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Custom How Wal-Mart Utilizes Its Supply Chain essay paper
A supply chain refers to a system of people and organizations involved in conveying products to customers originally from suppliers. In the supply chain, technology is inevitable since it makes things easier. Nowadays, technology has a very vital role of in businesses with all their dealings from supplies to record-keeping. Therefore, powerful computers with high performance are networked and used for these dealings
Traditionally, the technology in Wal-Mart started with computerization of individual stores where small billing machines were used. Later on, centralized billing was used for record keeping. The technology has heavily grown to become increasingly challenging to maintain enormous volumes of data and even record-keeping hence very powerful networked computers have been introduced to ensure good record-keeping and efficiency.
Wal-Mart is considered to be having the largest information technology infrastructure of any private company in the world. Its state-of-the-art technology and network design allows accurate demand forecast, tracking and predicting inventory levels and managing customer relationships Over the past ten years, Wal-Mart has maintained its position as the world’s largest and most powerful retailer with a great inventory turnover, operating profit and sales per square foot. This company owes its steady growth from being a regional retailer to a global powerhouse largely to effective supply chain management.
Market leadership position has been primarily assumed by Wal-Mart because of its efficient integration of suppliers, manufacturing, warehousing and conveyance to stores. Its strategy for supply has four components: cross docking and distribution management, vendor partnerships, technology and integration. In this essay, I have discussed in length about supply chain management and the strategies employed
Wal-Mart’s Method of Managing the Supply Chain
Technology plays a key role in the supply chain of Wal-Mart. It actually serves as the foundation of their supply chain. The following methods have been employed in Wal-Mart and it remains the world’s largest and most powerful retailer with a great inventory turnover, operating profit and sales per square foot.
1. Using EDI for Procurement
This involves Electronic data interchangebetween computer systems. The computers of Wal-Mart are connected to those of its suppliers therefore enabling suppliers to download purchase orders. As soon as suppliers receive information about the sales of various products, they ship the required goods to Wal-Mart’s warehouses.
This is where finished goods are directly picked up from manufacturing plants, sorted out and directly supplied to customers. It is an efficient system since it reduces storage and handling of finished goods. This therefore, eliminates the role of outlet centers and storage facilities. Goods are packed according to specifications from different storage facilities and sent directly to consumers.
3. Logistics Management
A fast and responsive transportation system is an important feature associated with Wal-Mart, the distribution centers are serviced by a company owned trucks which are more than 3000. This Company believes that it needs drivers who were dedicated to customer service hence hired only experienced drivers with little violation of traffic.
4. Voice-based Order Filling (VOF)
Each person responsible for picking orders was provided with a microphone/speaker headset, connected to the portable VOF system that could be worn on waist belt. They were guided by the voice to item locations in the distribution centers. The system verified the amount of stock bought by customers. It also responds to a variety of customer requests for example providing product detail. By installing the VOF system, Wal-Mart eliminated costs associated with labeling of products. This is because the system does not need labels and paper lists to be displayed on the merchandise.
5. Inventory Management
Wal-Mart has invested heavily in information technology systems to track sales and merchandise inventories in the sales points across the U.S.A. It reduced unproductive inventory by allowing stores to manage their own stocks, hence reducing pack sizes across many product categories. A full use of IT capabilities was applied to make inventories available in items wanted most by customers. This assisted them to keep records of inventory in sales points and backup stock at the outlet areas.
Wal-Mart asked its suppliers to move from the Value Added Networks EDI to EDI enabled by the web. Value Added Networks manage and route messages relating to Electronic Data Interchange for their customers. By implementing internet-based EDI, Wal-Mart saves millions of dollars in the form of fees relating to licenses to the private Value Added Networks.
CPFR enables business partners to exchange results and forecasted information through an online platform. This reduces costs related to inventory and also enhances product availability in the supply chain. In CPFR, Wal-Mart works with its important suppliers on a real-time basis by using the online platform to determine product demand forecast jointly. This also improves efficiency of their operations.
8. Radio Frequency Identification Technology (RFID)
Due to the cons of barcodes, a new technology RFID has been identified to meet the demands. RFID is a small wireless device which can store a good amount of data and can virtually be tagged to anything. RFID is an electronic tagging technology as shown in figure 1 that allows an object, place, or person to be automatically identified at a distance without a direct line-of-sight, using an electromagnetic challenge/response exchange.
Issues at hand
Some groups in the industry claim the push from Wal-Mart for merchandise valued at lower costs puts pressure on owners of factories to remunerate little money to employees and cut on training of fire safety and proper exits. This would in turn cost them more. It still contends that improving factories should not lead to prices going up indefinitely. Wal-Mart operates on the fact that running its business on a low-cost basis leads to low prices for its weekly customers who have reached 200 million weekly
Rules and regulations of the supply chain
Its main rule is implemented as a policy and designed to create a supply chain that meets standards and at the same time delivers high quality products at low prices.
Analysis and History of Wal-Mart
Wal-Mart is a 50-year-old chain, founded by Sam Walton, he was born in 1918 at Oklahoma. By1940, he worked for a famous retailer but gave up the job to set up his own retail store. He purchased a store franchise in Arkansas and offered significant discounts on prices, he became successful and acquired a second store in 3 years, by 1969, Walton had established 18 Wal-Mart stores.
In 1980s, Wal-Mart continued to grow due to huge customer demands in small towns Wal-Mart was offering low prices, customer satisfaction guaranteed, and hours that were realistic for the way people wanted to shop. By 1984, there were 640 Wal-Mart stores in U.S.
The phenomenal growth of Wal-Mart is attributed to its continued focus on customer needs and reducing cost through efficient supply chain management practices. Currently it has more than 10,000 stores and its annual sales rose nearly 6 percent to $443.85 billion last year.
Wal-Mart emphasized the need to reduce purchasing costs and offer the best price to the customer. The company directly procured from manufacturers, by passing all intermediaries, it also finalized purchase deals only when it is fully confident that the products being bought are not available elsewhere at a lower price.
Wal-Mart spends a significant amount of time meeting vendors and understanding their cost structure. By making the process transparent, the retailer can be certain that the manufacturers are doing their best to cut down costs.
Like Wal-Mart, most companies, big or small, have a supply chain. Management of the supply chain ranges from the simplest to the most challenging depending on the size of the company to the market it is involved in. Management of a company’s supply chain, like Wal-Mart, is very critical, especially when it can make or break a company. If Wal-Mart does not manage its supply chain correctly, it would lose profits because they are providing products at lower costs than its competitors, so they must also receive lower prices from its suppliers. Overall, the supply chain of every company should not be overlooked as it may lead to a loss in profits, revenues, and even the company itself.
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