Inventory Management at Wal-Mart - Case Study Example

Executive Summary The report which highlights the manner in which inventory management process is an important part of the organization has been reflected through Wal-Mart. It has been identified that Wal-Mart has looked to transform the manner in which they work by integrating the supply chain with the inventory management process. This has been matched by developing the required relationship with the different intermediaries and identifying a path through which better inventory management process will be developed. The overall changes which Wal-Mart has implemented in their supply chain network has faced certain obstacles and working on those and looking towards implementing the Collaborative Planning, Forecasting & Replenishment will further help to improve the supply chain. The overall process will thereby lead towards maximizing the gains and creating a clear path through which management of different resources becomes possible. This will also entail towards having better techniques and will lead towards operational efficiency and will help Wal-Mart to bring about change and gain operational efficiency in the management of inventories. Table of Contents Introduction 3 Background Information 3 Development of Wal-Mart Inventory Management Process 4 Inventory Management Process at Wal-Mart 5 RFID in Wal-Mart 7 Method in which Wal-Mart can improve the inventory management process 9 Challenges faced by Wal-Mart in inventory management process 11 Ways to overcome the Challenges 12 Inventory Management Process 13 Conclusion 14 References 15 Introduction Organizations success is largely dependent on the strategy which a business looks to develop use the different resources in the best possible manner. Supply chain management is an aspect of business which helps to use the different resources effectively and inventory management which is a part of supply chain process holds its importance. Businesses look to develop their inventory management strategies and process in such a manner that it looks to minimize wastage and ensures that the inventories which the business has is appropriate for carrying out different business activities. Wal-Mart which is a retail giant has developed appropriate strategies which will look at effective management of inventory by developing proper supply chain and inventory management strategy. Since, both supply chain and inventory management is interlinked so it is imperative that businesses manage them effectively. This report looks to analyze the inventory management strategy which has been used by Wal-Mart and the manner it has contributed towards their success. The paper will also look into different techniques and methods which have been used to manage the inventory and the different problems which the process presents. This is backed by providing the different mechanism which can be adopted and the manner in which better inventory management strategy will help business to bring about a complete transformation and ensure better development of the business. Background Information Wal-Mart which is one of the largest retail chain players has over 6,500 stores in over 50 states all over the world and employs more than 1.8 million people. The company by developing its inventory chain management through the development of the supply chain process has been able to provide its customer with the best products at the best prices. The development of proper inventory management practices has helped Wal-Mart to develop its business by looking to provide “Everyday Low Price” to its customers. The effective management of inventory through the process of proper techniques and development of supply chain practices has helped customers to be able to get the best products at competitive prices. The process has also helped to ensure that the products are readily available at the correct time and timely delivery of different products at the appropriate place has ensured maximum efficiency and multiplied customer satisfaction. Development of Wal-Mart Inventory Management Process Since its start of business in the year 1962 has looked towards developing its supply chain and developing strategies which will help to manage the inventories in a better way. The organization looked to purchase the quantity in bulk and then transported the same to the different stores so that it could be sold to the customers. This helped in managing inventories and helped to develop a path and process through which inventory management process improved. The mechanism which was adopted was traditional and looked as shown below (Hugos & Thomas, 2005). The process of inventory management was thereby traditional and relied on managing inventories at the main warehouse and dispatching to the different stores separately. This helped to managed inventories centrally and ensured that the entire process of procurement was low. This concept of managing inventories and looking at different facets and aspects through which supply chain management can be managed and inventory management process was better helped to maximize the overall gains in managing different resources which were imperative for the growth and development of the business. Inventory Management Process at Wal-Mart The company has developed its inventory management process in such a manner that it neither has stock outs not has stock in excess than required. This has helped to manage their finances in a better way and has provided an opportunity to provide better services to its customers. The process has been integrated with their supply chain and has enabled the business to be able to remove the intermediaries and provide quality products at competitive prices to its customers. Wal-Mart to gain effectiveness in the inventory management process ensured that the goods procured were the cheapest and could help the business to function on a similar manner where they look to provide the final customers with products at the cheapest price. The inventory management process has been integrated and developed in such a manner that it looks to provide goods to over 40 distribution centers where they supply over 85% of the inventories compared to 50 - 60 percent supplied by other competitors (NuThink, 2001). This has given Wal-Mart an edge and provided an opportunity through which the business basic fundamentals have been developed and overall efficiency and effectiveness has been gained in managing inventory. The inventory management process has been developed by developing its supply chain system where Wal-Mart has looked upon using Vendor Management Inventory System so that different process and business can be carried out. The use of the system helps Wal-Mart to replenish its inventory when it falls below a certain limit thereby ensuring no stock out and helping to have a good process which manages inventory as per the business needs and requirements. The process has helped to manage the finances which will be required in inventories and has helped to gain efficiency in managing the different resources (Disney and Towill, 2003). The inventory management system which has been developed further looks towards having an automatic process instead of a manual one. The process looks at having automation which generates an electronic message and helps to keep track of the present stock position, the forecasted sale and the future needs and requirements. This helps to manage the inventory in a better way and provides an opportunity which has ensured that the inventory management process is up to date and helps to monitor the different needs and requirements in a better way. The process has helped to maximize the different benefits and is shown through a chart below (Chopra and Meindl, 2004) The overall process aims towards managing inventory through a process where the vendor takes responsibility of maintaining the required stock and supplying the required goods and products based on the forecasted demand for goods and services. The process of managing inventory has been developed using Vendor Management Inventory Scheme along with Just in Time inventory management system. This has helped to manage inventory based on proper time and looked at supplying the goods at the appropriate time and in correct quantity. The process has helped to ensure that inventory management system is fully developed and helps to manage the needs in a proper manner. Having a process which has integrated Vendor Management Inventory Scheme along with Just in Time inventory management system has helped to develop a process which brings maximum effectiveness. The process has also ensured that the business through it has been able to work on the different fundamentals and develop the required parameters through which better management is achieved and the business is able to achieve the different goals in a better way. RFID in Wal-Mart To develop their inventory management process Wal-Mart has looked towards using a process of RFID which has enabled Wal-Mart to use technology for managing inventories. Through the process Wal-Mart has looked towards tagging different products and uses radio waves for the information to be transmitted. This helped to identify the products which have been sold and helps to manage inventories at the required level. The use of silicon chips and integrating the process with management of inventory has helped to bring about a complete turnaround and has improved the entire mechanism through which tracking takes places. The process has led towards reducing the operational cost associated with the management of inventory and has thereby maximized the operational gains for the business. The process is further shown below (Bhattacharya, Chao-Hsien and Mullen, 2007) The integration of inventory management system with RFID technology has helped Wal-Mart to be able to keep better track of the different products and has maximized the overall manner in which business is carried. Since, the process aims towards automation it helps to generate adequate reports at the appropriate time and prevents chances of stock being below the required level. This has thereby looked to bring effectiveness and has changed the entire mechanism through which business process is carried out (Garfinkel and Rosenberg, 2005). The use of proper procedures and methods has helped to ensure that correct products are available at the correct price and at the appropriate place thereby helping to bring efficiency in managing inventories. This has ensured that the inventory management process is better developed and brings effectiveness in managing the different needs and requirements of the business. The result has transformed and brought efficiency through which management of inventories has improved and ensured optimum finances are made in that direction. Method in which Wal-Mart can improve the inventory management process Wal-Mart has looked towards working in a manner where they have aimed towards continuous up gradation of the inventory management process so that they are able to identify the different imperatives and areas through which better services can be provided. Looking to make changes and integrating the process by developing the required supply chain process has helped to improve the inventory management process and has helped to manage inventory in a better way. This has helped to exercise better control and has brought about complete change through which better inventory management process has been identified and developed. One process which has been used by Wal-Mart for developing their inventory management process is Collaborative Planning, Forecasting & Replenishment. The process looks at identifying the different intermediaries and developing the required relationship through which all information which is shared helps in proper management of inventories. The process looks at using a central process system and informs all the intermediaries regarding the different needs of the business and thereby looks towards having a process which helps in better management of inventories as shown below (Michael and McCathie, 2005) The mechanism looks at creating the required collaborative relationship between the strategy and planning process so that the future needs and requirements can be estimated in a better way. This will help to develop the required plan and develop appropriate strategy to find out the future inventory needs. The use of demand and supply management will help to find out the estimated demand, determining the date when the inventories will be replenished and having a process which ensures that the required inventory level is maintained. The execution process aims towards ensuring that the inventories is received at the correct time and every step is taken to ensure that inventory level doesn’t reaches below the required level. The process will thereby help to develop the manner in which different key performance indicators will be identified and the logical steps will be developed through which the maintenance of inventory will be identified. This ensures that the overall process will help to take better decisions and will bring about a change in the manner in which different business decisions are taken. Wal-Mart has looked towards identifying different ways through which development of the inventory management process has become feasible. Developing and integrating the inventory management process with supply chain process has helped to develop the required fundamentals and derive a mechanism through which better activities can be carried out. This has helped to improve the manner in which inventories are maintained and has served as a framework where optimization has been ensured and overall development has become possible. The use of a proper mechanism has also helped to maintain the required standards and identify the different dimensions through which better long term results will be achieved. Challenges faced by Wal-Mart in inventory management Wal-Mart had to deal with different problems while looking to implement the inventory management process as overall effectiveness and performance will be largely dependent on the manner in which different results are achieved. The major obstacle for Wal-Mart to gain efficiency from the process is to find out the manner in which the business will be able to implement the process for management of inventories. Since, the process requires identifying the different gaps and parameters through which operational efficiency will be achieved it will require looking at different dimensions and areas which is a problem for the business (Enarsson, 2006). The other challenge for Wal-Mart is to determine a mechanism which will help to continuously upgrade the inventory management process and at the same time garner the required support from the different intermediaries so that better results are achieved. This is a difficult process as different intermediaries have different process which is old and outdated and to bring together the process which will help in better implementation of the process is an area of concern. Wal-Mart also has to deal with the issue of identifying the manner in which major ramifications and changes need to be made and need to convince the intermediaries so that better process to manage inventory can be developed. This is an obstacle as intermediaries might not be willing to undergo the required ramifications and will thereby make it difficult to execute the required process. The process will require that the different intermediaries come in contact with Wal-Mart and look to bring about the required change so that the process can be developed and the mechanism which will help to improve the overall management process can be developed. Ways to overcome the Challenges Wal-Mart while looking to gain efficiency from the process of managing inventory needs to look at having an increased role and participation from the different intermediaries. They need to look at additional support from the intermediaries and have to look at making a complete change and overhaul the present system. This will help to manage inventories at the desired level and will garner a process which will enable to maintain the required stock levels and will maximize the efficiency through which different work is being carried out. This will reduce the level of risk and maximize the overall operational efficiency through which different process is maintained (Kampstra, Ashayeri and Gattorna, 2006). In addition to it Wal-Mart has to look at identifying the manner in which inventory management process has to be developed so that the different people associated with the business can understand the same and is able to identify the mechanism through which better inventory can be managed. This will help to improve the overall focus towards managing inventories at the desired level and thereby garnering a process through which overall effectiveness can be seen. This will help to remove the different dis-functionalities and will create an opportunity through which better operational effectiveness and gains can be ensured (Simchi-Levi, Kaminsky and Simchi-Levi, 2009). Inventory Management Process Wal-Mart as a result has been able to develop the inventory management process where they look and take care of the different important needs and requirements so that they have the adequate resources at their disposal. The inventory management process has been integrated with the supply chain process and has helped the business to determine the optimal mix which will maximize the business opportunities and develop the required parameters through which better business activities will be carried out. This strategy will help to keep control of the stock and will ensure that the business is able to garner proper stock control measures. This would transform into an area where the business overall effectiveness and operational efficiency is determined by identifying the different core areas and managing inventories would be better. This will reduce the risk and chances of stock out or having excess inventories and will thereby look to bring about a complete change in the manner different business activities are carried out. The process which Wal-Mart has adopted looks towards having an agile system so that there remains flexibility and provides an opportunity through which better streamlining of the business becomes possible. This has thereby looked into the present working environment and has developed a process through which superior services are being delivered and the business is able to work on the different core areas. The degree of relationship which Wal-Mart has developed is based on a large extent to the relationship which the organization has with the different intermediaries and suppliers. This has helped to ensure that the agile system remains flexible and provides an opportunity to make timely changes so that better results can be achieved. The overall mechanism will help to develop the required system and will provide an opportunity through which the required standards will be delivered and better inventories will be maintained. Conclusion The report which highlights the manner in which inventory management process is an important part of the organization has been reflected through Wal-Mart. It has been identified that Wal-Mart has looked to transform the manner in which they work by integrating the supply chain with the inventory management process. This has been matched by developing the required relationship with the different intermediaries and identifying a path through which better inventory management process will be developed. The overall changes which Wal-Mart has implemented in their supply chain network has faced certain obstacles and working on those and looking towards implementing the Collaborative Planning, Forecasting & Replenishment will further help to improve the supply chain. The overall process will thereby lead towards maximizing the gains and creating a clear path through which management of different resources becomes possible. This will also entail towards having better techniques and will lead towards operational efficiency and will help Wal-Mart to bring about change and gain operational efficiency in the management of inventories. References Bhattacharya, M., Chao-Hsien, C. and Mullen, T. 2007. RFID Implementation in Retail Industry: Current Status, Issues, and Challenges. Accepted to Decision Science Institute (DSI) Conference, Phoenix AZ, for November 2007 conference. Chopra, S. and Meindl, P. 2004. Supply Chain Management. Upper Saddle River, NJ: Prentice Hall. Disney, S. and Towill, D. 2003. Bullwhip Reduction in Supply Chains: The Impact of VMI International Journal of Operations and Production Management. 23 (6), 625-651. Enarsson, L. 2006. Future Logistics Challenges. Frederiksberg, Denmark: Copenhagen Business School Press. Garfinkel, S. and Rosenberg, B. 2005. RFID Applications, Security and Privacy. Addison-Wesley Professional Hugos, M. and Thomas, C. 2005. Supply Chain Management in the Retail Industry. Wiley. Kampstra , R., Ashayeri, J. and Gattorna, J. 2006. Realities of Supply Chain Collaboration. University of Wollongong, Australia: Centre for Supply Chain Research; and United Kingdom: Cranfield School of Management Michael, K. and McCathie, L. 2005. The Pros and Cons of RFID in Supply Chain Management. Proceedings of the 2005 International Conference on Mobile Business. Sydney, Australia. 623-629 NuThink, Inc. 2001. Improve Profits, Competitiveness & Satisfaction with a high performance Retail Supply Chain. Simchi-Levi, D., Kaminsky, P. and Simchi-Levi, E. 2009. Designing and Managing the Supply Chain, McGraw-Hill Read More