Introduction to Supply Chain
Supply chains entail the end-to-end movement of products, money, and products. It is a network between a firm and its suppliers to manufacture and supply goods and services. The supply chain network includes people, various activities, resources, entities, and information. Therefore, the way the flow is organized and managed impacts a business’s competitiveness in terms of working capital necessity, cost of goods, market speed, and service quality and perception. Thus, the best arrangement in the supply chain with the corporation’s strategy is vital in ensuring a high level of the company’s performance (Ivanov, Tsipoulanidis & Schönberger, 2017).
Sometimes, companies define their supply chain activities in export or domestic sales, which is a restricting and shortsighted view. Shortsighted firms limit their supply chains and logistics in terms of costs, warehouse, and freight. The firms fail to comprehend how much clients and businesses are affected by the organization of the chain of supply. To prosper and grow, it needs to use the best practices in its supply chain. Companies use supply chain strategies that are shortsighted because they think that the only thing that can differentiate them from their competitors is cost. Consequently, they lack customers that are value proposed (Lu, 2018).
Firms that understand themselves as global and dynamic see the projections for themselves. They have the best practices in their supply chain and have value intentions that differentiate them from their opponents. They are aware that worth propositions are around the clients but not what the company does. The firm comprehends the importance of the supply chain in creating service benefits and as a reagent for new businesses. The most critical matters that drive the necessity to have the most acceptable practices used in supply chain management are time and inventory. The strategy used in the supply chain has three main elements that include the marketplace, competitiveness, internal processes, and link between the process of supply chain and the business strategy.
Walmart Inc. is a multibillion-dollar corporation that operates in both wholesale and retail markets. The company operates a food supply chain, a discount segment, and hypermarkets. Sam Walton founded the business in 1962, and it was merged in 1969. Walmart also works and possesses Sam’s Club, which is a retail warehouse. As of 2020, the firm owns 11,503 stores and clubs in 27 states which operates in 55 different names. Walmart is the most significant film globally on a revenue basis, which is US$514.405 billion. It is also named the most important private employer as it has employed about 2.2 million people. Walton’s family controls the company, and it is publicly traded (Lu, 2018).
In 2019, Walmart was named the largest retailer in grocery in the U.S. The company has invested in other countries apart from its home country, the United States, and has had mixed reactions. Its subsidiaries and operations have been successful in countries such as the United Kingdom, South Africa, Canada, and China. The exact ventures failed to succeed in South Korea and Germany (Forbes. 2016). Sam’s West, Inc. is a retail warehouse that is a membership named after the founding father of Walmart. In 2019, the club ranked the second-best globally in terms of sales volume, where it made sales of $57.839 billion. Sam’s club owns and operates 599 membership clubs in Puerto Rico, United States, and the Virgin Islands as of January 2020 (Lu, 2018).
Walmart is the world’s most significant operational and logistical triumph. Walmart is a global giant in the retail industry with millions of employees, thousands of stores, and managing an inventory of about $32 billion (Lu, 2018). With such numbers, a firm must operate an effective and competent supply chain organization. The whole company is dedicated to a corporate method of driving prices from supply chains so that customers can live better and save money. In the last two centuries, Walmart has managed to be the most significant global and debatably the most powerful retailer with the highest inventory turnover, sales, and operating profit. When you look at the history of Walmart stock stats, you will notice the influence and the success it has in the retail space.
Walmart started with the objective of providing its clientele with goods that they required, wherever and whenever they needed them. Next, it developed an advanced strategy in supply chain management, and that was highly structured. This was done to enhance and exploit its competitive advantage and undertake the position in market leadership. The company has initiated the use of information technology to keep innovating to facilitate its supply chain management efficiency. The firm then focuses on coming up with cost structures that enabled it to offer low prices every day. This strategy ensures that the supply chain is fast, integrated, and cost-effective, and thus it has brought massive success to the firm (Forbes 2016).
Walmart owns a combined supply chain that has enabled it to grow from a small retail store in Arkansas to a multinational company and a global leader. This has been possible as Walmart has a decision-making system that relies on analyzing data through a point-of-sale method, barcode scanning method, and collection of data in real-time. Additionally, the company has an efficient practice in its supply chain that has automated distribution centers and an inventory system that is computerized. The firm also has its trucking structure that ensures it operates successfully and an advanced cross-docking logistic practice where goods may be supplied from incoming to outgoing trailers short of in-between storing (Forbes 2016).
Fewer Links in the Supply Chain
The management of Walmart’s supply chain is the key contributor to its success from the beginning. The first practice was the removal of a few of its chain’s links in the early years. The founder, Sam Walton, owned a few franchise stores of Ben Franklin before he started the first Walmart, where he selectively bought bulk stock and transported it straight to his stores (Global 500. 2017). In the 1980s, the corporation commenced working with producers directly to supervise its supply chain professionally and reduce costs. The management developed an inventiveness known as the vendor.
Managed inventory, wherever the producers were in charge of handling their goods in warehouses owned by Walmart. After the effort, the company managed to expect almost 100% fulfillment of its orders on merchandise. As a result, Walmart was ranked as the vendor of the period where its distribution charge was 1.7% of its total price of sales, where its competitors Sears and Kmart were operating at 5% and 3.5%, respectively. Since then, the firm’s supply chain has only improved effectiveness and efficiency (Lu, 2018).
Walmart is a business leader and also a leader in technology. The firm has a technique in its supply chain that helps in collaborative forecasting, replenishing, and planning and vendor managed to record. This program assists Walmart in minimization of misrepresentation of demand info and coordination of the commercial plan with partners in the chain of supply. The aspect of vendor inventory management shares data between Walmart and its leading suppliers to uphold the cheapest inventory cost. Last year the company Walmart introduced a new system under trial that helped manage its stock known as Top Stock, where the top shelves in the store are used for more storage, creating room in the back. It is also working on online delivery of products to fight with its competitors, the Amazons.
Walmart’s Competitive Strategy
According to the model of Michael Porter, a firm uses a basic approach and a generic competitive strategy to compete against other companies effectively in the same industry. The primary generic process that Walmart uses is of minimizing the cost of its products. Therefore, Walmart can adjust the prices of its products accordingly. In Walmart’s SWOT analysis, its strength is selling price, and it helps the firm compete against its competitors around the world that are in the retail business. The firm indirectly and directly competes with other firms such as Amazon, Costco, eBay Inc., Home Depot, and Whole Foods Market. These firms influence the strategic management of Walmart and how it implements its generic competitive tactic and connected strategic goals (Lu, 2018).
The company has a competitive approach of ensuring the best eminence of goods and services to its clients. In the 1970s and 1980s, Walmart used a “Everyday Low Price method,” which promised a wide variety of high-quality products and services at a lower price than most of Walmart’s rivals (Global 500, 2017). So that Walmart could implement this strategy, it achieved a new trend of offering discounted merchandise from the suggested price in the 1960s. With the use of the Everyday low-price strategy (EDCL), the company saved money that it would have otherwise used in advertisement and was transferred to the reduction of price, and through this, it became the world’s best-known retailer.
Cost leadership includes differentiation of low products. Walmart focuses on low prices as a selling point, and its retail services are standard, and therefore they are poorly differentiated from other services provided by the competitors. This generic strategy includes marketing segmentation of low levels. For example, Walmart delivers its retail services to all clients in all sectors of its targeted market. By so doing, the company can align its supply chain practices with its corporate vision and mission, which aims at being the leader in the world’s retail market. Walmart has relied on management approaches, process efficiency, and other methods to implement the generic competitive strategy successfully.
In its retail strategy, Walmart focuses on cutting operating costs. Thus, Walmart put its distribution centers nearer to real-time info on the in-stock balance of every store; this permits the firm to shove the goods to stores automatically. The information system at the store stage ensured that manufacturers are knowledgeable every time a commodity is traded. In estimating fluctuations in products requests, associates were able to input necessities manually or supersede awaiting transportations. Indeed, to ensure that employees were informed, in-depth information was shared by the management about daily, weekly, and monthly sales on the stores with all staff in an informal meeting that was 10 minutes long regularly.
Managing Walmart’s Supply Chain
Distribution, acquiring, and inventory management are the three parts of the supply chain that a business must consider to successfully manage its supply chain. Walmart has been successful due to the use of technology in the direction of the supply chain that has improved its fundamental competencies.
So that Walmart could adhere to the policy of EDCL, as earlier mentioned, the company had to eliminate the intermediaries and procure products directly from the producers. Additionally, the firm first negotiated prices before order placement with the manufacturers made estimates on purchases, and learned about their price structures. In the 1980s, the firm became the first retailer to experiment on the main folder, satellite system, and store-level point-of-sale design. Additionally, providing sales and external information like weather forecasts supported customers to improve the accuracy of their purchasing predictions.
Walmart’s distribution hubs are positioned in several parts, and the firm separated each center into different segments according to the excellence of goods. The firm mainly requires inventory income frequently and a significant section of goods in the hubs before directly moving them to stores. The competence in the supervision of circulation centers is an essential factor for Walmart as it ensures a consistent and stable flow of products.
The company also applies information tech; for example, the barcodes and the radio frequency identification tags (RFID), which they are currently using, make the process smooth. IT has enabled workers to acquire real-time info about all distribution centers and the merchandise stored. RFID is considered better than traditional barcodes as they can store more information and data than barcodes. They also allow workers to access data on products, for example, the location and time in which the products were made and their expiry date. Additionally, RFID tech assists the firm in tracking and identify inventory from producers to the warehouses where they are stored (Bromiley & Rau, 2016).
Walmart has managed to succeed in running its trucking structure. Walmart has a robust carriage structure which is the high point of its logistics set-up. It has around 3,500 trucks that work in the distribution centers. The tracked fleet allows the logistics division to complete goods from their distribution centers to storage quickly and replenish the catalog weekly.
Similarly, the company has an advanced cross-docking logistic tactic that enhances the success of delivery, which is capable of conveying and classifying the stock from manufacturers to Walmart’s warehouse. It then directly and fast transfers goods from coming into outbound trucks without extra charges on storage. The cross-docking tactic assists Walmart in reducing handling costs, inventory, operational costs, and space that ensures efficiency in distribution.
Besides, combining all the mentioned logistics technology with REMIX tech and a satellite network has gotten Walmart many benefits. It has transformed Walmart’s approach to distributing great-velocity products, for example, bread and potatoes, from a lower level of robotics to mechanization. The use of these technologies in a single distribution center can serve many vendors and add food delivery centers in the supply chain to deal with the high numbers of products.
Walmart has effective inventory management that primarily relies on the use of data structures. It is the most significant contributor to victory in the firm. The company has become perfect in the management of its inventory and innovations methods during its operations. It is an excellent illustration of the advantages of progressive technology and improvement in the presentation of optimized inventory management. Walmart has advanced inventory management that has enabled it to establish a competitive advantage compared to companies like Amazon and Target in the merchandising industry. Besides, the competitive aspects of the distribution operations in digital content of firms like Google, Apple, Facebook, and Microsoft are partly reduced through Walmart’s high efficiency in inventory management and connected strategies and products growth approach. The inventory management of the firm is directly correlated to its productivity strategies and operations management.
Walmart’s Vendor-Managed Inventory Model
The implementation of a vendor-managed inventory model has contributed to the success of Walmart in managing its inventory. The approach enables suppliers to access data from the information system, such as information on current stock levels and the degree to which certain goods are sold. Therefore, suppliers can know and decide when they will add products they supply to Walmart, whereas the firm controls and monitors the actual transit of products to the stores from the warehouse. This strategy is essential as it shifts part of the control of inventory activity to the supplier’s side.
Walmart’s vendor-managed record contains the advantage of reducing suspensions in the distribution of stock through the supply chain. It is so because suppliers can straight recent access information on the catalog of their products at the company’s stores. An additional benefit of using a vendor-based model is that it minimizes the cost in activities around inventory supervision. The firm does not require spending its finances on extra personnel to supervise each supplier’s products. In its place, the expenditure of this human and monetary resource is approved directly by the firm’s traders.
Types and Roles of Inventory
The most common examples of lists used in Walmart’s practices include buffer inventory, complete goods inventory, expectation inventory, and transit inventory. Each of these types has a corresponding strategy, tactics, and management approach. Additionally, each type achieves a specific role in Walton’s supply chain and inventory. Finished goods inventory is an inventory type that has the highest significance to the company. Finished good reaches the company’s stores and are stored where the stock is regularly replenished (Forbes 2016). The central part of the kind of inventory is to back up the processes of the company. The finished products are relocated from the firm’s stock distribution centers for resale to retailers at the stores.
Transit Inventory is the subsequent most important in a backup of Walmart’s retail operations. This nature of inventory is the products that are apprehended while being transported. Walmart operates globally, and as such, some products are in transportation for days or weeks. The primary part of this nature of inventory is provided backing to the replacement of finished product inventory in the stock centers of delivery and the company’s stores. Another type of list is known as the buffer. Walmart uses this type of inventory to provide a small margin of additional products to maintain the company’s continuity when suddenly the demand fluctuates (Ivanov, Tsipoulanidis & Schönberger, 2017). For that reason, there is continuously be an additional stock of products at the company’s stores. The inventory aims to guarantee that the company has adequate capacity to withstand unanticipated increases in demand. Given that present predictions methods in the retail market might be precise, they may not be perfect in molding such variations.
Walmart’s last type of inventory is anticipation inventory, ensuring the maximum capacity to fulfill the clients’ demand. This nature of inventory is similar to Buffer inventory as the firm provides extra stock maintained to cater to an upsurge in demand. Nevertheless, the anticipated list is founded on seasonal changes and consistent empirical info on periodic variations in the industry. For instance, before Black Friday, Walmart usually increases the size of its stock so that it can meet the considerable increase in demand throughout the spending holiday (Bromiley et al., 2016). Additionally, the firm uses anticipated Inventory during Christmas or some other long holidays. During ordinally shopping days which is also the remaining year, the firm does not use anticipated inventory. This type of stock enables the firm to satisfy the seasonal demand increase that is expected.
Just-in-Time (JIT) Cross-Docking
For Walmart to manage its inventory, it uses different methods. The just-in-time inventory model consists of activities and measures for operational goals of lessening storage and other linked costs. The Just-in-time technique at Walmart is practical, like cross-docking. In cross-docking, the company’s trucks and the suppliers’ trucks meet at the firm’s warehouses or stock distribution hubs. Products are moved from the supplier’s vehicles to the company’s trucks directly, which take the products to the stores.
The critical advantage of cross-docking at the firm’s warehouse is to minimize the size of inventory. Through the process, fewer goods are kept in the warehouse. A reduced list is cheaper in maintenance (Ivanov et al., 2017). Additionally, cross-docking ensures that the firm can quickly deliver goods in the stores, which is one strategy of Walmart. The condition allows the company to reply to variations in requests rapidly and connected fluctuations in the industry. Therefore, this technique of inventory running provides Walmart’s competence in operations and elasticity in business.
Measures of Inventory Performance
Walmart practices several variables to measure its inventory due to its size and numerous products it provides. The most important criteria that Walmart uses include inventory size, inventory turnover, and stock-out rate. Inventory turnover is defined as the rate at which the company’s inventory is sold out and restocked. It measures the price of storing the respective product in stock. High turnover in the list is less expensive and extra appropriate for the business. Stock-out rate is the degree to which the Inventory of Walmart becomes insufficient in sustaining the request. A lesser stock-out price is suitable for the firm. In inventory extent, as earlier indicated, the firm spends fewer finances for a smaller inventory. This measure reflects Walmart’s cost minimization goal to its cost leadership strategy that requires fewer costs to uphold attractive low retailing charges.
The first method used is known as ABC analysis. Items in Category A of Walmart’s Inventory comprise operational equipment such as inventory management and information systems and finished items sold at the firm’s stores. Goods in this category are frequently recorded and monitored. Products in category B in the company’s inventory include other materials or supplies used in operations such as office furniture and maintenance equipment. These goods are monitored in moderation, and their recording accuracy is moderate. Items in category C require less monitoring and recording, and they include janitorial supplies and office provisions, for example, paper.
Walmart has an inventory information system that is advanced explicitly designed to support global retail activities such as e-commerce processes. This system enhances the firms’ vendor-managed inventory and thus reduces operations costs, making the company lower the prices of its products. Walmart’s supply chain entails bullwhip effects, spreading mistakes like excesses or inadequacy in the supply chain. A minor error in a single share of the firm’s supply chain might lead to more massive mistakes and huge charges throughout the supply chain. The vendor-managed model is therefore used to minimize bullwhip impacts. Suppliers have direct data of the inventory. The company’s employees have less involvement in likely mistakes in transporting properties from the manufacturers to the stores (Nguyen, 2017).
The vendor-managed inventory method used by Walmart reduces inventory management as the prices are moved to suppliers. The mixture of the inventory of finished products, buffer inventory, transit inventory, and anticipated list backs up the firm’s generic strategy in cost leadership by minimizing costs. Walmart’s cross-docking and a type of just-in-time inventory model assists in reducing the costs of inventory by reducing its size. Therefore, these combined methods support Walmart’s financial soundness and profitability.
Effectiveness of an Integrated Supply Chain
Walmart has attained a leading place in the merchandising industry with the speediest growth in its reduction delivery network over reducing further costs in activities and stopping the marginal development. Walmart has a good relationship with its suppliers, customizing its operations, merges with industries, and provides a bigger platform to the supplier’s brand. Thus, it has managed to do better than its competitors.
Additionally, Walmart looks after the demands of its clients and provides an in-stock level that is efficient and allows the suppliers to be aware of the sale of their products on run-time. By owing some strengths, Walmart was able to become the world’s leader in the retail business. The division of Walmart’s supply chain can keep track of goods and follow on how they are moving from where they are stored through implementing an effective info system that looks into all kinds of transactions and transits (Nguyen, 2017).
Hence, a practical integrated supply chain is the fundamental way of competitive benefit for the company’s impressive and fast growth and the maintenance of the first position in the global retail market. An integrated supply chain is seen as an enabler of supply chain running, and it aids in improving the performance of the supply chain and earns the firm some competitive advantage. The integrated system used by Walmart provides data on inventories and sales between associates. They are common in the supply chain, creating collaboration amongst partners’ practices, decreasing the bullwhip impacts, reducing pipeline inventories, and reducing short supplies to clients during inflation, thus ensuring stability (Forbes 2016).
Moreover, Walmart is aware of how integrated its supply chain has a high degree of organizational and functional combination. New products and services are developed, client relationship processes, external and internal associations, supplier relationships, and order fulfillment are combined into the industry. This is to lessen the disturbances coming from unforeseen fluctuations in supplies and demands in the supply chain. Walmart, besides focused on producing private label that helps reduce prices by selling on a discounted price. This method brought a lot of profit compared to its competitors (Forbes 2016).
The dealer relationship procedure displays the model to find the rapport between the firm, upstream dealers, and downstream suppliers. The course shows how to monitor, choose, and assess upstream suppliers and work with the leading dealers in scheming new services and goods to exchange and negotiate product info. Most suppliers of Walmart initially were located close to the company. It was efficient for Walmart to collaborate and select suppliers and ask for assistance where need be. The company was also successful in negotiating with the manufacturers by emphasizing “a single invoice price” and assuming the prices of distribution, promotion, and discounting (Forbes 2016).
Lastly, the company has a combined supply chain that emphasizes its relationship with its employees, the internal and external connection between the firm, customers, and suppliers. For the internal operations, Walmart came up with uniform standards for in-store activities to reduce miscommunication between truckers, coordinators, and workers. The firm also in-depth communal info on the day, week, and month store sales every day with its staff, and also it kept informing employees of the newest information by the use of satellite network (Ivanov et al., 2016). With its suppliers, it started by using standardized and labeled boxes to safeguard the efficient movement of products. To increase sales, the company worked with its suppliers by the use of price rollback campaigns.
The supply chain management mentioned above has enabled Walmart to have a sustainable competitive advantage such as lesser product costs, reduced cost of carrying inventory, highly competitive customers pricing, and better in-store selection and variety. The strategy has made Walmart a leading force in a universal market that is competitive. As expertise advances, Walmart focuses on advanced systems and processes to advance its supply chain and manage higher competence.
Also Study; Organizational Structure of Walmart