Question

Question 1 :

What are some ways that a firm such as Wal-Mart benefits from good sourcing decisions?

Question 2:

What factors lead Wal-Mart to own its trucks although many retailers outsource all their transportation?

Question 3:

Most firms offer their sales force monetary incentives based on exceeding a specified targets. What are some Pros and Cons of this approach? How would you modify these contracts to rectify some of the problems?

Answer 1

Solution 1:

Strategic sourcing is exceptionally critical for organizations with the scale and footprint of WLMT. Following are the benefits:

1) Better Profits:

WLMT's competitive advantage is low prices, which is due to its efficient strategic sourcing model. Every organization wants to attain profits. With strategic sourcing activities, organizations like WLMT can offer customers a massive bouquet of products and services at the lowest prices. The savings from procurement operations urare passed on to the end customer.

2) Managing Risks:

Managing business risks is critical in today's uncertain global economy. Thus there is a need to evaluate the risk associated with their categories, expenses, and suppliers. In strategic sourcing, WLMT evaluates its suppliers based on quality risks, financial risks, supply risks, and support services. Based on the risk analysis, they take adequate measures to avoid the risks mentioned above.

3) Scope For Improvement:

Strategic sourcing offers a continuous range of improvement to companies like WLMT, which eventually improves the company's health and market value.

4) Operational Excellence:

Strategic sourcing allows businesses to focus on the long-term future while moving away from the day-to-day rigor that can consume time and effort. Strategic sourcing helps firms prepare for the future for different scenarios, both good and bad.

5) Strong Relationships With The Suppliers:

Companies like WLMT build strong relationships with global suppliers to get the most out of their procurement activities. Strategic sourcing lays stress on supplier interactions, which is essential when the list of suppliers is extensive.

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Solution 2:

By owning its fleet of trucks, WLMT allows its suppliers fo focus on their core expertise, manufacturing. Suppliers do not have to worry about the logistical challenges. Secondly, by managing their fleet, WLMT can keep its freight costs lower than what it would have costed them otherwise. They have introduced innovation such as the Green fleet and RFID to keep costs low and visibility maximum. Thirdly, it reduces WLMT's dependency on freight carrier companies.

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Solution 3:

Following are some of the benefits associated with a monetary incentive program:

• It is a direct and straightforward approach to influence specific behaviors.
• It is a standardized model where everyone gets paid, and most are satisfied.
• Monetary incentives appeal to employees more than non-monetary carrots.
• Financial incentives expedite short-term goals, such as increasing productivity.
• Fair system where extra effort is tied to spare money.

Following are some of the limitations associated with a monetary incentive program:

• Over time, an incentive program becomes an entitlement rather than a motivator.
• Without a proper framework in place, it may result in undesirable outcomes such as revenue at a low level of profitability, which is not beneficial.
• Monetary incentive programs can become de-motivating when an employee misses a ceiling/level by little.
• Such programs can result in unnecessary competition among team members, which can lower overall team performance.
• Monetary incentives become less effective over time.

Most companies take a balanced approach where they combine monetary incentives with relevant variables such as revenue at a certain level of profit. At the same time, it is also good to have non-monetary incentives in place, such as reward & recognition, so that employees have a sense of fulfillment.