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?