Case Study: Supply Chain Management of Walmart

The world’s largest retailer Wal-Mart was founded by Sam Walton in the year 1962. He opened his first store in Rogers, Ark. On 31st October 1969, the company was incorporated as Wal-Mart Stores. Key success factor was the guidance of Sam. Presently they are operating in fifteen countries with more than 8,000 stores with 2.1 million employees (2009). Major features of Wal-Mart stores are its store area, cleanliness and its shelves which is filled with varieties of quality items that includes health care products, family apparels, electronic items, automotive products, hardware items, jewelry etc.

Wal-Mart is giving more emphasis for customer needs and tried to reduce cost through the effective usage of supply chain management system. In the year 2009, Fortune Magazine ranked Wal-Mart as first among other retailers in its survey. Sales were about 401 billion U.S dollars in the FY 2009. Sam Walton claims that Wal-Mart’s vision had always been to increase sales through lowering the costs through organized distribution system with the help of the Information Technology. It is said that Wal-Mart’s extreme success could be attributed to its effective supply chain management.

Wal-Mart’s efficiency in supply chain management was due to two key factors namely automated distribution center and the computerized inventory system. This brought in minimizing a lot of time the later not only reduced the checking out time but also recorded the transaction which is much needed to know envisage demand. Demand forecast is a constant issue which could be a threat when not handled properly. This is due to the fact that demand prediction is always inaccurate. Aggregation would be a remedy for this unpredictable demand.

Wal-Mart’s focus has always been to sell goods at a lower price to the customers. They ensured direct purchase form the companies bypassing the intermediaries. This by passing is one of the ways to reduce cost. Wal-Mart preferred small vendors to the big players however the vendor who provides the best price qualifies and gets the deal. This applies to the giants like P& G as well. Their practice these days had been choosing few vendors and they literally negotiate the best price the one that comes up with the best price qualifies. This does not blindly mean that they have been ruthless. Wal-Mart also work with the vendors for improving its supply chain efficiency.

Wal-Mart with its power distribution system made quite innovative changes like reducing paper work, reduced its lead time drastically, used bar codes to bill which recorded inventory levels and the access to the stock levels served as the valuable data for management. The movements of products are systematic and strategically aliened in a way that it reduces the most valuable time and cost and results in efficiency. Wal-Mart had a very effective rather responsive and flexible distribution system to transport goods from docks to stores. It educated the drives with the ethics and code of conduct which pictures their supply chain responsibility. Cross docking is one lethal weapon that was used by Wal-Mart in their SCM.

Cross Docking: Cross Docking is a method of handling goods. This happens when vendor and the company work together. This is the method of supplying the product in the right time and the said quantity. This cut down a lot of time. This also changed Wal-Mart’s way of looking things. This transitioned Wal-Mart from being a centralized management to almost decentralized system took a major turn in focus of pull strategy than a pull strategy.

Cross-docking is one of the techniques used by Wal-Mart. It means there is no unnecessary storage or little storage in between the loading and unloading of goods so that customer can enjoy the quality of the goods by first hand. Wal-Mart have logistics infrastructure which is very fast transportation system wherein the distribution centers are being serviced.   Wal-Mart assured that their drivers are capable of doing their jobs accordingly and do not cause unnecessary delays that can hamper the efficiency of the distribution operations.   To deliver it on time, the coordinators give information to the driver the expected time of arrival or delivery of the goods.

Point Of Sale: Information sharing is one of the most important things when it comes to SCM. P&G with its Pampers requested Wal-Mart to share its point of sale so that it could predict its demand more or less and work on the information to bring in efficiency. When Wal-Mart shared this information P&G could plan in advance and it with its efficient supply chain management could supply pampers to Wal-Mart on time.

Wal-Mart did not want to dedicate lot of space to pamper in its warehouse of shop store either. Instead the supply was taken care by P& G. This led the initiation of working with the vendors and coming out with huge efficiency by maintaining lower inventory and satisfying demand without stock outs. Thus point of sale sharing would be a key element for any company for its further scope of improvement and also when there is further scope of improvement there is a role for Supply chain management.

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