Wal-Mart builds best-in-market supply chain for overseas stores

Wal-Mart Stores Inc. has decided to use a "best in market" supply chain strategy rather than a "world class one" to serve its stores in overseas markets, Wal-Mart executive Gary Maxwell told attendees at the Council of Supply Chain Management Professionals' (CSCMP's) annual conference in his keynote address. A best-in-market approach means "thinking like a customer" and "understanding where the market is in the maturity curve," said Maxwell, a senior vice president of international supply chain.

That strategy has worked well for Wal-Mart. Last year, the retailer's international division just missed earning $100 billion, a figure that accounted for one-quarter of the company's overall sales. The retailer has stores in 15 different countries, operating some of those as joint ventures.

Maxwell told the audience that when Wal-Mart acquires a foreign company or moves into a new market, business leaders often say that they look forward to Wal-Mart building a world-class supply chain in their country. But that's not exactly how Wal-Mart operates, said Maxwell. Instead Wal-Mart examines the situation in each locale, analyzing factors such as land and labor costs, local regulations, asset utilization, and risk. "In some places, you can't afford automation [in a warehouse]," Maxwell said. "In other markets, if regulations tell how many pounds a worker can lift, you're going to put in automation."

Maxwell noted that when Wal-Mart sets up a supply chain for a particular country, it takes into account what consumers in that country can afford. "Our first warehouse in India was small and had no automation," he said. "We had racks and forklifts because that was what the customer could afford."

In Japan, on the other hand, consumers have a different set of expectations, and Wal-Mart's warehouses employ technology such as sortation systems, radio-frequency picking, automated cranes, and miniload systems. "Each piece of technology [in Japan] is targeted at keeping product at a certain quality," he said.

As the market in a particular country matures, Wal-Mart responds by introducing more sophistication into its supply chains. "We need to build a best-in-class supply chain for today," Maxwell said, "and then we'll evolve the supply chain."