Supplier Stakeholder Ethics
An integral part of Walmart’s operational efficiency is its ability to partner with suppliers in order to purchase merchandise and reduce costs of packaging and shipping. Review the Walmart Case Study in our text book (pages 408-409) and identify at least 2 issues that may negatively impact relationships with supplier stakeholders. Be specific.
No plagarism and must be at least one page.
This is the case study
Relationships with Supplier Stakeholders
Walmart achieves its “everyday low prices” (EDLPs) by streamlining the company. Well-known for operational excellence in its ability to handle, move, and track merchandise, Walmart expects its suppliers to continually improve their systems as well. Walmart typically works with suppliers to reduce costs of packaging and shipping, which lessens costs for consumers. Since 2009 the company has worked with The Sustainability Consortium to develop a measurement and reporting system known as the Sustainability Index. Among its many goals, Walmart desires to use the Sustainability Index to increase the sustainability of its products and create a more efficient, sustainable supply chain.
In 2008 Walmart introduced its “Global Responsible Sourcing Initiative,” a list providing details of the policies and requirements included in new supplier agreements. In 2012 CEO Mike Duke expanded upon these initiatives to set improved goals for increasing the sustainability of the company’s supply chain. He highlighted four main sustainability goals: (1) purchase 70 percent of merchandise sold in U.S. Walmart stores and Sam’s Clubs from global suppliers that use the Sustainability Index to assess and share information about their products by 2017; (2) use the Sustainability Index as a model for U.S. private brands; (3) apply new evaluative criteria for key sourcing merchants to encourage sustainability to become a more important consideration in buyers’ daily jobs; and (4) donate $ 2 million to fund The Sustainability Consortium.1 If fully achieved, these goals will increase the sustainability of Walmart suppliers significantly. Some critics, however, believe pressures to achieve these standards will shift more of a cost burden onto suppliers. When suppliers do not meet its demands, Walmart may cease to carry the supplier’s product or, often, will find another supplier for the product at the desired price.
Walmart’s power centers around its size and the volume of products it requires. Many companies depend on Walmart for much of their business. This type of relationship allows Walmart to influence terms with its vendors, and indeed, there are benefits to being a Walmart supplier; as suppliers become more efficient and streamlined for Walmart, they help other customers as well. Numerous companies believe supplying Walmart has been the best thing for their businesses.
However, many others found the amount of power Walmart wields to be disconcerting. The constant drive by Walmart for lower prices can negatively affect suppliers. Many have been forced to move production from the United States to less expensive locations in Asia. Companies such as Master Lock, Fruit of the Loom, and Levi’s, as well as many other Walmart suppliers, moved production overseas at the expense of U.S. jobs.
This was not founder Sam Walton’s original intention. In the 1980s, after learning his stores were putting other American companies out of business, Walton started his “Buy American” campaign. However, the quest to maintain low prices has pushed many Walmart suppliers overseas, and some experts now estimate as much as 80 percent of Walmart’s global suppliers are stationed in China. The challenges and ethical issues associated with managing a vast network of overseas suppliers will be discussed later in this case.