Supplier Stakeholder Ethics An integral part of Walmart’s operational efficiency is its ability to partner with suppliers in order to purchase merchandise and reduce costs of packaging and shipping. R

Supplier Stakeholder Ethics

An integral part of Walmart’s operational efficiency is its ability to partner with suppliers in order to purchase merchandise and reduce costs of packaging and shipping. Review the Walmart Case Study in our text book (pages 408-409) and identify at least 2 issues that may negatively impact relationships with supplier stakeholders. Be specific.

Here’s the Case Study:

Relationships with Supplier Stakeholders

Walmart achieves its “everyday low prices” (EDLPs) by streamlining the company. Well known for operational excellence in its ability to handle, move, and track merchandise, Walmart expects its suppliers to continually improve their systems as well. Walmart typically works with suppliers to reduce packaging and shipping costs, which lowers prices for consumers. Since 2009, the company has worked with The Sustainability Consortium, an association of businesses that helps its members achieve sustainability goals, to develop a

measurement and reporting system known as the Walmart Sustainability Index (discussed in further detail later in this case). Among its many goals, Walmart desires to use the Sustainability Index to increase the sustainability of its products and create a more efficient, sustainable supply chain.

In 2008 Walmart introduced its “Global Responsible Sourcing Initiative,” a list pro- viding details of the policies and requirements included in new supplier agreements. In 2012 then-CEO Mike Duke expanded upon these initiatives to set improved goals for increasing the sustainability of the company’s supply chain. He highlighted four main sustainability goals: (1) by 2017, purchase 70 percent of merchandise sold in U.S. Walmart stores and Sam’s Clubs from global suppliers that use the Sustainability Index to assess and share information about their products; (2) use the Sustainability Index as a model for U.S. private brands; (3) apply new evaluative criteria for key sourcing merchants to encourage sustainability to become a more important consideration in buyers’ daily jobs; and (4) donate $2 million to fund The Sustainability Consortium.1*If fully achieved, these goals will increase the sustainability of Walmart suppliers significantly. Company leaders stated Walmart was moving into “phase three” of its sustainability plan, which will involve “reshaping] entire systems” toward achieving sustainability goals. Further details have not yet been revealed.

Some critics of Walmart’s approach note that pressure to achieve its standards will shift more of the cost burden onto suppliers. When a supplier does not meet Walmart’s demands, the company may cease to carry that supplier’s product or, often, will be able to find another willing supplier of the product at the desired price.

Walmart’s power over its suppliers stems from its size and the volume of products it requires. Many companies depend on Walmart for much of their business. This type of relationship allows Walmart to significantly influence terms with its vendors. For example, Walmart generally refuses to sign long-term supply contracts, giving it the power to easily and quickly change suppliers at its discretion. Despite this, suppliers will invest significantly into long-term strategic and business commitments to meet Walmart demands, even without any guarantee that Walmart will continue to buy from them. There are cor- responding benefits to being a Walmart supplier; by having to become more efficient and streamlined for Walmart, companies develop competitive advantages and are able to serve their other customers better as well. Numerous companies believe supplying Walmart has been the best thing that has ever happened to their businesses. However, many others find the amount of power Walmart wields to be disconcerting.

The constant drive by Walmart for lower prices can negatively affect suppliers. Many have been forced to move production from the United States to less expensive locations i…

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