Logistics News: Walmart’s Maxwell cites keys to developing best-in-market global supply chains
Jeff Berman, Group News Editor -- Logistics Management, 10/1/2009
CHICAGO — In a speech that focused on the various aspects of successful supply chain management, Wal-mart Senior Vice President of International Supply Chain Gary Maxwell said that understanding customer needs is the key to designing a fluid global operation.
Addressing attendees at the Council of Supply Chain Management Professionals (CSCMP) Annual Conference in Chicago last month, Maxwell discussed how diversity in supply chain networks and evaluating supply chains based on the needs of a particular geographic market are major drivers when developing an international supply chain. Maxwell also stressed that, while often overlooked, effective inventory management may be the most critical element to master.
“A lot of times when working with engineers to create a supply chain in a new international market the question is around what the supply chain will look like,” said Maxwell. “You build your assumptions on distance and volume, and inventory is typically viewed as a fixed variable.”
He explained that network engineers will present data on how many days and dollars worth of supply of product by category that Wal-mart’s distribution centers need to hold to service that region. “My challenge is then to ask why that number? When you look at the number of days on hand we have in the DC today, why aren’t we looking at a DC two years out in the future that is going to hold the same days worth of supply? Inventory in our network needs to be variable and not fixed, and we need to build and design for more efficient supply chains with less inventory,” he added.
The inventory management function in many organizations is often thought of as separate from other logistics functions, noted Maxwell. But to run a truly thorough and efficient supply chain, you need to start with inventory and look at how you can carry less and turn it faster.
Securing corporate capital to build efficient supply chains is yet another major challenge when expanding internationally, said Maxwell. But supply chain and logistics executives need to overcome this by thinking of themselves as a “marketer” for the supply chain.
“You have to sell your ideas, and you have to sell why starting with the customer and building what’s right for them all the way through the supply chain through labor costs, land, and regulations is critical,” said Maxwell. “Your CFO may not be thinking about these things when they think about the supply chain, but that is our job as educators and promoters of the value we add to the business.”
Maxwell stressed how sustainability is a core component to any company’s future global success. He cited Wal-mart CEO Lee Scott’s three key goals for sustainability: to be supplied by renewable energy, create zero waste, and to sell products that are good for and sustain the environment.
“These are high and difficult goals for a supply chain that is filled with hundreds of thousands of trucks and large DCs,” said Maxwell. “This leads to a lot of experimentation, and in this pursuit of a more sustainable network you need to try some things.” Some green tactics Wal-mart is trying: hydrogen fuel cell-powered forklifts and reducing package sizes for toys.
Maxwell said Wal-mart took 277 toys from its product line and redesigned and shrunk their packaging. This effort resulted in using 727 fewer containers to ship the toys from China to the U.S. It also saved more than 5,000 trees and an estimated 1,300 barrels of oil.
“Putting things in smaller boxes and using less carbon produced a tremendous savings for the environment and a financial savings for the company,” said Maxwell. “Our approach to sustainability is to be better for the environment and save money at the same time.”
Going forward, Maxwell said that Wal-mart customers around the world will expect and demand more from the company’s supply chain in the form of sustainable products so they have some understanding of whether that product is good or harmful to the environment.
In July, Wal-mart rolled out plans for a Sustainability Index in which the company is working with educators, universities, and a consortium of companies to build a product index that would tell a customer, on a to be determined scale, how a product will impact the environment when used by a customer.
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