Walmart’s Grocery Pickup Operational Excellence

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Introduction

In an organization, operational excellence is the execution of organization’s business system with more prominent consistency and productivity than the opposition. It encourage the usage of the practices and work process required to accomplish what the business requires to be effective.

An organization enforces the most effective strategy that has minimal operational risks, low operation costs, and enhanced revenue relative to its rivals. Particularly, in retail industry each business sector operational excellence is important to achieve overall business success. Further, operations excellence can be achieved via various business parameters, starting with top management’s objectives on quality, dependability, cost, reducing errors, and minimizing risk, and translating them within the organization’s each business operations would result achieving operational excellence.

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The online sales and related business of retail industry, like any other e-commerce market, is very competitive and challenge. In effect, players in the retail industry strive to enforce operation excellence as a way of gaining leverage and remaining ahead of competitors. One of the firms operating within this industry is Walmart?® Inc. Walmart?® was founded in 1962 and established on 31 October 1969, headquarters in Bentonville, Arkansas, and since then, the company has continued to dominate the retail industry and its global presence in 28 countries with 11,718 stores and clubs is a virtuous indication of how the company has remained successful amidst the competition. In effect, the objective of the research is to review the manner in which operational excellence resulted from store/Grocery Pickup strategy has facilitated Walmart’s success within retail industry, and providing recommended solutions to address challenges faced in the Grocery Pickup strategy.

Background

It is important to for a firm/organization to have an efficient operations process system in place that can reduce cost, higher capital utilization, and dependability, which in turn could be a basis for building a strong operational skills for future innovation and being symbol for quality and successful.

Walmart?® online sales is a small slice of its overall business, but it showed a significant revenue growth of online sales of 33% compared to store sales of 2.1% in the first quarter 2018 (Meyersohn, 2018). Online sales is an encouraging sign for Walmart?® since its introduction and it helped the digital growth of Walmart?® revenue increase by 1.4% YoY to $117.5 billion for the first quarter 2018.
The applicable theory in the study of operational experience is the Goldratt’s Theory of Constraints as postulated by Costas et al. (2015). In order to examine the impact of operations excellence on organizational success, the model offers a framework that can be applied in outlining the most integral factors that limit attainment organizational goals in an effort to address the constraints limiting the firm’s performance. In this regard, the theory offers powerful tools regarding the approach that organizations can implement to realize operational excellence.

The Walmart?® concept of Grocery Pickup is a part of online/digital sales strategy, and has been selected for the current analysis as an organization implementing operational excellence strategies across its US network of stores and clubs. As the company expands to new regions across the world, the operational strategy will be aimed at making the firm more competitive.

Customers today are looking for more convenience, choice and savings, and Walmart?® offering Online Grocery Pickup service for fast, easy way of shopping for grocery items.

According to Oakland (2014), operation excellence is described as an outstanding practice that the organization implements to achieve outstanding results. The practice of operational excellence has been built around a number of concepts that collectively are geared to achieving organizational success. These concepts include results orientation: focus on customer service delivery, leadership, and consistency of purpose, effective management of processes and facts, people engagement and development and continuous learning. Other factors that are embodied in operation excellence include innovation and improvement, facilitating continuous learning developing partnerships and being public responsible. Organizations embrace operations excellence as an approach for achieving organizational strategic objectives and clients’ expectation. Organizations thus implement the concept of operational excellence by integrating leadership and teamwork, as well as problem-solving as measures of constant improvement throughout the organization as well as addressing the welfare of employees and meeting the demands of clients. The idea behind operational excellence is to maximize the existing processes within the organization in order to give the company leverage over other competitors in the retail industry.

Statement of the problem

In the wake of increased competition on the global scale and global downturn in the economy, many businesses have been compelled to review their strategy in order to boost their efficiency to survive. Measures such as cost-cutting and efficiency strategies are some of the approaches that firms are implementing to counter the inherent challenges. Operational excellence offers a viable choice for domestic and global companies to gain a competitive edge and survive in the industry. Nonetheless, not many firms have successfully implemented the practice, mostly because of the lack of skilled personnel to facilitate the process but, Walmart?® has implemented operational efficiency in its online sales strategy, and identified most convenient way of providing grocery store via online shopping, this service may help customers to get fresh products like diary and meat produces as store pickup which may not available at online shopping.

Walmart?® want to explore this concept of Grocery Pickup at their stores for online shopping customers, and integrate this service of online selling in to their traditional brick-and-mortar practice as a way of attaining a competitive edge. Most studies that have been facilitated with regard to operational excellence have mainly focused on online sales compared to in store sales and the inclusion of total quality management in organizational processes. The knowledge gap that the current study seeks to address Grocery Pickup service operational challenges and that can be integrated with Walmart’s overall business model to attain success. Mainly, picking groceries proficiently presents numerous difficulties uncommonly in a retail location condition the same number of demonstrated distribution center picking efficiencies can’t be embraced because of absence of automation, merchandise driven designs and the idea of the requests. The picking procedure likewise has a tendency to be manual expanding satisfaction costs as well as constraining income openings making the picking procedure a bottleneck to the quantity of requests that could be guaranteed to clients on the site.

Research Objectives

The primary objective of this research is to incorporate the concept of automation in store pickup services thereby increase of online customer base and to determine the change in their process performance. Since this paper primarily uses the findings of the past studies on this topic, it will also strive to bridge the gaps in the existing literature on store pickup. Lastly, it will demonstrate how competitors of Walmart?® using store pickup services as an additional revenue to ensure improvement in their online sales process.

Main Research Objectives

The objectives that the research seeks to achieve are as follows:

i. To establish the operational excellence strategies on Walmart’s Grocery Pickup service

ii. To examine the impact of operational excellence in Walmart’s performance and competitiveness

iii. To establish and suggest operational strategies that Walmart?® can implement to realize organizational efficiency w.r.t to store pickup and enabling the Walmart’s online sales business to survive the competitive business setting

Methodology

The methodology section covers the approach that was applied in the research. Mainly it incorporates a blueprint that facilitated the collection, measurement, and analysis of the data. Aspects covered include the research design, the target population, the research sample, and methods applied in the analysis.

The Research Design

The study conducted relied on various articles describes store pickup options available as a part of their online sales through their website. In regard, we focused on stores that have store pickup services and their challenges as a sample so that the outcome could be generalized to the overall business process in relation to store pickup services. The research is based on qualitative research, whereby data was collected from the selected organizations that has store pickup services offered as a part of their online sales. The case design approach adopted in the research attempted to define the subject by establishing a profile to denote a group of problems. Mainly, this was achieved through the collection of data to show the various process available in store pickup services in selected companies. The approach was considered ideal for the research as it facilitated a reflection of the right state of affairs regarding the implementation of operational excellence at Walmart?® Grocery Pickup services without deviating from the aim of the research.

The sample

Home Delivery of basic needs is by and large more intricate than transportation books, hardware, toys, attire and different things. The essential reason being nourishment is transient. Liquefied frozen yogurts and broke eggs negatively affect edges as well as think about inadequately the client encounter. Furthermore, the last mile adds to about 33% of the general inventory network costs. Given these difficulties Walmart?® chose to pilot crowdsourced conveyance in one of its business sectors. The supply chain group assembled a last mile conveyance stage to empower simple coordination with crowdsourced conveyance accomplices.

Picking perishables goods successfully makes various troubles demonstrated the same number of distribution center picking efficiencies can’t be embraced because of absence of robotization, merchandize driven designs and the idea of the requests. The issue of picking improvement handles two interlacing choice focus conveying orders among groups and deciding a cluster picking course for each clump with the end goal to limit the aggregate satisfaction time for all requests.

Limitations

Grocery shopping is a normal assignment, it is generated from a need and not desire. There are various limitations to this study due to limited players in the store pickup service providers. Walmart?® is one of the largest retailer in the U.S.A, with many outlets across the globe. In this regard, the business dynamics across the regions of operations vary significantly. Therefore, it will be challenging selecting a representative sample that will truly reflect the operational efficiency factor from a general outlook. Notably, this challenge can be overcome by choosing a case study, whereby the focus of the research will be within a single region such as the United States only. This approach is ideal especially when Walmart?® outlets in one region will be selected to feature the representative sample. The second limitation is the time and financial resource constraint that researcher will face in conducting the research. This challenge can be overcome by scheduling the research activities within the given time period to ensure that the research is conducted within the projected time to avert delays or changes in the project scope, as well as additional costs.

The limitations of Walmart?® Grocery Pickup that the research seeks to achieve are as follows:

i. There is a $30 minimum purchase for all Walmart Grocery orders.

ii. Substitutions may cost Walmart as they need to substitute unavailable product with available one priced at higher, for example, if a customer ordered a 4 pack of coke, and Walmart?® is out of stick for 4 pack then they substitute with available 6 pack coke.

iii. Coupons and rewards use may not be available with all Walmart?® stores

Research findings and Analysis Walmart?®

Online grocery shopping and pickup offering is an attract service for Walmart customers due to its accessibility and availability in more than 1,000 stores in the U.S.A.

How It Works: Ordering (Walmart’s Fact sheet, 2015)

Customers visit Walmart.com/grocery and enter their zip code.

Customers can then browse the Walmart Grocery assortment online, which carry the same prices as local Walmart stores.

During checkout, customers choose a designated store to visit and select a timeslot to pick up their order.

How It Works: Free Pickup (Walmart’s Fact sheet, 2015)

Orders are fulfilled from our local stores by Walmart personal shoppers. Customers will receive a phone call to let them know when their order is ready and the specific location at the store to pickup (usually in front of or at the side of the store).

Once customers arrive at their pickup location, there will be reserved parking spaces for online pickup customers and a designated number to call in order to alert an associate in the store. That associate will quickly retrieve the prepared order and load it into the customer’s car.

Same-day pickup is available orders placed by 2 a.m. will be available for pickup from 8 a.m. and orders placed by 10 a.m. will be available from 1 p.m.

Pickups can be scheduled seven days a week, up to three weeks in advance.

According to Slice Intelligence (2017), Walmart Grocery and Sams’s Club’s US e-commerce sales together grew around 63% YOY in second quarter 2017, resulted from online and store pickup services.

Target?® BOPIS

Target?® introduces BOPIS (Buy Online Pickup In Store) services in 2013 to support their omnichannel strategy to benefit their customers include saving on shipping costs and save time. There is a 15% increase in Target?® online sales after launching BOPIS in 2013, and the volume of online orders for store pick-up grew by 50% in 2016 (). As per our research, Target’s order pickup facilitates 90% of orders are ready for pickup within an hour, and make sure there is a less chance of products being out of stock.

Kroger?®

Kroger?® has ClickList pickup services provide similar pickup services like Target?® and Walmart?®, and it gained its customers experience after introducing their ClickList pickup service. Kroger?® had research collaboration with University of Cincinnati and working on innovative techniques to improve store pickup services.

Challenges

Our research findings on store pickup services reveals that, most of store pickup services has similar challenges related to automation including the prospects of added payroll for employees handling orders and the additional workload in stores, inventory needs, adapting to new fulfillment procedures, queries about existing technology would handle new inventory needs worries that filling online/web orders could reduce store stock levels, and order prioritization for online customer orders.

Store Pickup Challenges Automation Inventory Needs (Real-time) Handling Orders/ Priority (Manual) Added Payroll (Manual)
Target?® No No Yes Yes
Kroger?® No No Yes Yes
Walmart?® No No Yes Yes

The other challenges that store pickup services face from the website design and customer interaction with online ordering, for example, item not found’ rate is higher than projected due to vast list of customer choice that may or may not available which results 50% of cancellation of online orders. There are many reasons that surfaced this cancellations like, some stores has limited capacity of maintaining stock/inventory in the warehouse. Another, biggest challenge that most of companies’ faces from customer service and coordination with online order system with backend engine, specifically, integrating inventory systems with order pickups and prioritization.

Recommended Solutions

Walmart leverages technology to help support their store pickup services business strategy and uses an in-house developed supply chain visibility tools to facilitate communication and collaboration with inventory management. According to Arnold and Fernie (2000), Wal-Mart invested approximately $4 billion in developing in-store technologies.

Automation in store pickup using robots could leverage Walmart?® to speed up store pickup service. Walmart Labs is still researching this innovative to reduce manual intervention and save cost from labor and order handling process. We recommend the use of Robotics due its exceptional capability in managing in-store inventory management with online orders and prioritization, and thereby improving operational excellence in Walmart’s Grocery Pickup services.

In addition, Robotics can also help in identifying items within store and reduced repetitive effort of visual inspection by Walmart associates within the store, for example shelf scanning robots can place missing item and place at designated shelf location.
Use of advanced technologies in inventory management can improve current store pickup services, for example, use of Stitch Labs in the current processes by automating, centralizing, and streamlining multichannel inventory and operations into a single platform, provides the visibility and control over online orders and prioritization.

Retailers lose $1.75 trillion annually due to the cost of overstocks, out-of-stocks, and returns.

References

  1. Costas, J., Ponte, B., de la Fuente, D., Pino, R., & Puche, J. (2015). Applying Goldratt’s Theory of Constraints to reduce the Bullwhip Effect through agent-based modeling. Expert Systems with Applications, 42(4), 2049-2060.
  2. Digital sales jumped 33% last quarter. (n.d.). Walmart’s online sales grow 33%. Retrieved from https://money.cnn.com/2018/05/17/news/companies/walmart-stock-jet-amazon/index.html
  3. Oakland, J. S. (2014). Total quality management and operational excellence: text with cases. Routledge.
  4. Walmart. (september 2015). FACT SHEET WALMART ONLINE GROCERY PICKUP [Brochure]. Author. https:// news.walmart.com/reporter/
  5. Timmermann, M. (2018, September 25). Kroger Grocery Pickup: What you need to know before your first order. Retrieved from https://clark.com/shopping-retail/online-shopping/kroger-savings-tip-clicklist-grocery-pickup/
  6. Briggs, B., Evans, K., Zaroban, S., Brohan, M., & Lindner, M. (2017, March 03). Fulfilling web orders from stores wasn’t always easy for Target. Retrieved from https://www.digitalcommerce360.com/2016/06/14/fulfilling-web-orders-stores-wasnt-always-easy-target/
  7. Arnold, S. J. & Fernie, J. (2000). Wal-Mart in Europe: Prospects from the UK.
    International Marketing Review, 17(4/5), 416-432.

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