satisfying the concerns in this strategic decision area of operations management. Effective and efficient maintenance supports business resilience against threats in the industry environment, such as the ones evaluated in the PESTEL/PESTLE Analysis of Walmart Inc.

Determining Productivity at Walmart Inc.

One of the goals of Walmart’s operations management is to maximize productivity to support the minimization of costs under the cost leadership generic strategy. There are various quantitative and qualitative criteria or measures of productivity that pertain to human resources and related internal business processes in the retail organization. Some of the most notable of these productivity measures/criteria at Walmart are:

  1. Revenues per sales unit
  2. Stockout rate
  3. Duration of order filling

The revenues per sales unit refers to the sales revenues per store, average sales revenues per store, and sales revenues per sales team. Walmart’s operations managers are interested in maximizing revenues per sales unit. On the other hand, the stockout rate is the frequency of stockout, which is the condition where inventories for certain products are empty or inadequate despite positive demand. Walmart’s operations management objective is to minimize stockout rates. Also, the duration of order filling is the amount of time consumed to fill inventory requests at the company’s stores. The operations management objective in this regard is to minimize the duration of order filling, as a way to enhance Walmart’s business performance.