Founded by Sam Walton in 1962, Wal-Mart was ranked second in the global Fortune 500 list in 2009 (Refer Table 1). It was the largest retailing company in the world, which specializes in satisfying consumers’ durable goods product needs and offering consumers a choice multiple merchandise lines, at variable price points, in all product categories. TABLE 1
GLOBAL FORTUNE 500 LISTS (2009) Rank| Company| Revenues (in millions)| 1| Exxon Mobil| 442,851.0| 2| Wal-Mart Stores| 405,607.0| 3| Chevron| 263,159.0| 4| ConocoPhillips| 230,764.0| 5| General Electric| 183,207.0| Source: www.fortune.com
Wal-Mart was able to achieve a leadership status in the retail industry because of its efficient supply chain management practices. 3 areas where Wal-Mart manages the supply chain: Procurement & Distribution Wal-Mart procured goods directly from manufacturers, bypassing all intermediaries. It was a tough price negotiator which will only purchased when it was fully assure that the products bought were not available elsewhere at a lower price. Wal-Mart also spent time meeting vendors and understanding their cost structure.
By making the process transparent, it would know which manufacturers were doing their best to cut down costs and then it will establish long term relationship with that vendor. Besides, Wal-Mart had over 40 distribution centers at various locations in the US to ensure steady and consistent flow of products to support the supply function.
To manage center easier and more economical, it used sophisticated barcode technology and hand-held computer systems to enable the packaging department to get accurate information about the products to be packed so as to save time on unnecessary paperwork. It also allowed the center supervisors to monitor their employees closely which resulted in satisfying customer needs quickly and improving the level of efficiency.
Logistics Management Wal-Mart has fast and responsive transportation system. It has over 3,500 trucks to service its distribution centers by shipping goods from distribution centers to stores within two days and replenishing the store shelves twice a week. To make its distribution process more efficient, Wal-Mart adopts a logistics technique called ‘cross-docking’ where finished goods were directly picked up from suppliers’ manufacturing plant, sorted out and then directly supplied to the customers. This reduced the handling and storage of finished goods, virtually eliminating the role of the distribution centers and stores.
Inventory Management Wal-Mart allowed stores to manage their own stocks, reduced pack sizes across many product categories, and timely price markdowns to reduce unproductive inventory. It also networked its suppliers through computers. This was a win-win situation as Wal-Mart could monitor its stock levels constantly and also identify fast-moving items while suppliers could lower its costs and pass on the savings to Wal-Mart. Wal-Mart used bar coding and radio frequency technology to manage its inventories where goods were directed to the appropriate dock, and then loaded on to the trucks for shipment.
In brief, I would say that Wal-Mart’s SCM practices lead to increased operational efficiency and better customer service. Old stocks are eliminated and qualities of goods are maintained. Bar coding and radio frequency technologies allowed accurate distribution of goods. Cross docking helped reduce inventory storage costs and cut down the labor and other handling costs involved in loading and unloading of goods. Wal-Mart is definitely a good example which succeeds in SCM practices.
(500 words) Appendix 1
Bibliography 1. ICFAI Center for Management Research (ICMR), Wal-Mart’s Supply Chain Management Practices, P. Mohan Chandran, 2003 http://mohanchandran.files.wordpress.com/2008/01/wal-mart.pdf
2. Wal-Mart, the Wikipedia http://en.wikipedia.org/wiki/Wal-Mart
3. FORTUNE 500 2009 http://money.cnn.com/magazines/fortune/fortune500/2009/
4. Wal-Mart’s Supply Chain – A Business Success www.gyte.edu.tr/dersler/546/.../2-Wal-Mart%20Supply%20Chain.ppt
5. Supply Chain Management Case Studies: Why Wal-Mart’s supply chain is so success http://supply-chain-case-studies.blogspot.com/2008/06/walmart-scm-strategy-analysis.html