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WALMART SUSTAINABILITY STRATEGY(C): INVENTORY MANAGEMENT IN SEAFOOD SUPPLY CHAIN
Walmart sources over $750 million in seafood annually and its seafood business was growing 25% per year. However, global fisheries output had declined significantly. To address sustainability issues, Walmart adopted a strategy in 2005 and started working with the Marine Stewardship Council (MSC) to certify its seafood suppliers. The Fishin' Company, a major supplier of frozen fish fillets to Walmart, embraced MSC certification to secure its long-term business relationship with Walmart, despite the added complexity and costs. The case examines the Fishin' Company's salmon supply chain and alternatives for processing wild Alaskan salmon versus purchasing farmed salmon fillets from Chile, which are available year-round.
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WALMART SUSTAINABILITY STRATEGY(C): INVENTORY MANAGEMENT IN SEAFOOD SUPPLY CHAIN
- 1. WALMART SUSTAINABILITY STRATEGY(C): INVENTORY MANAGEMENTIN SEAFOOD SUPPLY CHAIN MANAS RANJAN TRIPATHY MBA IB 500035420
- 2. 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
- 3. • MSC PROGRAMWAS 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
- 4. WALMART AND MSCCERTIFICATION • 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
- 5. 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
- 6. 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
- 7. CURRENT PROCEDURE • HEADEDAND 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
- 8. ALTERNATIVE • PROCESS FISHIN 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
- 9. 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
- 10. ADDITIONAL COSTS (INUS) • 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
- 11. FISHIN COMPANY ADDITIONALDATA • 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
- 12. DISCUSSION •HOW SHOULD WALMARTRATIONALIZE ITS SEAFOOD SUPPLY CHAIN TO REDUCE COSTS AND PROMOTE SUSTAINABILITY?