Wal-Mart Organization Supply Chain Management - Case Study Example

Wal-Mart Organization Supply Chain Management Research Report Student Name Institutional Affiliation Wal-Mart Organization Supply Chain Management Research Report Introduction As the largest retailer in the world with net sales of about $500 billion in 2012, Wal-Mart is regarded as the best company based on its supply chain management strategies. Notably, the company’s supply chain management strategies form a key competitive edge to the Wal-Mart in its business practices and operations, in the global market (Mark, 2009). This remarkable competitive edge have enabled the company to attain market leadership in the retail and consumer goods industry through focusing on enhancing the operations efficiency, as well as suitably satisfying the real time consumer needs. Indeed, Wal-Mart Corporation considers distribution and logistics as the heart of its business operations for they are the one that keep million of goods moving to the ultimate consumers each day of the year (Johnson, 2006). Thus, the company’s commendable achievement it its supply chain management has enhanced the writer to select it as the most suitable for this study. Nevertheless, the company’s supply chain is also affected by various challenges, including high emphasis on low cost supplies at the expense of quality, less effective information flow within the supply chain, as well as lack of outsourcing its transportation and logistics management. Due to this, report has suitably outlined various feasible and effective recommendations that can be executed to enhance its competitive advantage in the industry. The Analysis of Wal-Mart Supply Chain (Distribution and Logistics Systems) Essentially, Wal-Mart has got highly automated distribution systems and centres that operate 24 hours a day. More too, the company’s distribution centres are efficiently served by its own truck fleets. Worth noting, the use of automated technology, round the clock operations, and the use of its own trucks as opposed to outsourcing truck logistics, forms the foundation of the company’s growth strategy, especially to its supply network (Jeff, 2009). For instance, in United States market alone, the company has got more than forty regional distribution centres meant for import flow. Most importantly, while penetrating to a new geographical market in the global arena, the company, firstly, determine whether the area would be in a position to hold enough stores for supporting its distribution centres. Noteworthy, each of its distribution centres usually supports about 100 retail stores located within a 250 miles area. In this regard, once a distribution centre is established, the company’s stores are consequently built around it so as to saturate the area. In addition, the distribution network suitably realigned with an aim of maximizing efficiencies through a process referred to as re-optimization (Conklin & Cadieux, 2011). As a result of its trickledown effect, the Wal-Mart’s trucks do not to move as far to retail store to make deliveries of inventory. In doing so, the shorter delivery distances significantly reduces the transportation costs, as well as lead time. On the same note, shorter lead time also means holding less safety stock. Of high essentiality, in case inventory shortage occur in the company’s retail store, replenishment can be enhanced more swiftly owing to the verity that the stores usually receive daily deliveries from the distribution centres. The Wal-Mart’s distribution network of hub and spoke, significantly, utilizes a manufacturer storage system with customer pick up (Barone, 2006). In this regard, no inventories are stored at the company’s distribution centres. More specifically, the company has a fleet of 6,500 effective trucks and above 50,000 trailers that are used in picking up goods directly from the respective manufacturers’ ware houses, thereby eliminating intermediaries and simultaneously increasing responsiveness. In addition, although the usage of trucks may seemingly raise the company’s transportation costs, it is more effective and efficient as it is justified in regard to reduced inventory. The merchandises that are brought in by the company’s trucks to the distribution centres are then sorted for deliveries to the respective retail stores within not more than 48 hours. Nevertheless, certain goods, including drugs and automotive products, are sufficiently delivered directly to retail stores by the company suppliers (Gosman & Kohlbeck, 2009). As a pioneer in the cross docking logistics technique, Wal-Mart also has got store specific orders that are packed and shipped directly to retail stores by respective manufacturers. Owing to the fact that, the organization has fast and significantly responsive logistical operations, which are a major part of the corporate successful logistic system, much care is taken while recruiting, training, monitoring, as well as assigning the drivers’ job responsibilities and schedules. Notably, since the onset of his retailing practices, the founder of Wal-Mart has always recognized the significance of recruiting experienced and highly qualified people, as well as building sustainable loyalty, not only among customers, but also among the among the employees at equal measure. Most importantly, the company only hires experienced drivers that have driven above 300,000 miles of accident free and whom it believes would be committed to enhancing customers’ quality service. Remarkably, this aspect makes its retail stores to be considered as highly reliable, effective and efficient due to their customer oriented logistic management, distribution centres, as well as sufficiently spread retail stores in the global strategic target markets (Conklin & Cadieux, 2011). In addition, the company drivers are given a manual copy, whereby they are expected to be kind and polite while dealing with store personnel, as well as other organizational stakeholders. In addition, the logistical drivers are also given rules and instructions in regard to following various pre planned travel schedules and routes, as well as ensuring responsible off loading of tracks in both distribution centres and retail stores, and also safe guarding the company’s properties. For instance, although the company truck drivers usually deliver loaded trailers during the afternoon hours, the trailer can only be brought to the docks of a store at its scheduled time of unloading. Worth noting, off loading are done within 2 hours intervals during nights, and the drivers are expected to nights at work and also return to the respective distribution centres at pre-scheduled times with the off loaded, empty tracks. This is highly strategic for the company, owing to the fact that, when logistical operations are done during night hours, especially offloading and supplying inventories to retail stores, enhances conveniences and fewer interruptions on the part of customers buying practices. Moreover, the company’s logistic co-ordinators usually monitors closely the detailed adherence records upon each company’s driver (Jeff, 2009). Through effectively managing all aspects of its supply chain operations, as well as treating all the actors within its supply chain fairly, the Wal-Mart ultimately realizes remarkable results, which remains unrivalled in the entire arena of supply chain. In this regard, rules adherence is the key to consistency, which consequently leads to sufficient preparedness that consequently lead to effective execution. The Relationships in the Supply Chain Network The Wal-Mart Company has got a strategic supply chain network management, which significantly enhances lower product costs, and consequently highly competitive pricing to the target customers. In addition, it is due to the company’s remarkable supply chain management that has greatly enhanced the company to become the largest and most powerful retailer in the world, with the biggest sales and inventory turnover, as well as high operating profits. Therefore, Wal-Mart owes its transition from being a regional retailer to a global powerhouse mainly to changes on and effective management of its entire supply chain. The company began with a key goal of providing customers with goods they specifically want where and when they need them (Mark, 2009). Wal-Mart has also developed reduced cost structures that are significantly aligned to its efficient supply chain strategy. In specifics, the company uses cross docking, whereby products are transported from suppliers to the company’s distribution centres, where they are then appropriately delivered to retail stores without being kept there for long durations of time. Notably, this strategy helps in reducing the Wal-Mart’s supply chain operational costs, which is then passed to consumers through a highly competitive pricing (Johnson, 2006). Essentially, the main components of the company’s supply chain network include procurement, operations, logistics, and integration. In this regard, the supply chain commences with purchasing, whereby the purchases manager determines the products the company would sell at each specific store, sources and procures products from suppliers at terms and conditions that satisfy the company’s profitability goals. The operations of supply chain mainly focus on demand planning, inventory management, as well as forecasting. This allows the company to reduce the inventory carrying costs in the long run while still satisfying the customers’ needs. With its remarkable network, products are moved from manufacturing plants or warehouses to the company’s distribution centres, and ultimately to retail stores for potential customers to purchase, which is the company’s supply chain distribution function (Gosman & Kohlbeck, 2009). In addition, the company has got an integrated supply chain, in which there is a collaborative workflow and information flow within the entire company and among all supply chain components with a focus of maximizing efficiencies. The Opportunities and Challenges of the Company’s Supply Chain Network Although the Wal-Mart has been able to acquire the market leadership position in the retail and consumer goods industry globally through its effective integration of suppliers, manufacturers, warehouses, distribution centres and retail stores, there are some various supply chain opportunities and challenges that can be attributed to the company. Firstly, besides focusing on low priced supplies, the company has got an opportunity of enhancing better customer satisfaction through taking keen emphasis on product quality (Dan, 2008). Worth noting, Wal-Mart remains with a dire challenge as it is yet to build substantial and long term strategic partnerships with most of its supply chain actors, including suppliers, employees, as well as customers. This would enhance the company to accomplish long term cooperation with its stakeholders, thereby enhancing more effective supply chain management and service delivery, with a key focus of enhancing increased customer satisfaction. In addition, with the establishment of strategic partnerships and relationships with most of its supply chain actors the company stands a chance of enhancing its cross docking, distribution, transportation and inventory management, as well as reducing operations time and costs, thereby eliminating inefficiencies. The other supply chain challenge regards ineffective information technology infrastructure. In this regard, although the company has significantly installed substantial information technology infrastructure, like any other private company in the world, the company has got an opportunity of updating its information technology as the level technology advances. In doing so, Wal-Mart would remain in a strategic position to accurately forecast demand, tracking inventory levels, creating more effective transportation routes, managing supplier and customer relationships, as well as service response logistics on a consistent basis (Li, 2007). Recommendations Having analysed the company’s commendable supply chain management that mostly focuses on efficiency and cost reduction, one can generally conclude that, the company’s supply chain operations and practices are laudable. However, based on the analysis of the company’s supply chain opportunities and challenges, it can be seen that the company is yet to realize its ultimate goals in this function. It is due to this that this report has got to offer various effective and feasible recommendations, which would be executed to enhance the company’s further effectiveness in its supply chain management. Firstly, it is worth to note that the company’s supply chain activities cover procurement, sourcing, logistics, as well as information systems. It is of high importance for the company to ensure that it strategically coordinate all activities within each of these functions of the supply chain (Radhakrishnan, 2001). The first recommendation is that the company should significantly ensure that besides emphasizing on ensuring low cost of supplies, the company must also embrace quality inventories with a focus of maximising the customer satisfaction. Essentially, low cost is in most cases related to compromised quality, which perceivably does not meet the customers’ expected quality standards. Therefore, the Wal-Mart should significantly embrace quality, while at the same ensuring low cost sourcing of supplies for better and sustainable customer satisfaction in the long run (Plambeck, 2007). Furthermore, the company has got own transportation system, having its own trucks for distribution purposes. This is a relatively expensive strategy as compared to outsourcing the logistics and transportation services, in the long run. Thus, this report recommends the company to shift to outsourcing the logistics services. In this regard, there are many effective transportation and logistics operators that can potentially add value to the company’s supply chain practices owing to the evident that it is their key area of specialization. Outsourcing can suitably decrease the cost of company’s operations due to their more effective quality deliveries, as well as releasing the company from managing transportation activities, which include hiring, monitoring, trailer procurement, and maintenance (Schulz, 2013). In addition, it would enable the company to concentrate on its core operations of enhancing its supply chain networks and market performance. Additionally, the company should consistently ensure installation of up to date and highly advanced information and communication technology. This would consequently allow effective information flow both within and outside the company, thereby allowing the companies supply chain partners to significantly realize their long term plans with the company (Leeman, 2010). Moreover, it would also enhance the control of day to day flow of consumer products and information both up and down the supply chain. References Barone, M. (2006). The Wal-Mart Model. US News World Report, 140(1), 28. Conklin, D. W., & Cadieux, D. (2011). Transformations of Wal-Mart: Experimenting with New Retail Paradigms. Richard Ivey School of Business Foundation, 1-4. Dan, K. (2008). Supply-Chain Operations: Wal-Mart Stores. SN Supermarket News, 56, 29 Gosman, M. L., & Kohlbeck, M. J. (2009). Effects of the Existence and Identity of Major Customers on Supplier Profitability: Is Wal-Mart Different? Journal of Management Accounting Research, 21(1), 179-201. Jeff, B. (2009). Walmartʼs Maxwell cites keys to developing best-in-market global supply chains. Logistics Management, 48(10), 18. Johnson, F. P. (2006). Supply chain management at wal-mart. Richard Ivey School of Business Foundation, 907(D01), 1-15. Leeman, J. (2010). Supply Chain Management: Fast, flexible supply chains in manufacturing and retailing. Düsseldorf: Institute for Business Process Management. Li, L. (2007). Supply chain management: Concepts, techniques, and practices enhancing the value through collaboration. Hackensack, NJ: World Scientific. Mark T Hoske. (2009). The wisdom of Wal-Martʼs supply chain strategies. Manufacturing Business Technology, 27(5), 6. Plambeck, E. L. (2007). The Greening of Wal- Martʼs Supply Chain. Supply Chain Management Review, 11(5), 18-25. Radhakrishnan, P. (2001). Proceedings of the 1st international conference on logistics and supply chain management. New Delhi: Allied Publishers. Schulz, J. D. (2013). Logistics Management’s Top 50 Less-than-Truckload & Truckload Trucking Companies. Retrieved from http://www.supplychain247.com/article/logistics_managements_top_50_less-than-truckload_truckload Read More