walmart sustainability strategy(c): inventory management in seafood supply chain
TRANSCRIPT
WALMART SUSTAINABILITY STRATEGY(C):
INVENTORY MANAGEMENT IN SEAFOOD SUPPLY CHAIN
MANAS RANJAN TRIPATHY
MBA IB
500035420
INTRODUCTION
• BY 2007, WALMART WAS SOURCING APPROX. $750 MILLION IN SEAFOOD
ANNUALLY
• WALMART’S SEAFOOD BUSINESS WAS GROWING ROUGHLY 25% PER YEAR EVEN
• WORLDS FISHERIES OUTPUT HAD DECLINED TO 3% OF THE YEAR-1900
(ACCORDING TO PETER REDMOND)
• PETER REDMOND, VP FOR SEAFOOD AND DELI, BELIEVED SEAFOOD SUPPLY
CONTINUITY WAS THE SINGLE GREATEST LONG TERM ISSUE
• WALMART ADOPTED SUSTAINABILITY STRATEGY IN 2005:
SUPPLIED BY 100% RENEWABLE ENERGY
0% WASTE
SELL PRODUCTS THAT SUSTAIN PEOPLE AND THE ENVIRONMENT
• MSC PROGRAM WAS STARTED BY UNILEVER AND WORLD WILDLIFE FUND IN 1997
• PROVIDED CERTIFICATION STANDARDS BASED ON UN CODE OF CONDUCT FOR
RESPONSIBLE FISHING
• MSG-ACCREDITED CERTIFYING AGENCIES AUDITED FISHERY AND PROCESSOR
COMPLIANCE TO ENSURE PRODUCTS WERE MANAGED SUSTAINABLY FROM
“BOAT TO PLATE”
• DIRECT COST OF CERTIFICATION RANGED FROM $50000 TO $500000 AND WAS
PAID FOR BY BOAT OPERATORS OR PROCESSING PLANTS
• ON AVERAGE, CERTIFICATION TOOK 1-2 YRS FOR COMPLETION
MARINE STEWARDSHIP COUNCIL
WALMART AND MSC CERTIFICATION
• TO HELP ADDRESS SUSTAINABILITY ISSUE, WALMART STARTED WORKING WITH
MSC
• WALMART WANTED TO SELL 100% MSC CERTIFIED WILD-CAUGHT SEAFOOD BY
2011
• WALMART STARTED TO PUSH SUPPLIERS TO INCREASE NUMBER OF FISHERIES
AND PROCESSING PLANTS TOWARDS MSC CERTIFICATION
THE FISHIN’ COMPANY
• MAJORITY SUPPLIER OF FROZEN FISH FILLETS TO WALMART
• MANISH KUMAR, CEO EMBRACED MSC PROGRAM EVEN THOUGH IT ADDED
COMPLEXITY, TIME AND EFFORT WITHOUT INCREASING NEAR TERM PROFITS
• KUMAR FELT HIS EFFORTS WOULD SECURE AND EXPAND BUSINESS WITH
WALMART IN THE LONG RUN
• THE CASE DEALS WITH THE FISHIN’ COMPANY’S SALMON SUPPLY CHAIN
WILD PACIFIC SALMON• SALMONS SPAWN IN FRESH WATER (NEAR SHORES) AND MIGRATE TO SALT WATER
• SALMONS RETURN TO FRESH WATER TO SPAWN DURING MAY-SEPTEMBER
• IN ALASKA, WILD SALMON FISHING IS ALLOWED FOR A LIMITED SEASON UNDER
PERMIT, TO CERTAIN OPERATORS, BY NORTH PACIFIC FISHERY MANAGEMENT
COUNCIL
• THE LENGTH OF SEASON VARIED TO ENSURE A SUFFICIENT NUMBER RETURNED TO
SPAWN
• SEASON VARIED FROM A WEEK TO A COUPLE OF MONTHS
• PRICES COULD FLUCTUATE BY 30% IN A SEASON
• AVERAGE PRICE OF HEADED AND GUTTED WILD PINK OR CHUM SALMON WAS
AROUND $1/POUND
CURRENT PROCEDURE• HEADED AND
GUTTED FISH SENT TO CHINA
• THAW, FILLET, PACKAGE AND REFREEZE IN PLANT
• 50% CONVERSION
• EMPLOYEE WAGE IN CHINA- $200
• FISH FROM DIFFERENT PARTS AND TIME CAN BE PROCESSED
ALTERNATIVE
• PROCESS FISH IN ALASKA
• EMPLOYEE WAGE- $2000
• HIGHER PROCESSING COSTS DUE TO UNCERTAIN SUPPLY AND ONLY SPECIFIC
SUPPLY PERIOD OF ALASKAN SALMON
• PROCESSING DELAYS IN PEAK SEASON CAUSING DEGRADED QUALITY
• TRANSPORT COSTS TO MAINLAND US
FARMED SALMON FILLETS
• FARMED FROZEN SALMON FILLETS FROM CHILE
• SALMON COST- $3.00/POUND(FILLET)
• PROCESSING- $0.50/POUND
• TRANSPORT COST FROM SOUTHERN CHILE TO US- $0.20/POUND
• AVAILABLE YEAR-ROUND
• KUMAR PURCHASED LARGE QUANTITIES FOR LOWER FREIGHT CHARGES
ADDITIONAL COSTS (IN US)
• PORT TO COLD STORAGE- $0.01/POUND
• HANDLING CHARGE TO MOVE FISH TO WAREHOUSE- $0.01/POUND
• HOLDING FEE- $0.05/POUND/MONTH
• GROUND TRANSPORT FEE- $0.15/MONTH
• FISHIN COMPANY KEPT LARGE STOCK TO SUPPLY WALMART ON JUST IN TIME
BASIS
• FARMED SALMON WAS BOUGHT TO STORAGE (RATHER THAN DIRECTLY SENDING
PARTIALLY FILLED TRUCKS TO WALMART) TO REDUCE GROUND TRANSPORT
CHARGES
FISHIN COMPANY ADDITIONAL DATA
• WILD SALMON SOLD- 5 MILLION POUNDS
• RETAIL PRICE- $4.50/POUND
• FARMED SALMON SOLD- 10 MILLION POUNDS
• RETAIL PRICE- $6.00/POUND
• PRE TAX NET PROFIT FOR BOTH PRODUCTS- $0.05/POUND
DISCUSSION
•HOW SHOULD WALMART RATIONALIZE ITS
SEAFOOD SUPPLY CHAIN TO REDUCE COSTS
AND PROMOTE SUSTAINABILITY?