Walmart’s Operations Management: 10 Strategic Decisions & Productivity - Panmore Institute 23/5/21, 8:12 AM

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BUSINESS, MANAGEMENT

Walmart’s Operations Management: 10 Strategic

Decisions & Productivity
UPDATED ON AUGUST 21, 2020 BY NATHANIEL SMITHSON

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 of the 10 decision areas of
operations management. These strategic decision areas
pertain to the issues managers deal with on a daily basis as
A Walmart store in Clinton, Maryland. Walmart they optimize the e-commerce company’s operations.
Inc. successfully addresses the strategic
Walmart’s application of the 10 decisions of operations
concerns in the 10 decision areas of operations
management, optimizing efficiency and
management reflects managers’ prioritization of business
productivity. (Photo: Public Domain) 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.

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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 Market, 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 service. 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 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-

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Walmart’s Operations Management: 10 Strategic Decisions & Productivity - Panmore Institute 23/5/21, 8:12 AM

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 (see Walmart: Human Resource
Management).

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

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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 for 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

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Walmart’s Operations Management: 10 Strategic Decisions & Productivity - Panmore Institute 23/5/21, 8:12 AM

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. In relation, 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.

References

Agrawal, N., & Smith, S. A. (Eds.). (2015). Retail Supply Chain Management: Quantitative Models and Empirical
Studies (Vol. 223). Springer.
Ball, D. R. (2011). Integrating Multiple Sustainability Criteria in Technology, Innovation, and Operations
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Barratt, M., Choi, T. Y., & Li, M. (2011). Qualitative case studies in operations management: Trends, research
outcomes, and future research implications. Journal of Operations Management, 29(4), 329-342.
Choi, T. M., Wallace, S. W., & Wang, Y. (2018). Big data analytics in operations management. Production and
Operations Management, 27(10), 1868-1883.
Dedeke, A., & Watson, N. (2008). Exploring Inventory Trends in Six U.S. Retail Segments. Harvard Business
School.
Kistruck, G. M., Morris, S. S., Webb, J. W., & Stevens, C. E. (2015). The importance of client heterogeneity in
predicting make-or-buy decisions. Journal of Operations Management, 33, 97-110.
Kouvelis, P., & Tian, Z. (2014). Flexible Capacity Investments and Product Mix: Optimal Decisions and Value of
Postponement Options. Production and Operations Management, 23(5), 861-876.
Patel, P. C., Guedes, M. J., & Pearce II, J. A. (2017). The role of service operations management in new retail
venture survival. Journal of Retailing, 93(2), 241-251.
U.S. Department of Commerce – International Trade Administration – The Retail Services Industry in the
United States.
Walmart Inc. – Form 10-K.
Walmart Inc.’s E-commerce Website.

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G O O D S I N D U S T R Y , E - C O M M E R C E , O P E R AT I O N S M A N A G E M E N T , R E TA I L , R E TA I L I N D U S T R Y , WA L M A R T

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