Different products require different supply chains and unique logistics systems. Even in the same industry, a company's unique strategy can require that you design a different kind of logistics system. And don't forget, these may change over time. The unexpected can derail even the best supply chains. To compete and win, you have to take risks. But, you can't afford to be blind to the risks. You have to consider and plan for the contingencies, constantly asking,"What if?"A resilient logistics system can help you bounce back when rivals can't. As you read through the case study for this assignment, consider the risks that Walmart must take to maintain competitive in the marketplace.

Task

Read the case study below and answer the following questions:

Turbulence in Retail: Dealing with Changing Shopping Habits

How many different ways do you buy products? Perhaps, you go to a store to buy them or you shop online and have them delivered to your home. Maybe, you shop online and have the items delivered to the nearest store; or you may prefer to bypass the retailer altogether and buy direct from the product's manufacturer or distributor.

The alternatives to shopping at a conventional brick-and-mortar store are presenting challenges to traditional retailers and their established networks of distribution centers and store locations. The prevailing strategy until recently for major retailers, like Walmart and Target, was to build really large "super stores" in the outer edges of urban areas. Each megastore covers nearly 200,000 square feet and stocks almost 150,000 different items (or stock-keeping units, SKUs). The typical logistics provision for such a store is for vendors to ship direct in full truckload quantities, or to ship full truckloads to the nearest distribution center, which then ships an assortment of goods to the store location. This high-volume flow of goods supports Walmart's Everyday Low Price (EDLP) market strategy, which has supported the company's rapid growth.

Despite 30 years of resounding success with the "supercenter" store format, and almost 3,600 of these stores in operation, Walmart encountered declining foot traffic and same-store sales in 2014. This new reality pointed to the need for changea need to diversify its ability to reach customers. The company announced in late 2014 that it would stop building supercenter stores in favor of smaller formats, including its Neighborhood Market grocery stores typically found in urban areas. These stores are approximately one-fifth the size of a supercenter and house "only" about 26,000 SKUs.

But that does not mark the end of the challenges for Walmart. Recall the different ways that shoppers buy products today. eMarketer projections show that about 4.28 trillion of retail sales worldwide were expected to occur online in 2020. This includes a pandemic surge of 27.6% over 2019 (see chart). Further, with each year's growth in online sales, we see a decline in foot traffic in conventional brick-and-mortar stores. This spells trouble for retailers relying on that foot traffic to generate sales.

Retail E-commerce Sales Worldwide

Although online grocery represented a mere 3.5% of the market in 2014, it is expected to reach 21.5% of grocery sales in 2024. The 2020 pandemic surge raised online sales by an amazing 43%. More shoppers sought an alternative to going into store during the pandemic. Most of this surge came from shoppers who had never purchased groceries online before the COVID-19 outbreak.1

Walmart determined that it would approach the consumer market through multiple formats, called omni-channel retailing. "Omni," meaning "all," suggests that Walmart and its chief competitors will attempt to be competitive in various delivery formats at once. This means that consumers can access products by any means they wish: walk-in and shop, online with store pickup, or home delivery. Increasingly, retailers are trying to catch up to the ways that consumers want to shop: Via mobile technologies, choosing products and the way they want to acquire the product on-the-fly.

Importantly, Walmart had already begun to experiment with a wide assortment of fulfillment, pickup, and delivery options before the pandemic. This experimentation proved lucrative when the pandemic struck. Walmart's CFO noted: "I think online grocery is a trend that will continue. I think people learn to love that online grocery service and we're right in the perfect place to serve that customer."

It all adds up to dramatically different retail environment where consumers rule.

Questions

1. Do the changing consumer shopping habits described in the case suggest a change in warehousing strategies? If so, how might Walmart distribution and fulfillment strategies change?

2. In recent years, Amazon.com has added a small number of retail stores to their array of retail formats and acquired Whole Foods in 2017. What do you think of Amazon's attempt to compete with Walmart in its traditional retail game? Discuss this development.

3. Think about the changing consumer shopping habits presented in the case. How might they affect smaller competitors to Walmart that lack the buying power and market presence of the behemoth retailer? How might these retailers adapt to the changing consumer shopping trends? Would the market, distribution, and fulfillment strategies have to change? If so, how?