Supply Chain in Toyota and Was-Mart

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- Strategic Alliances

Along with the expansion of the market, continuous specification of social division of labor and the fast development of the technology, people gradually start to realize that none of the independent economic entity, the retailer and supplier has the ability to utilize all the resources and take all the responsibilities. Instead, they can only be some parts of the whole supply chain. At the same time, due to the restrictions of cost, regulation and the limit of the flexibility, it is not desirable to depend only on internal expansion or external acquisition. Therefore, it will be ideal to develop a relationship between different enterprises in which they can share resources and advantages, thus forming a more flexible contract. Then the competition is to develop from between individuals to the value chains. (Geneva,1988)

Based on the general information shown in figure 2, we can find that the supply chain management is such a complex process that requires many parts’ cooperation.

Wal-Mart

Toyota

Goal

Every Day Low Price

Highest Quality

Lowest Cost

Shortest Lead Time

Supply Chain Strategy

VMI

RFID

…

Just in Time

PDCA

Kanban

Supply Chain Structure

Pull Mode

Pull Mode

Figure 2 Supply Chains of Wal-Mart & Toyota

(Kerber and Dreckshage, 2011, Lichtenstein, 2006, Iyer& Seshadri and Vasher, 2009)

In today’s new era, the relationship between retailers and suppliers is definitely in the mode of win-win. Both of them pursue interests, in other words, they “share the same breath”. And a totally new type of relation rises from this kind of strategic alliance, which is based on the competition between value chains.

- Basic concepts of strategic alliance

The prerequisite of strategic alliance in supply chain is that the cooperative businesses have complementary resources and technologies. Cooperation is a good way for them to finish the tasks. The goal is to sustain competitive advantage by developing such dynamic alliance partnerships.

When there is a need for the adjustment for strategic target because of the relative changes of interests and abilities, the members of the alliances can make effort to fortify the alliance or look for an alternative alliance partner to end the old ones. The strategic alliance between companies is based on competitive cooperation in the value chains. The formation of the alliance is determined by the combination of technological knowledge share and the management. By such collaboration, all the partners in the alliance can find their specific positions in supply chain and then perform particular functions. Often, it is not what needs to be done matters but who is the most appropriate one to do that counts. A successful alliance is able to help both of the members in the following ways: adding products values and technological strength, improving market access, strengthening operations, enhancing strategic growth and organizational skills as well as building financial strength. (Tjemkes, Vos& Burgers, 2012)

- Wal-Mart Strategic Alliances

As mentioned above, the fierce competition in the 21st century is not only between enterprises but supply chains. The reasons why Wal-Mart, who is one of the leaders in the retail industry, remains in an invincible position relies in its clear strategies and the strictly execution, particularly in the area of forming strategic alliance with Procter& Gamble (P&G). (Ireland& Crum, 2005)

Under the background that Wal-Mart had already successfully applied a lot of technologies in its supply chain, P&G and Wal-Mart formed the strategic alliance and started to develop a new type of cooperative relations, which is to be considered a great success in managing the supply chain in practice (Prahalad& Ramaswamy, 2000). In order to construct a new type of production and marketing relationship between producers and retailers, they two built a collaborative team to realize the information share also with the help of computer technology (Prahalad& Ramaswamy, 2000). In the form of alliance, P&G company can call the Wal-Mart’s sales and inventory data, thus developing an efficient plan for the production and delivery. Not only the financial management, but the comprehensive management of the entire business using high technologies.

As the main organizations of the cooperation, a collaborative team with 70 people who all specialized in finance, distribution, production and other functional areas was established and sent to Wal-Mart. According to the team’s plan, Wal-Mart started to manage the diapers supply chain, which is to say constructed a just-in-time automatic order-deliver system. With the aid of this kind of system, not only can P&G company quickly know the diapers inventory level in Wal-Mart logistics center, but timely know the sales, inventory, price and other data in all of Wal-Mart’s stores. Then the P&G company can work out the plan for meeting the market demand timely as well as the item-management of the Wal-Mart inventory. It is able to achieve continuous replenishment. At the same time, Wal-Mart is liberated from the onerous logistics operation. It can focus on its business activities and determine the quantities of goods timely with the help of P&G’s data. (Prahalad& Ramaswamy, 2000)

The specific operation process is described as followed and shown in figure 3. Each each of the Wal-Mart’s store sets up a safe stock level, once the current inventory level is lower than the level, the computers located in Wal-Mart will automatically make order with P&G’s diapers factory with the communication satellites. After receiving the order, P&G company will deliver the goods to stores and then implement inventory management as well. In order to be compatible with the shorten lead time of the whole goods production process,