Kmart's Supply Chain Management example essay topic

Kmart, once the leader in the discount store industry, has found itself surpassed by Wal-Mart and Target in recent years and is now facing the possibility of closing its doors. The differences among the companies's uc cesses can be seen in their business models and strategies. Wal-Mart focused on decreasing expenses and Target established its market placement as a high-quality low-cost discount store. In contrast, Kmart used a promotions-driven business model. Because of this, Kmart focused on trying to generate sales from promotions, rather than trying to cut expenses to increase their profits Management contributed greatly to Kmart's problems by not paying attention to their business environment. As their competitors worked at lowering costs and improving customer service, Kmart continued with its strategy to carry as many products as possible and offer promotion after promotion.

Even after Charles Conaway took over, he continued expanding the products carried rather than focusing on those products that were most profitable. In all respects management failed to embrace technology as a means of improving the business. It was not until 1987, that Kmart began to put money into its information infrastructure. However, management rejected any use of technology that could benefit them.

For example, while Kmart had the capability to collect data for forecasting, it did not. Rather management still developed the forecasts themselves. Additionally, a proposal to integrate computer systems in distribution was rejected because management thought it too costly. The technology lag in the distribution centers was so bad that reorders were often based on hand tracking. Kmart's supply chain management contributed to their problems. The company did not have a strong relationship with suppliers.

Unlike Wal-Mart where the supplier relationship focused on establishing strong sales of individual products, Kmart's suppliers pushed them to sell as many products as possible. Because of the push of products into the system, Kmart continued using the promotion-based model. The promotion-based approach in turn led to inconsistent demand for products that made it difficult for Kmart to forecast and maintain optimal inventory levels. Also contributing to the supply chain problems was the organizational structure. The majority of shipping was planned centrally, rather than at the local level causing store inventories to be either in excess or short. Particularly in cases where inventory was in excess, stores ran into problems with warehousing and shrinkage.

The effort to rebuild the supply chain management systems was a step in the right direction. However, while not being familiar with the other offerings at the time; I am not sure that the selection of i 2 was the best choice for Conaway to make. I 2 had limited experience with a retailer, and it appears that the two companies failed to realize the business requirements of the system early enough to avoid some costs in development. The problems within Kmart in conjunction with problems at i 2 contributed to the failure of the system. It is interesting to note, that both Target and Wal-Mart are also customers of i 2, indicating that the problems experienced with Kmart may rest more heavily with Kmart. As Kmart goes through bankruptcy and closes hundreds of stores, they continue with their strategy of promotions and sales.

The failure of Conaway and Kmart management to realize the problems the company faces in its environment appears to be continuing. The company has retained its strategy of promotions and sales rather than looking at the company's operations. Instead of having storefronts, they are depending on the revamped website, Kmart. com. to deliver a plethora of products. Unless Kmart changes its strategy and core processes, no amount of marketing and promotions will cause it to be successful.