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Supply Chain Management of Wal-Mart -
December 29th, 2010
Wal-Mart Stores, Inc. (formerly branded as Wal-Mart, branded as Walmart since 2008) (NYSE: WMT) is an American public multinational corporation that runs a chain of large discount department stores and a chain of warehouse stores. In 2010 it was the world's largest public corporation by revenue, according to the Forbes Global 2000 for that year. The company was founded by Sam Walton in 1962, incorporated on October 31, 1969, and publicly traded on the New York Stock Exchange in 1972. Wal-Mart, headquartered in Bentonville, Arkansas, is the largest majority private employer and the largest grocery retailer in the United States. In 2009, it generated 51% of its US$258 billion sales in the U.S. from grocery business. It also owns and operates the Sam's Club retail warehouses in North America.
Wal-Mart has 8,500 stores in 15 countries, with 55 different names. The company operates under its own name in the United States, including the 50 states. It also operates under its own name in Puerto Rico. Wal-Mart operates in Mexico as Walmex, in the United Kingdom as Asda ("Asda Wal-Mart" in some branches), in Japan as Seiyu, and in India as Best Price. It has wholly owned operations in Argentina, Brazil, and Canada. Wal-Mart's investments outside North America have had mixed results: its operations in the United Kingdom, South America and China are highly successful, while it was forced to pull out of Germany and South Korea when ventures there were unsuccessful.
Wal-Mart was named the number one ranked in the prestigious global Fortune 500 for the financial year 2002 with earning revenues amounting to $219.81 billion has earned its reputation as the largest retailing company in the world. The success of course was made possible behind the dedication of the men and women employees of Wal-Mart having employed about 1.28 million employees. But the essence behind the success of Wal-Mart is the man behind who started everything and laid down the basic principles and philosophy to be emulated by Wal-Mart people is Mr. Mr. Sam focuses on four core principles that engulfs the overwhelming success of Wal-Mart are the focus on the improvement of sales, constantly reducing costs such that they will be able to capitalize on cost saving opportunities to be passed on the customers, the adoption of efficient distribution and logistics management systems to ensure the constant flow of the goods and the use of highly-advantageous innovative information technology (IT) tools that makes the operating processes even faster, efficient and up to date. At the age of 22, Mr. started out the business and from then on, decades have passed, the success of Wal-Mart is tremendous. Until 1980, Wal-Mart continued to grow rapidly that is brought about by the gigantic customer demands by the small towns where the penetration of its market is prevalent. Mr. ’s death in 1992 had caused a setback of Wal-Mart; however, 5 years after, the resiliency of Wal-Mart is mirrored in the emergence of Wal-Mart as the largest volume discount retailer in Canada and Mexico. Similarly on the same year, Wal-Mart even expanded in the Europe particularly in Germany. The other international expansion efforts immediately followed in the successive years.
Analysts perceived the phenomenal growth of Wal-Mart to the emphasis being placed in the customer needs and the reduction of cost through efficient supply management practices as being laid down by Mr. as Wal-Mart’s core principles in running and competitively staying in the business.
1 Critically appraise the essential pre-requisites for cross-docking and highlight the key benefits to Wal-Mart.
Cross-docking refers to the logistics practice in the unloading and loading of materials with little or no unnecessary storage in between to ensure the that the quality of goods would be enjoyed by the customers by first hand. To avoid all sorts of potent causes of inefficiencess in the distribution operations, Wal-Mart features a logistics infrastructure that is guaranteed to be fast and responsive transportation system wherein the distribution centers are being serviced.
The essential pre-requisite for cross docking are very basic and monitorable. Basics are strong building foundations in which it ensures the overall efficiency of the whole process. Wal-Mart recognizes the need to hire dedicated drivers who can share in their belief of prioritizing customer service. Upon hiring potential drivers, they “filter” the driver’s capabilities and measure the responsibleness and reliability in being able to handle the pertinent standards essentially needed to maximize the worth of the drivers. Far more interesting is that after they have “filtered” and honed drivers commitment as being stated in the code of conduct embodied in the The Private Fleet Driver Handbook which contains the check-list to be followed at all times in the safe exchanges of goods and the roles they are expected to act on. Further, Wal-Mart after implementation, monitors their drivers progress in which drivers have to report the hours of service they have done on a daily basis to their respective coordinators. By these means, Wal-Mart is constantly assured that their drivers are able to do their jobs accordingly and do not cause unnecessary delays that may hamper the efficiency of the distribution operations. To be able to make it up on time, the coordinators on the other hand, gives information to the driver as to what is the expected time of arrival or delivery of the goods should be made. Part of Wal-Mart’s expectations to the drivers is that they are to take a loaded truck trailer from the distribution center to be delivered to the retail store and such time drivers will be headed back, their trailer would be empty and surely have unloaded everything to the point of destination where it is supposed to be delivered.
Other than the standards being strictly imposed to Wal-Mart’s drivers, the structure of the distribution process is truly well-organized that can be attributed to the efficient distribution practices Wal-Mart has been employing. Like for example, the scheduling of the unloading time at the dock of a store with two hours interval in between unloading. The precise unloading time of goods to a dock permits the constant, smooth flow of the distribution process without the fuzziness of rushing into the completion of the delivery process. Further, the purpose of the time interval permits the employees to do their job without the pressure and hassle of doing it impromptu. By the time the 2 hour lapses, Wal-Mart is then assured that everything has been unloaded and the distribution is followed accordingly.
Cross-docking is an add-on technique that Wal-Mart employs to further contribute to the efficient distribution process they already had. In this system, it requires the direct pick-up from the manufacturing plant or supplier the finished goods, to be sorted out and also directly supplied to the customers. With the shift of focus to the supply chain to the demand chain, it takes out the centralization and allows the customers to pull products the moment they are needed. The benefits of cross-docking technique Wal-Mart has reaped is the reduction in the handling and storage of finished goods and most importantly the competitive edge of having an efficient supply chain management system that includes reduction in lead time, speedy inventory turnover, accurate forecast of inventory levels, reduction in safety stock, reduction in the dependency of the distribution center, thereby, further causes reduction in the training costs and errors. Overall, the cross-docking helped in the minimization of storage, labor and handling cost.
2 Critically evaluate the use of “state- of –the- art technology” systems to track and predict levels of inventories in Wal-Mart.
The use of technological infrastructure such as information technology and state-of-the art communication system is a very powerful tool in any business today that guarantees up-to-date and hasten process in the logistics operations which leads to being able to cater to the needs and demands of the customer in the least time possible. Therefore, to hand over excellent service that is tantamount to customer satisfaction. For example, in many companies the incorporation of e-business allows companies to keep up with the wants of customers in a fast changing world of business and it enable companies to reach more customers while at the same time increasing the number of customer retention. The use of the said state-of the art technology guarantees Wal-Mart to readily and steadily track down the sales and merchandise in all of its stores across the United States including the follow-up track down to the global operations. In fact, in 1983, Wal-Mart launches its own satellite communication system as they see the need to expand not only their operations but also their communication system such that they can sustain the growing demand of communication essential to keep terms in the operation of the increasing retail outlets or distribution centers. The benefits of the communication system, as Mr. explained, “I can walk in the satellite room, where our technicians sit in front of the computer screens talking on telephone to any stores that might be having a problem with the system, and just looking over their shoulders for a minute or two will tell me a lot about how a particular day is going. On the screen, I can see the total of the day’s bank credit sales adding up as they occur. If we have something really important or urgent to communicate to the stores and distribution centers, I, or any other Wal-Mart executive can walk back to our TV studio and get on that satellite transmission and get it right out there. I can also go every Saturday morning around three, look over these printouts and know precisely what kind of work we have had.” The satellite communication system has been utilized in Wal-Mart at its maximum level including the employees. Wal-Mart ensures that potent problems are being settled readily and just like the valuable importance given by other companies to communication system, Wal-Mart, aside seeing its importance, they regard the communication system as being pivotal aspect of their entire operations.
With the use of communication system, Wal-Mart also actuates information technology in the supply chain management. The manual way of using inventory which is sometimes costly of the potential human errors has been minimized by Wal-Mart by the full usage of IT to make inventories instantly available when needed. Similarly, Wal-Mart was able to network its suppliers through the use of commuters where Wal-Mart in this regard can have a cooperated collaboration with its leading big time suppliers like Procter and Gamble. Both the use of IT on one hand monitors the inventory supply through automatically updating the IT system which in turn, reciprocates by sending signal directly to the supplier and the communication system, on the other hand, proposes a win-win solution for both the supplier and Wal-Mart due to the open communication line between them results to better coordination and collaboration for both parties. Thus, the supplier on one hand would love to do business with Wal-Mart of the utmost convenience Wal-Mart has been offering to the suppliers.
Wal-Mart was very genius in the optimization use of information technology and communication system because they only did not limit its usage to the executives and the suppliers but they extend the usage and made available for the employees that can also benefit the use of the said technologies in aiding them to do better of their work with no stress. Employees of Wal-Mart in every store had what they called the ‘Magic Wand’, a hand held computer which was linked to in-store terminals through a radio frequency network, that gives assistance to employees of tracking down the inventory, deliveries and back-up merchandise in stores at the distribution centers. The Point of Sales (POS) System is another application in the use of IT that is used in the monitoring and tracking down of sales on the store shelves. These helped employees to keep track of the inventory in stores, deliveries and backup merchandise in stock at the distribution centers. The execution of both the order management and store replenishment of goods was made possible by the use of the said POS system.
Another use of Wal-Mart’s information technology is the establishment of the centralized inventory data system wherein it enables the store personnel to know precisely the status of inventory levels and the location of every product since the centralized inventory data system is made to monitor the progress of inventory, whether it has been already been loaded to a distribution center or still in transit. By this means, the store is able to know what to expect and make sure that every store has adequate supply to cater to the customers.
3 Critically appraise the advantages and disadvantages of Wal-Mart’s in-house transport fleet.
The advantages of Wal-Mart’s in-house fleet are that they were able to reap the benefits of low-cost in transportation for the delivering of goods to the different stores and distribution centers. Given the benefits of having owned a transportation system, Wal-Mart capabilities of replenishing the shelves, is four times faster than the other competitors. Not only that, it enables Wal-Mart to save 3% compare with the 5% of the competitors. Moreover, the code of conduct that is being imposed to the Wal-Mart’s drivers boosted more confidence for Wal-Mart that the goods are being delivered exactly on time and right on the money.
A disadvantage of Wal-Mart’s in-house transport fleet is hard to pinpoint and cannot be readily noticeable since the reputation of Wal-Mart is impeccable. Perhaps, one disadvantage of having an owned transport fleet is that the repairs and maintenance may be a bit costly for Wal-Mart since they have that sole responsibility of taking care of their trucks. Additional expenditure will be evident and Wal-Mart is expected to sustain and allocate ample amount of money in the operations of in-house transport fleet. Amidst of the disadvantage of the additional cost, the easiness and effectiveness of the use of in-house fleet transportation system wins over the slight disadvantage it brings.
The success of Wal-Mart is proved to be in the reliability and efficiency in the supply chain management system. Having gone through the essence of the underlying operations of Wal-Mart, they always seek to improve and explore over the possible ways to give customers superb quality service without an additional expense. From the purchasing to transporting and then finally to selling, at Wal-Mart they were able to have a well-coordinated and systematized system that ensures the success of the whole supply chain management which in turn would benefit and satisfy Wal-Mart’s customers.
From the external environment dealings, Wal-Mart started first by bargaining prices with the suppliers and manufacturers until Wal-Mart gets the bottom or the drop-down price and then develops a more than a business relationship with the suppliers such that they give suppliers full business loyalty and expresses how much Wal-Mart look forward of having years of business with them. Then in the transportation, the monitoring and tracking down of the goods allows Wal-Mart to constantly replenish the shelves giving its customers the taste of the freshness of goods. Aided by the use of satellite communication system and the information technology system, undoubtedly added to the effectiveness and efficiency of the whole supply chain management and thus, certified the provision of uninterrupted service to its customers, suppliers, stockholders and trading partners that leads to the integration and coherence of what has been established.
True to the basic principle of business, the minimization of cost, high production leads to the maximization of profit. The practice of Mr. ’s core principles on constantly improving sales is brought about by the service they have been offering at no extra cost. At Wal-Mart, they have been very successful in finding means in which to capitalize on every cost saving opportunities and the adoption of efficient logistics system enable Wal-Mart to earn unrivaled intangible competitive advantage and edge to the rest of the business world which is made possible also in the use innovative technology.