Leveraging blockchain and artificial intelligence in procurement and supply-chain management: A strategic approach for Walmart

This article was first published on Dr. Craig Wright’s blog, and we republished with permission from the author.

Introduction

Walmart Inc. (NASDAQ: WMT), headquartered in Bentonville, Arkansas, is the world’s largest retail corporation by revenue and employees (Bank Muñoz et al., 2018). Operating various formats of retail outlets in 27 countries under 55 different names, Walmart commands an extensive global supply chain. Its key product categories include groceries, clothing, home goods, and electronics, which are sourced from an array of domestic and international suppliers. This paper explores the critical uncertainties in Walmart’s procurement and supply management and offers recommendations for managing these uncertainties and enhancing supplier relationships.

1. Major uncertainties impacting procurement and supply management

As one of the largest multinational retail corporations, Walmart’s procurement and supply chain management activities are significantly influenced by various uncertainties. First among these are geopolitical disruptions (Yeung & Coe, 2015). Changes in trade policies, the introduction of tariffs, or the imposition of sanctions can drastically impact the cost and availability of goods. To maintain the efficiency and effectiveness of its supply chain, Walmart must continuously monitor and adapt to such policy changes.

Environmental concerns constitute another significant uncertainty. Given the global expanse of its operations, Walmart’s supply routes can be significantly affected by environmental disasters like hurricanes, floods, or fires. For example, a flood in a region where a key supplier is located could disrupt the production or shipment of goods, impacting Walmart’s ability to stock its stores and serve its customers (McKnight & Linnenluecke, 2019).

Economic fluctuations also pose a significant challenge. Consumers may reduce spending in economic downturns, decreasing demand (Greenwald & Stiglitz, 1993). Alternatively, during periods of economic growth, increased competition can drive up the prices of goods, affecting Walmart’s cost structure. In both scenarios, Walmart’s procurement and supply management activities must be agile enough to adapt to these changes, which might involve seeking more cost-effective suppliers or adjusting procurement strategies to match changing demand.

Another substantial uncertainty is the rapid advancement of technology. The retail industry is increasingly digitized, with e-commerce emerging as a significant growth area (Dekhne et al., 2019). As such, Walmart must ensure its procurement and supply management activities can keep up with these technological advancements. This might involve integrating digital tools to streamline procurement processes or data analytics to make more informed purchasing decisions.

Finally, shifts in consumer behavior can significantly impact Walmart’s procurement and supply management (Mason et al., 2020). An increasing number of consumers seek sustainable and ethically sourced products, so Walmart needs to adapt its procurement strategies accordingly. This might involve more rigorous vetting of suppliers to ensure they meet these sustainability and ethical standards or prioritizing suppliers who do.

In essence, the uncertainties Walmart faces in its procurement and supply management are multifaceted and complex, necessitating a dynamic and adaptable approach. As the world evolves, these challenges will likely persist and even intensify, underscoring the importance of effective procurement and supply management strategies in maintaining Walmart’s competitive advantage (Bank Muñoz et al., 2018).

2. Managing the impact of uncertainties

To mitigate the potential impacts of these uncertainties, Walmart could deploy various strategies that not only leverage its existing capacities but also embrace cutting-edge technologies such as blockchain (Tan et al., 2018). At the core of these strategies is establishing a diversified supply base and logistics network, offering Walmart flexibility in the face of geopolitical disruptions.

By sourcing from multiple regions, Walmart can hedge against changes in trade policies or sanctions that disproportionately impact certain regions. Similarly, in response to environmental crises, a diversified logistics network can ensure alternative supply routes, thereby maintaining the flow of goods.

Risk assessment and contingency planning are vital components of Walmart’s strategy (Sheffi, 2009). This proactive approach involves systematic identification and evaluation of potential risks and creating contingency plans to tackle these risks effectively. For instance, if a critical supplier is in a region prone to natural disasters, having a contingency plan, such as identifying alternative suppliers or increasing inventory levels, can provide a safety net, ensuring uninterrupted supplies.

Technological advancements, especially blockchain (Christopher, 2016), can offer
transformative solutions to Walmart’s procurement and supply management activities. Blockchain technology could provide a transparent and immutable ledger, ensuring traceability and verification of transactions along the supply chain. This could aid in making more informed purchasing decisions and enhance trust among all stakeholders. Walmart could also utilize cloud-based procurement solutions to streamline its operations, improve efficiency, and enable real-time collaboration with suppliers, improving response times and decision-making processes.

The rising consumer demand for sustainably and ethically sourced products calls for an intensified focus on sustainability in procurement activities. Blockchain can play a significant role here by providing visibility into suppliers’ practices and confirming adherence to sustainable and ethical standards (Ahmad et al., 2021). By prioritizing suppliers demonstrating solid commitments to sustainability and ethical practices, even if their prices are slightly higher, Walmart could enhance its brand image and earn long-term customer loyalty.

In the face of economic fluctuations, cost-effective strategies are paramount. Walmart could strengthen relationships with suppliers to negotiate better terms and conditions. Committing to longer-term contracts with suppliers, facilitated by blockchain smart contracts (Cong & He, 2019), could secure lower prices and guarantee supply, even during economic downturns. These smart contracts could automate transactions based on pre-set rules, reducing administrative costs and the likelihood of disputes.

As Walmart navigates the complexities and uncertainties inherent in the global retail sector, strategic planning and the adroit application of cutting-edge technologies like blockchain and artificial intelligence (AI) can help mitigate risks and maintain operational efficiency. Blockchain technology emphasizes transparency, traceability, and security and allows Walmart to manage risks associated with counterfeit goods, supply chain disruptions, and supplier compliance (Ahram et al., 2017). Blockchain’s immutable, decentralized ledger system ensures the authenticity of goods, tracks their journey through the supply chain, and records supplier adherence to agreed-upon standards and contracts. This level of visibility and accountability aids in managing uncertainties related to quality and delivery while also fostering trust between Walmart, its suppliers, and its customers.

Furthermore, integrating artificial intelligence with blockchain opens new avenues for managing risks and uncertainties (Charles et al., 2023). AI’s predictive analytics can analyze blockchain data to forecast potential supply chain disruptions, giving Walmart a proactive stance in managing these risks. For instance, machine learning algorithms can use data stored on the blockchain to predict possible delivery delays or identify suppliers that pose a risk due to past non-compliance issues.

AI can also optimize inventory holding by predicting demand patterns, helping Walmart avoid stockouts and overstocks, which pose financial risks. Additionally, AI’s capacity to analyze vast amounts of data can help Walmart anticipate shifts in consumer behavior, market trends, or regulatory changes, thereby equipping the company to respond effectively and timely, reducing the risk of obsolescence or non-compliance (Natanelov et al., 2022).

Combining blockchain and AI can create a robust risk management framework for Walmart (Kashem et al., 2023). Blockchain provides a trustworthy record of transactions and movements across the supply chain, while AI analyses this data to predict potential risks and offer strategic recommendations. This fusion safeguards Walmart’s procurement and supply management activities and ensures a consistent supply of goods, meeting customer needs and expectations. Effectively managing uncertainties through these advanced technologies reinforces Walmart’s competitive position in the retail sector, enabling it to deliver superior customer value and maintain operational excellence, even in the face of changing market dynamics and unforeseen disruptions (Deiva Ganesh & Kalpana, 2022).

3. Procurement and supply management practices

Effective procurement and supply management practices are pivotal in an increasingly complex global retail industry. Blockchain, a distributed and transparent ledger system, can augment these practices, enhancing Walmart’s competitiveness significantly. Central to this strategy is fostering robust, collaborative relationships with suppliers where mutual objectives are intertwined. Blockchain’s transparency and traceability could open new avenues for collaboration, extending from joint product development initiatives to shared sustainability goals, thereby boosting product quality and overall operational efficiency (Tan et al., 2018).

Blockchain tokens can revolutionize Walmart’s supply chain by providing real-time visibility and traceability (Alkhader et al., 2020). These digital tokens represent physical assets and can be tracked throughout the supply chain, from the raw material stage to the end consumer. This can help Walmart ensure product authenticity, monitor product movements, and identify bottlenecks or inefficiencies in the supply chain, thereby reducing losses associated with counterfeits, theft, and inefficiencies. This kind of visibility can also reassure consumers about the origin and quality of their purchases, enhancing Walmart’s brand image and trustworthiness.

A vital aspect of these practices is regular communication and transparency, an area where blockchain can provide substantial benefits. Blockchain can facilitate real-time data sharing across the supply chain, leading to proactive problem-solving and idea exchange. This level of transparency also allows Walmart to share its business strategies and expectations with suppliers, helping them align their operations more effectively (Bertino et al., 2019).

Monitoring supplier performance continuously and providing constructive feedback is another critical area where blockchain can play a transformative role. With blockchain, Walmart can create an immutable, accurate record of supplier performance indicators such as quality, delivery, cost, and innovation (Ozdayi et al., 2020). The clarity provided by this technology enables suppliers to understand their areas of improvement and align their goals with those of Walmart. Additionally, Walmart can launch capacity-building initiatives, such as training programs on blockchain technology, to improve supplier capabilities and their comfort with adopting this technology.

Furthermore, the motivational aspect of supplier management can also be enhanced through blockchain. Long-term contracts can be executed as smart contracts on a blockchain, providing suppliers security and demonstrating Walmart’s commitment to the relationship (Natanelov et al., 2022). Similarly, performance-based incentives can be automated through blockchain. In recognition of exceptional performance or innovation, suppliers can be rewarded through tokenized incentives on the blockchain platform.

Moreover, introducing Central Bank Digital Currencies (CBDCs) into Walmart’s payment system could reduce transaction costs and simplify cross-border payments. This digital currency, governed by a country’s central bank, can streamline the payment process, reduce transaction times, and lower business costs (Kim et al., 2022). Using CBDC can also reduce the reliance on traditional banking systems, minimizing the risk of payment delays and adding more value to Walmart’s procurement and supply management activities.

Through these blockchain-powered practices, Walmart can establish a harmonious relationship with its suppliers, aligning with its strategic goals, reducing losses, and reinforcing its competitive position. The combination of blockchain technology and the potential use of CBDC will revolutionize Walmart’s procurement and supply management, driving cost efficiency and enhancing transparency and traceability (Tan et al., 2018).

4. Supplier evaluation and selection process

The supplier evaluation and selection process at Walmart requires careful consideration of numerous factors, including industry context, the company’s strategic priorities, the nature of the supply market, and the characteristics of its supply network. Since Walmart’s operational model hinges on offering low-cost products, its supplier selection process is geared toward identifying suppliers who consistently deliver high-quality goods at competitive prices (Ross, 2008).

However, the dynamics of the retail industry and consumers’ evolving expectations call for a more nuanced approach. The focus should be on cost, reliability, and strategic fit. This means selecting suppliers whose business strategies, values, and goals align with Walmart’s, which can lead to more collaborative and mutually beneficial relationships (Ross, 2008).

Furthermore, sustainability has become a critical priority for many consumers and businesses (Bateh et al., 2014). This warrants a greater emphasis on the sustainability practices of suppliers in the selection process. Suppliers who demonstrate firm commitments to sustainability, such as those with responsible sourcing and waste reduction practices, can help Walmart cater to the growing consumer demand for ethically sourced and environmentally friendly products.

Artificial intelligence (AI) technology is at the forefront of transforming the retail industry, driving new efficiencies and competitive advantages. Suppliers who adeptly leverage these advancements can provide Walmart with a strategic edge in a highly competitive market, enhancing every aspect of the supply chain, from manufacturing to logistics (Deiva Ganesh & Kalpana, 2022).

AI offers unparalleled opportunities to map the movement of goods and services, making the supply chain more transparent and efficient (Deiva Ganesh & Kalpana, 2022). Suppliers using AI can use predictive analytics to forecast demand accurately, enabling them to adjust production in real time and minimize waste. AI can also analyze a wealth of data from various sources to identify trends and patterns, thereby predicting potential disruptions in the supply chain. By pre-emptively recognizing these disruptions, Walmart can take proactive measures to mitigate any adverse impacts, thereby maintaining a consistent supply of goods.

Artificial intelligence can also optimize supply holding, reducing the costs associated with overstocking or understocking. Machine learning algorithms can analyze historical sales data and variables such as seasonality, promotional activities, and economic indicators to accurately forecast future sales (Punia & Shankar, 2022). This allows for precise inventory management, ensuring Walmart has the right stock at the right time. Efficient inventory management reduces costs and enhances customer satisfaction by avoiding stockouts and ensuring products are available when consumers want them.

AI can also automate and optimize logistics, a critical area for a global retailer like Walmart. AI-powered logistics solutions can determine the most efficient routes, considering factors like traffic, weather conditions, and fuel costs, to ensure the timely and cost-effective delivery of goods (Punia & Shankar, 2022). Moreover, suppliers equipped with AI capabilities can support Walmart in offering more innovative products to its customers. AI can analyze consumer behavior and preferences to identify gaps in the market or predict upcoming trends, guiding the development of new, highly targeted products.

Suppliers who integrate AI into their operations can provide a significant competitive advantage to Walmart. From improving efficiencies in production and logistics to enhancing product offerings based on customer preferences, AI-powered suppliers can help Walmart navigate the complexities of the retail industry (Tarallo et al., 2019). Through these technology-driven partnerships, Walmart can stay at the forefront of retail, meeting and exceeding customer expectations while improving its bottom line.

To enhance the overall effectiveness of its supplier evaluation and selection process, Walmart could consider adopting a comprehensive supplier scorecard linked to a machine learning system (Guan et al., 2023). This would involve assessing potential suppliers on a range of criteria, not just cost and reliability but also financial health, operational efficiency, sustainability efforts, and capacity for innovation. By doing so, Walmart could ensure a more holistic assessment of suppliers, leading to better-informed selection decisions that align with its strategic goals and the evolving demands of the retail industry.

Conclusion

As a titan in the global retail industry, Walmart’s procurement and supply chain management practices are decisive in shaping its performance and competitive standing (Bank Muñoz et al., 2018). The company faces many uncertainties, including geopolitical disruptions, environmental issues, economic fluctuations, technological advancements, and evolving consumer preferences. Such complexities can significantly impact Walmart’s procurement and supply chain activities. To navigate such uncertainties, Walmart needs to implement a multifaceted approach, including diversifying its supply base, adopting robust risk assessment and contingency planning, embracing technological advancements, focusing on sustainability, and establishing cost-effective strategies.

Evaluating the supplier selection process from the industry context perspective, Walmart’s strategic priorities, the supply market, and supply network characteristics reveal opportunities for further enhancement. While cost efficiency and reliability are essential, expanding the criteria to include strategic alignment, sustainability, and technological capabilities of suppliers can optimize the selection process. Incorporating a comprehensive supplier scorecard and assessing a wider array of criteria like financial health, operational efficiency, sustainability efforts, and innovation capacity could yield more holistic evaluations.

For Walmart to optimize its procurement and supply management, it needs to continuously adapt and innovate, catering to the dynamic industry landscape and its customers’ evolving needs and expectations. By managing uncertainties effectively, strengthening supplier relationships, and refining its supplier evaluation and selection process, Walmart can bolster its supply chain, enhancing its competitiveness and positioning itself for long-term success in the global retail industry.

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