Wal-Mart Supply Chain Management Practices - Example

Wal-Mart Supply Chain Management Practices Name Institution Course Date Executive Summary Wal-Mart is world’s largest retailer with presence in many countries across the globe. This report has provided the retailer’s supply chain management practices by delving on the design and integration aspects of its supply chain. The is discovered that Wal-Mart has a robust supply chain management system that is integrated using the latest technology to ensure ease of coordination and collaboration between Wal-Mart and parties within the supply chain, such as suppliers and customers. Among the supply chain practices of the company include operating own distribution centers, and trucks and drivers, cross-docking and e-commerce. However, it is suggested that Wal-Mart needs to consider outsourcing its transport and distribution system, as well as make its supply chain more sustainable to help it build a competitive advantage. Table of Contents Executive Summary 2 Table of Contents 3 1.0 Introduction 4 2.0 Wal-Mart Supply Chain Design 4 2.1 Distribution Centers 4 2.2 Cross-docking 5 2.3 Own Trucks and Drivers 5 2.4 E-commerce 6 3.0 Supply Chain Integration 6 5.0 Conclusion 8 References 9 1.0 Introduction The business environment in which companies operate has experienced a dramatic shift in the last decade. The shifts has been driven by rapid technological developments, coupled with globalization that has given rise to the business environment becoming more complex and competitive than ever before (Chakravarty 2014, p. 5). Accordingly, this requires effective strategic business management and the management of supply chain in particular. Effective management of supply chain is particularly important and more demanding for manufacturing companies as they are involved in the movement of parts from the supply through to the production stage and finally to the end user (Watson et al. 2012, p. 6). Therefore, to achieve efficiency, the supply chain design needs to be appropriate. Additionally, there has been an increased shift towards supply chain integration by companies in recent years. Wal-Mart is the world’s largest retail store. The company currently operates in over 100 countries across the globe (Supply Chain Digest 2017). To ensure the success of its operations globally, Wal-Mart has had to implement an effective and efficient supply chain management system. This report describes Wal-Mart’s supply chain management practices, especially in the area of design and integration. 2.0 Wal-Mart Supply Chain Design Effective supply chain management is critical to the success of a company. In today’s complex and competitive business environment, supply chains compete. Watson et al. (2012, p. 2) state that the adoption of an effective supply chain is a source of competitive advantage. Supply chain denotes the systems through which companies deliver their services and products to the customers. It involves the movement of raw materials from the suppliers along the chain up to the time it reaches the final end user. Wal-Mart is an American multinational retailer with one of the best supply chain design that ensures that products flow efficiently from the suppliers to its stores and finally to its customers. 2.1 Distribution Centers Wal-Mart’s supply chain is characterized by own and leased warehouses or distribution centers that ensures that customers are able to get products on time. Reports indicate that once goods are bought by Wal-Mart from suppliers, they are transported by tracks to the company’s own and leased distribution centers which are located nearby its retail stores. From the warehouses, the products are split up by the retailer and delivered to the retail stores for customers. Wal-Mart takes the whole responsibility of breaking down the large stock and distributes them to other Wal-Mart stores. In 2014, 80% of Wal-Mart’s products in the United States were shipped to these warehouses (Supply Chain Digest 2017). Creating and leasing warehouse facilities has been critical to the retailer’s success as they ensure that the retailer does not experience stock outs (Govil & Proth 2002, p. 18). Although Wal-Mart deliver most of its stick to distribution centers, where they are kept for distribution, the retailer also allows suppliers to transport some of the products directly to the retail stores without necessarily taking them to the warehouse for later distribution (Roberts & Berg 2013, p. 131). Allowing suppliers to deliver products direct has been beneficial to Wal-Mart, especially in instances, where the retailer is about to run out of stock. 2.2 Cross-docking Cross-docking is another design feature of Wal-Mart’s supply chain. Cross-docking is an emerging inventory management system, which was popularized by XRT retailer. In cross-docking inventory management system, inbound shipments are offloaded directly onto waiting outbound trucks at distribution centers without necessarily having to keep the shipments in the distribution centers (Sony 2015). Analysis indicates that Wal-Mart introduced cross-docking system at its distribution centers that number about 160 and covering about 120 million square feet. With this system in place, some of the inbound shipments from suppliers are moved to the outbound waiting trucks, where the inventory is packed and distributed to the various retail stores (Chakravarty 2014, p. 7). The adoption of cross-docking inventory management system has been beneficial to Wal-Mart because it lowers the inventory storage cost (Sony 2015). Additionally, this supply chain design has been beneficial to the retailer as it results in reduced transportation cost. Moreover, this inventory management system has been beneficial to Wal-Mart as it has resulted in less time being spent in transit. 2.3 Own Trucks and Drivers Getting products from the suppliers to the stores efficiently and in a cost effective manner is important for the success of a company. Wal-Mart understands that to meet the needs of its customers it must ensure that there is availability of stock all the time. To realize this, Wal-Mart operates its own trucking fleet and drivers (Hill & Jones 2009, p. 493). The company trains its drivers to ensure that they are able to deliver the stock with the company’s trucks free of accidents or incidents. The company does this by maintaining the minimum standards for all drivers that include three years and 250,000 miles driving experience that is free of preventable accidents (Supply Chain Digest 2017). Although using own trucks and drivers provides reliability for the timely distribution of products from the supplier to the distribution centers, and to the retail stores because it gives the company greater control, the adoption of this supply chain management approach has the shortcoming as it is costly (Lan & Unhelkar 2006, p. 27). This is because it means that Wal-Mart has to pay for driver salaries, ensure that trucks are properly maintained and keep truck of the distribution all the time, which consumes management time. 2.4 E-commerce Online retailing has become a trend in recent years as more and more consumers embrace online purchasing. Accordingly, Wal-Mart has taken advantage of this growing trend in the retail industry by making e-commerce part of its supply chain management system. Wal-Mart created an online platform, where customers can view the products they need, order, pay electronically and collect the products at their selected outlets (Nash 2017). In the UK, the company adopts this method to attract the growing population of tech-savvy Britons who demand online purchasing. Once a customer has paid for the product ordered, Wal-Mart uses its trucks and vans to deliver the products to the customers at their preferred outlets with the next 48 hours depending on the customer location. The fact that Wal-Mart has an efficient distribution system has helped the company build credibility and trust with customers thus giving it a competitive edge over rivals, such as Amazon. 3.0 Supply Chain Integration Supply chain integration has become a trend across industries as companies seek to achieve supply chain efficiency and competitive advantage. Supply chain integration involves the use of management techniques to bring together the company, customers and suppliers to work together to optimize their performance in the development, distribution and support of the company end product (Sehgal 2009, p. 4; World Customs Organization 2005, p. 84). The objectives of supply chain integration are many. One of the objectives of supply chain integration is to ensure ease of coordination of resources of participants in the supply chain to as to optimize supply chain performance. In other words, supply chain integration is meant to address coordination problems at operational and tactical levels. Supply chain also aims to promote communication between the company and every party within the supply chain and this translates to greater supply chain performance. Chan et al. (2012, p. 29) indicate that integration process calls for a disciplined application of management processes, skills and technologies. Wal-Mart is one of the companies with a highly integrated supply chain, which acts as source of competitive advantage for the company. The retailer has in recent years in traduced various technologies that have ensured that its suppliers, and customers are in-synch with each other, thus enhancing its supply chain performance. Today, Wal-Mart has the largest IT infrastructure in the private company world. The company’s technology and network design allow the retailer to forecast with accuracy the demand for products, track and predict stock levels, as well as develop efficient transport routes and effectively manage customer relationships (Supply Chain Digest 2017). One of the technologies that Wal-Mart uses to integrate its supply chain is the Retail Link database. With the help of satellite system, Wal-Mart is able to use its Retail Link system to connect to analysts who then estimate supplier demands via the supplier network, which then provide sales data real time from the company’s cash registers and to the retailer’s distribution centers (Dunne et al. 2013, p. 199). Additionally, Wal-Mart has a centralized database, satellite network and store-level point-of-sale system that it uses to link with the manufacturers and suppliers within the supply chain. With these technologies, Wal-Mart is able to synchronize manufacturers and suppliers within the supply chain and this in turn allows for ease of demand projection through collaborative planning (Ireland & Crum 2005, p. 27). Additionally, Wal-Mart promotes supplier chain integration by adopting a radio frequency identification tags (RFIT) that it uses to link with suppliers to ensure efficient movement of merchandize along the supply chain (Rosenblum 2014). Figure: Wal-Mart Supply Chain Map Source: Roberts and Berg (2013) 5.0 Conclusion Wal-Mart as a multinational company has a robust supply chain management system. The retailer has an efficient supply chain design that consists of an own distribution centers, own trucks and drivers, cross-docking and is also leveraging on technology to facilitate online retailing. Additionally, the company has one of the most robust supply chain integration that promotes collaboration and coordination within the supply chain. However, there are certain recommendations that that the retailer needs to implement going forward to improve its supply chain performance. First, it would be important for the retailer to consider outsourcing some of its supply chain operations, such as transport and distribution. Today, big companies like Wal-Mart have the opportunity to enhance their supply chain performance by outsourcing operations, such as distribution to logistic companies such as DHL. This is important as it will relieve the retailer of the burden of having to buy and maintain many trucks, which is not only expensive, but also requires close monitoring and management. Second, Wal-Mart needs to adopt sustainable supply chain management practices that include sourcing its products ethically and adopting sustainable [practices, such as powering its stores with solar panels. This would not only enhance the performance of its supply chain, but also make the retailer attractive to health and environment conscious customers. References Chakravarty, A. K 2014, Supply chain transformation: evolving with emerging business paradigms. Springer, Oxford, NY. Chan, H. K., Lettice, F., & Durowoju, O. A 2012, Decision-making for supply chain integration: Supply chain integration. Springer Science & Business Media, Mason. Dunne, P. M., Lusch, R. F., & Carver, J. R 2013, Retailing. Cengage Learning, Cambridge. Govil, M., & Proth, J 2002, Supply chain design and management: strategic and tactical perspectives. Academic Press, New York. Hill, C., & Jones, G 2009, Strategic management theory: an integrated approach. Cengage Learning, Harvard. Ireland, R. K., & Crum, C 2005, Supply chain collaboration: how to implement cpfr and other best collaborative practices. J. Ross Publishing, London. Lan, Y., & Unhelkar, B 2006, Global integrated supply chain systems. Idea Group Inc (IGI), London. Nash, K 2017, Wal-Mart builds supply chain to meet e-commerce demands. The Wall Street Journal 7 May, viewed July 6, 2017 https://www.wsj.com/articles/wal-mart-builds-supply-chain-to-meet-e-commerce-demands-1431016708 Roberts, B., & Berg, N 2013, Walmart: Key insights and practical lessons from the world's largest retailer. Kogan Page Publishers, Chicago. Rosenblum, P 2014, How Walmart could solve its inventory problem and improve earnings. Forbes 22 May, viewed 6 July 2017 https://www.forbes.com/sites/paularosenblum/2014/05/22/walmart-could-solve-its-inventory-problem-and-improve-earnings/#5561149c5db1 Sehgal, V 2009, Enterprise supply chain management: Integrating best in class processes. John Wiley & Sons, Upper Saddle River. Sony, P 2015, Managing Walmart’s supply chain – Cross-docking and other tools, viewed July 6, 2017 https://finance.yahoo.com/news/managing-walmart-supply-chain-cross-230540171.html Supply Chain Digest 2017, Timeline of 50 years of Walmart's supply chain, viewed July 6, 2017 https://finance.yahoo.com/news/managing-walmart-supply-chain-cross-230540171.html Watson, M., Lewis, S., Cacioppi, P., & Jayaraman, J 2012, Supply chain network design: applying optimization and analytics to the global supply chain. FT Press, Oxford, NY. World Customs Organization 2005, Integrated supply chain management. World Customs Organization, New York. Read More