Walmart. What are the different components of the supply chain?

Walmarts Supply Chain

Wal-Mart, a leading corporation (Fortune500), with profits more than $16 billion, has to support a multifaceted Supply Chain. Its Supply Chain Management (SCM) can be split into several components: Production, supply, Inventory, transportation, location and information. Production - focuses on the strategic decisions of Wal-Mart regarding the manufacturing of products (Wal-Mart, 2012). OUTSOURCING? Supply - Then is the major component for Wal-Mart, the supply. Wal-Mart at this stage obtains required inputs for production of its products and services.

Wal-Mart focuses on the quality of product, flexibility in prices, developing velocity to determine supply of inputs that helps to maintain its low cost strategy continue (Wal-Mart 2012). Inventory - is one more significant component which has to do with the competitiveness of Wal-Mart within the industry. For effective management of inventory, Wal-Mart focuses on day to day stock based on Radio Frequency Identification (RFID) technology. It is a technology that is basically used to track remaining goods within organization (Wal-Mart 2012).

Transportation - is intimately related to inventory decisions and also with the customer requirements (Bolstorff & Rosenbaum 2007). Wal-Mart uses stores to offer its products to its customers as well as delivery services using its own trucks (Wal-Mart 2012).Wal- Mart is trying to coordinate the transportation in order to have the lowest possible distance travelled. Location - is also an important part of the business as it determines success of the business (Lambert 2008). Wal-Mart emphasizes on customer demands and determination of customers’ satisfaction in determining places for its stores. Identification of customer demand helps to determine the locations for stores and production facilities in order to be close to the consumers (Wal-Mart 2012).

Information - The final component is information. Information is an important component of the supply chain of an organization as it includes collection of information from end-users and to link them with resources (Li 2007). Wal-Mart is using linked computers through the largest satellite system to execute information globally.(Markowitz, 1988) All the stores globally are connected with each other which help to get customer feedback and information and to implement them within the business (Wal-Mart 2012).

References:

  • Markowitz, A. (1988). Wal-Mart launches world’s largest private satellite communication system. Retrieved March 18, 2012 from http://findarticles.com/p/articles/mi_m3092/is_n3_v27/ai_6333369/
  • CNNMoney. (2011). Fortune 500. Retrieved March 9, 2012 from http://money.cnn.com/magazines/fortune/fortune500/2011/full_list/
  • Bolstorff, P. & Rosenbaum, R. G. (2007) Supply chain excellence: a handbook for dramatic improvement using the SCOR model. 2nd ed. USA: AMACOM Div American Mgmt Assn.
  • Lambert, D. M. (2008) Supply chain management: processes, partnerships, performance. 3rd ed. USA: Supply Chain Management Inst.
  • Li, L. (2007) Supply chain management: concepts, techniques and practices enhancing the value through collaboration. Singapore: World Scientific. WalMart. (2012). Retreived March 9, 2012 from http://www.walMart.com/

What are the key issues in the supply chain at strategic through the tactical to the operational level?

Wal-Mart in order to manage successfully the massive Supply Chain Management (SCM) has to concentrate in some key issues. These issues span a large spectrum of a firm’s activities, from the strategic through the tactical to the operational level. The strategic level deals with decisions that have a long-lasting effect on the firm. (CHAPTER 1)

Wal-Mart focuses mainly on the Everyday Low Prices (EDLP) strategy. In order to have a successful hit on low-cost strategy the company has to establish strategic partnership with second-tier suppliers, bypassing intermediates, and obtain lower raw-material prices. Another strategic tactic is the numerous distribution centres in different geographical places in the US. Wal-Mart’s own warehouses supply about 80% of the inventory.

Each distribution centre is divided in different groups depending on the quantity of goods received. (RFID and SCM) RFID is the main key issue within this tactic. Department of Defense (DOD) and the retail giant Wal-Mart are both convinced that RFID in their internal and external supply chains could save billions of dollars. (DEFENCE.GOV) Moving on to the tactical level which includes decisions that are typically updated anywhere between once every quarter and once every year. This involves fast and responsive transportation system.

This committed system enables shipping of goods from distribution centres to the stores within 2 days and replenish the store shelves twice a week (RFID and SCM). In order to increase efficiency, Wal-Mart adopted a logistics technique called “Cross Docking”. In this distribution system items received at the warehouse are not received into stock, but are prepared for shipment to another location or for retail stores. Cross docking can achieve a cost reduction by skipping, put away and retrieval steps (Martin Murray, Logistics).

Finally, the operational level refers to day-to-day decisions (CHAPTER ONE). A high-quality communication across the stores was vital for Wal-Mart expansion rate. For this, Wal-Mart set up its own satellite communication system in 1983. This allowed the management to monitor each and every activity going on in a particular store at any point of the day and analyze the course of action taken depending on how the things went.

Wal-Mart allows stores to manage their own stocks by full use of its IT infrastructure. Wal-Mart owns the “Massively Parallel Processor (MPP)”, the largest and the most sophisticated computer system in private sector, which enables it to easily track movement of goods and stock levels across all distribution centres and stores, all in real-time (RFID and SCM).

References:

  • “Wal-Mart Case Study – RFID and Supply Chain Management” (p. 8) by Sangita, A. Vnkata, C. Brendon, D. Raxesh, P. Shazeb, S. Ramachandra, Y. (2005).
  • U.S. Department of Defence. (2005). Radio Frequency Identification. Retrieved March 9, 2012 from https://kb.defense.gov/app/answers/detail/a_id/483/~/radio-frequency-identification-%28rfid%29s
  • Murray, M. (2012). Cross Docking. Retrieved March 9, 2012 from http://logistics.about.com/od/supplychainglossary/g/Cross_Dock.html
  • Sangita, A. Vnkata, C. Brendon, D. Raxesh, P. Shazeb, S. Ramachandra, Y. (2005). Wal-Mart Case Study – RFID and Supply Chain Management. Retrieved March 9, 2012 from