SUPPLY CHAIN MANAGEMENT AT WALMART

INTRODUCTION

Wal-Mart Stores Inc is an American well known discount store in the retail industry that

operates worldwide. Almost everything can be found in Wal-Mart stores and it has

everything a homemaker can ever think of. It is arguably the largest retail chain that

deals with millions of product ranging from furniture’s, clothes, groceries, books,

movies, electronic, jewelries, baby products and much more.

Wal-Mart is currently led by three key people, the CEO; Mike Duke, Executive Chairman;

H. Lee Scott and Chairman; S. Robson Walton. They have over 2 million workers

operating in 6500 stores worldwide. In United States alone, it has 3800 stores with each

store as close as sixty kilometers each.

Wal-Mart’s purchases all the goods right from the supplier without 3rd party involvement, the

suppliers either send directly to Wal-Mart centralize distribution centers or to individual stores if they

are nearby with the outlet.Wal-Mart has distribution centers in different parts of United States. Each

centre serves approximately 150 stores and supplies 80% of the inventory to individual stores.

WALMART’S METHOD OF MANAGING THE SUPPLY CHAIN

Walmart has been able to assume market leadership position primarily due to its efficient integration

of suppliers, manufacturing, warehousing, and distribution to stores. Its supply chain strategy has four

key components: vendor partnerships, cross docking and distribution management, technology, and

integration.

Walmart’s supply chain begins with strategic sourcing to find products at the best price from suppliers

who are in a position to ensure they can meet demand. Walmart establishes strategic partnerships

with most of their vendors, offering them the potential for long-term and high volume purchases in

exchange for the lowest possible prices.

Suppliers then ship product to Walmart’s distribution centers where the product is cross docked and

then delivered to Walmart stores. Cross docking, distribution management, and transportation

management keep inventory and transportation costs down, reducing transportation time and

eliminating inefficiencies.

Technology plays a key role in Walmart’s supply chain, serving as the foundation of their supply chain.

Walmart has the largest information technology infrastructure of any private company in the world. Its

state-of-the-art technology and network design allow Walmart to accurately forecast demand, track

and predict inventory levels, create highly efficient transportation routes, and manage customer

relationships and service response logistics.

COMPETITIVE ADVANTAGE

Wal-Mart has adopted cost leadership strategy to achieve competitive advantage in the market. Wal-

Mart’s supply chain management strategy has provided the company with several sustainable

competitive advantages.

Lower product costs

Reduced inventory carrying costs

Improved in-store variety and selection

Highly competitive pricing for the consumer

Due to its enormous size and large number of stores worldwide, Wal-Mart has the

tremendous bargaining power with its suppliers and thus it purchases products at lower prices.

TECHNOLOGY

Recently, Wal-Mart became the first major retailer to demand manufacturers

use radio frequency identification technology (RFID). The technology uses radio frequencies to

transmit data stored on small tags attached to pallets or individual products. RFID tags hold

significantly more data than bar codes. During the first eight months of 2005, Wal-

Mart experienced a 16 percent drop in out-of-stock merchandise at its RFID-

equipped stores. Once the products arrive at individual stores, it will be stored and display at the

shelf area. It’s stored above shelf area where it will be retrieve if products on shelf run out. When a

product is purchased by a customer, the RFID reader at check-out counters will read the

purchase and be sent to the Electronic Data Interchange (EDI) System called Retail Link . The

information will be passed to the suppliers, accounting information system, Texlons Devices and CRM

information system. Wal-Mart shares real time information with suppliers for better

ordering accuracy, and transparency throughout the supply chain. Data’s that are sent to the

Customer Relationship Management will be used for data mining to make forecast. Marketing

managers in Wal-Mart used data-mine technology to develop replenishment plans for their suppliers

and adjust the composition of market baskets in individual stores. They also can learn about the

behavior of their customers of their purchase decision and sending pattern. Therefore they can plan

for peak seasons, to ensure that the right materials, supplies and personnel are in the right place at the

right time. If a product is low in stock, the EDI system will alert the store manager to make purchases.

At the same time, the data will be sent to suppliers to alert them to start production. Simultaneously,

the data also is sent to the accounting system will than make confirmation for the request purchase.

Once the request has-been approved, supplier can start to distribute.

This bring great comfort to managers to exactly know where the product whereabouts and able to

inform the customers the actual date the product will be available. RFID System in Wal-Mart Value

Chain- Implementation and RFID is a method to capture data about a single object without using

human tread the data. The implementation of RFID tags at pallet and case level, Wal-

Mart is able to identify and tracks the products as it arrives at their warehouses until

shelving at the giant retailer.

RFID reduce out-of-stocks

Make automated order fulfillment

Improved inventory

Product tracking

Reduce shrinkage

Improve product delivery time by providing visibility into the location of goods with RFID

tags

Track consumers behavior and buying patterns

(As customer pass by the self service check-out counter, the reader receives the data from the product

and charge the customer credit card. Using two different systems, it has reduced queue time of the

consumer. Thus Wal-Mart combining its RFID technology with the CRM package can enhance

customer service.)

There also some risk associate implementing RFID technology

Mainly privacy issues and cyber terror

It is possible for competitors to steal information regarding shipments, logistics companies, cost &

sensitive information

Wal-Mart has made their tag with limited range to read and write capability for security purpose.

Privacy issues in United States are taken very seriously by consumer advocacy groups. Their concerns

were that once the consumer leaves the store, that the tag can still be monitored. They believe it will

be an invasion of privacy as large corporation can monitor their activity. Therefore, Wal-Mart

should revise these factors before any further allegations in the future.

LATEST TECHNOLOGY

Walmart develops the latest technology to connect stores with the largest data warehouses in the

world, as well as define the next generation of Walmart stores. Using enhanced data analytics, we help

predict what customers will need and want next. We’re streamlining operations and back-room

systems in order to increase the agility and responsiveness of Walmart’s world-class logistics network.

Our Information Systems Division excels at keeping Walmart streamlined, smart and secure. And

through the innovative fusion of retail, social and mobile, Walmart Labs is redefining commerce and

the consumer experience for the largest retailer worldwide.

Wal-mart technology group is made up of more than 6,700 visionaries globally as a part of the

Leverage and ecommerce divisions. This growing team uses big data and technology to optimize retail

operations and business practices and change the way people shop through cutting-edge online and

mobile retail experiences.

RECOMMENDATION

Supply chains have huge potential to improve sustainable business practices. Firstly with smart

technology such as RFID, Wal-Mart could reduce their carbon emission to improve the environment.

This can be done through their logistic activities that directly contribute to environmental degradation.

It can improve their corporate reputation as well as further improving operational

efficiency and lowering cost. RFID tracking functions can reduce unnecessary truck deliveries and

reduce customer’s visitor the store for out-of-stock items. Imagine millions of shoppers visit Wal-Mart

everyday; a few hundred thousand trips that can be saved will save tons of gallons of carbon

emission. Even within its store, the forklifts that run around can locate the product with100% accuracy

reducing carbon emission. With huge savings on fuel emissions, Wal-Mart and suppliers are able to cut

more cost. This is an opportunity for Wal-Mart to improve the wages system and healthcare benefits

of their employee. Instead of paying millions of dollars in law suit and out-of-court settlement, they can

pay extra to their employees. This can motivate employees and in return they can give extra

service to the customers. By doing this, in the long run, it will become a win-win situation for

both parties.

Conclusion

In conclusion, to understand a company, it is important to analyze its environment and operation.

Therefore understanding the business model, the people, organization and technology in Wal-

Mart provides an overview of its operation. Inspirational leaders, open door policy culture and

using advance technology have made Wal-Mart the number 1 corporation in the world. Wal-Mart

supply chain is legendary which the company key success factor is. Accompanied with RFID

technology in place, it is near to perfection. No organization is perfect thus Wal-Mart

can improve by becoming a more sustainable and green organization. Further exploitation the RFID

technology can create a better living which lies in their current slogan.

Save Money. Live Better´.