Walmart’s Efforts to Instill Sustainability in its Supply Chain.

Wednesday, December 9, 2009 3:07
Posted in category Uncategorized

When Walmart called 1000 CEOs to Beijing for a meeting last year, it was an event that many covered as being a turning point in sustainability. With China still working through the “Made in China” label, and the world entered the recession, Wal-Mart’s announcement that it was going to use its size to become a change agent for sustainability initially sparked concern that local suppliers would be driven out of the market by increased costs.

There were more than a few in the market who were more than happy to question what the real results would be. Could Walmart effectively implement such a large program, how would the new structure be rolled out (and enforced), and wasn’t it just another action for Walmart to squeeze its suppliers.

It was a tough sell, and this morning when the COO of WalMart spoke to my class, the full size and complexity of the program became clear to me and I thought there were some excellent lessons to be drawn out from the event about the role of buyers in China.

But first a caveat. I know that Walmart has a mixed reputation, and that at time the emotional level can get kicked up a notch, so everything that I wil write in the below will be my own. Typically I have no problem quoting speakers at events, but having worked with a number of large firms who saw their desire to bring change through open dialogue and transparency blow up in their face.

Early on in the presentation, perhaps the most interesting thing for me was the moment of recognition for Lee Scott (and WalMArt) that it had a responsibility to work on this issue. It was a moment that was catalyzed by Hurricane Katrina, and the organizations recognition that its supply chain had real power (it was the only one functioning at the time). It was a moment that if you listen to a number of leaders in the field of sustainability shares the fundamental “awareness” characteristics.. but it took time to develop that into something more.

So, lesson number one. While it may take a moment of clarity, every organization needs to realize that they have the power to affect change.

the process itself, is still in what I would feel is in early days. That, regardless of intentions or plans, the shear size of the program that they announced required a lot of planning, staffing of the right people, speaking to partners, and kicking pilot programs off. One of the more interesting things that was mentioned as apart of this were the areas where they were looking to develop efficiency or reduce waste through developing new packaging. A program that resulted in a 97% reduction by HP within one signle product. Walmart, recognized that it needed to make a change, but that it needed a different tool belt to accomplish that, and this is true of many others that I have spoken/ worked with.

So, lesson two. Move from aspirational into operational through strong planning, pilot testing, and bringing on board the right people.

The next stage, and this is stage that will vary initiative by initiative for every firm, is to develop scale and stability in the product category. Not just moving 5 test farmers into a programmer, but working with 100,000 farmers to improve their time to the store (improved freshness and quality), reduce their need for packaging, and introduce tracing… a system that needs to work across all their categories (toys, home textiles, electronics, etc). It is a step that requires more than a few managers with vision, but a team who are managing processes, measuring, and making adjustments within a known/ verifiable set of parameters.

At the same time, this is also the stage where a significant amount of time communicating with suppliers is crucial. Making sure that the firm is supporting their transition by showing them the benefits of the program (offset costs wil increase bottom line) and the right steps to get there.

So, lesson three. Systematically program initiatives and create the framework that supports stability through hiring and training.

Next, looking beyond the supplier, firms who then transport their goods from factory to shelf, must then work to with logistics providers to improve processes. Imagine a firm that ships thousands of containers of goods a day, and how much opportunity there is to make large gains there through optomized shipping configurations, developing thinner boxes, removing harmful packaging materials, reusing pallets, and so on. Many firms, and many agencies simply skip over this step in the assessment process when it is actually one of the areas that often times has low hanging fruit

So, lesson four. Look holistically at the supply chain. Engage designers to develop better logistics solutions, and logistics providers to specify better packaging solutions

Finally, and perhaps I could add in a few more, developing scale through promoting best practices. To months ago while attending a conference at NYU, the former CEO of Intel who discussed his efforts to develop a culture within Intel to do things the right way. He developed GLOBAL standards (not that local + stuff we see a lot of here), and for firms who are going to make changes, that is key. This is an area where industry leaders can, and should take their programs to the next level. sharing best practices with competitors and developing industry standards that increase across the board. It was something that was mentioned during the discussion yesterday as a goal of Walmart, and will be an action that could close the loop on a number of hurdles that suppliers focus when faced with conflicting standards from different groups.

At the end of the 30 minute presentation, I was left with a very strong feeling about the program. The difficulty of the task faced was clear, but unlike a firm that releases a bunch of pres releases, what I saw in the speech was the development of a system that could become “the” case study on the ability of a firm to be a real catalyst for change in the areas of sustainability.

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3 Responses to “Walmart’s Efforts to Instill Sustainability in its Supply Chain.”

  1. Yair says:

    December 15th, 2009 at 11:22 pm

    Rich – this is excellent. I am especially interested in your comments here:

    The next stage, and this is stage that will vary initiative by initiative for every firm, is to develop scale and stability in the product category. Not just moving 5 test farmers into a programmer, but working with 100,000 farmers to improve their time to the store (improved freshness and quality), reduce their need for packaging, and introduce tracing… a system that needs to work across all their categories (toys, home textiles, electronics, etc). It is a step that requires more than a few managers with vision, but a team who are managing processes, measuring, and making adjustments within a known/ verifiable set of parameters.

    Our experience in the US, S. America, and Asia show that this is a challenge due to the lack of qualified professionals who actually manage/implement/execute. In China, this is a very large problem, despite the numbers of foreign entities operating in China; in reality though, India is also facing very huge problems as well.

  2. Rich says:

    December 16th, 2009 at 3:22 am

    Yair

    While I cannot speak for the speaker, I would agree that any effort to do this would require solid execution, and honestly… I think that is an area where a firm like Wal-Mart has the opportunity. They are used to bringing in and training up the troopers for supplier ID and QC…

    …either way, must be a great thing to watch logistically!

  3. Recalibrating a Corporate Culture Can Be Painful | Collective Responsibility | Sustainability. Responsible Leadership. Innovation. says:

    May 27th, 2013 at 2:21 am

    […] another chapter in Wal-Mart’s story where it has committed to a new way of doing businesses, and as the framework has been developed, it has required that the firm make personnel changes.  […]