Walmart and its operations management success

The first walmart was opened in rogers, arkansas in 1962, which later was incorporated in to different walmart stores around the country. In 192 walmart went public on the new york stock exchange. by late 1900s and mid 2000 walmart was able to grow itself in to a large retailer that not only was present in u.s but around the world in countries like united kingdom, puerto rico, mexico, canada, china and india. Now wal-mart is the largest retailer company in the u.s and across the world. Most people living in the u.s have experience of shopping at wal-mart.

As of february 28, 2015, the total retail units of walmart international was 11,462 and 4520 were in the u.s., and they had 2.2 million employees with 1.3 million in the u.s. alone. Why is walmart so successful?

Each company has its own operations management system and strategy that they used to become a valuable player in the retail industry. Apparently, walmart has kept its operation managements and strategy in a great condition to gain their success today. But how walmart did that is the question that is below being answered with various factors that effected the operations of this retail giant and helped it in becoming what they are known today for around the world.

Logistic and distribution function operation management is the management of systems, or processes that create goods, or provide services. Walmart is famous on its supply chain operation; it has more than a thousand suppliers worldwide, and most of its suppliers are from foreign countries.

Walmart purchases goods made abroad with a large quantity and they also have strong supply chain team; so they can always get a real low price to minimize the cost of the goods it sells. When those goods ship and arrive to the u.s.; they go to different distribution centers depending on the goods’ category. For example, fashion product, dry grocery, perishables, etc, will have different distribution centers that they will be directed to.

There are 158 distribution centers in the u.s. and they are spread over into many different states. Under walmart’s logistic management, those distribution centers are also divided into major or minor, and located on where the market has more or less demand. Every distribution center support 90 to 100 stores in a 200 mile radius. After products are available in the distribution centers, they will then go to different walmart stores. That’s how we the end customers/users purchase our products from.

Planning on demand the main reasons why walmart can offer customer low price is not only because they are able to purchase goods in low price from foreign countries, but also they have a good management on its inventory. Walmart has good selection on the store locations and good planning on demand, so they can always provide goods and service in a timely manner.

When inventory cost is low, they will be able to offer consumers lower price. if every time consumers shop at walmart, they can always find the products they need, they will likely to come back to shop again. That’s one main reason how walmart can retain their customers and keep themselves competitive to other retailers in the u.s.

Fewer links

How can walmart achieve such a huge success in the retail industry? Walmart’s founder sam walton’s strategy is pretty much still used but with a little alteration to meet the industry’s needs in today’s century. Mr. walton use to buy in bulk when he used to owned franchise stores during late 1960s, while after buying he would transport the goods to his stores. In 1980s Walmart decides to remove some of the links in his supply chain to effectively manage its operations.

This initiative was called vendor managed inventory (vim) which shifted the responsibility of managing products from Walmart to the vendors; who provide them at the first place. Strategic vendor partnership Walmart was smart enough by only joining vendors who can provide the goods on demand at the best price to beat its competitor. Walmart strengthened its partnership with these vendors by providing them discounts and long term large volume buying agreement in exchange for their lowest price possible. “Wal-Mart’s whole thing was collaboration,” crowell said.

“That’s a big part of what made them so successful” (lu). With the help of collaboration, walmart heavily focused its attention towards communication and relationship network of their suppliers in order to improve its operation and material flow of low inventories.

Inventory tactics

Walmart’s inventory strategy is the heart of its operations management. Walmart designed cross docking concept: which enabled it to replenish inventory efficiently. It is direct transfer of products from inbound or outbound trucks, or storage trailers without extra storage.

For example first goods arrive on an inbound storage truck to their required destination which is usually the Walmart distribution center and then they are unloaded from there to outbound trucks or trailers without extra storage. With this concept, Walmart was able to keep the cost of its inventory and transportation low, reduced the transportation time and eliminated inefficiencies. It takes 24 hours for the goods to be cross dock in to trucks and trailers.

Drivers continuously drove these trucks to the Walmart centers and unload them to the stores where they are repackaged and distributed without sitting in the company’s inventory. With this concept Walmart saves significantly in costs and passed down these saving to its customers with highly competitive pricing that is unbeatable by its competitors.

Technology 5

Technology enabled Walmart to move its operations supply chain fast as it can to predict the inventory and restocking of shelves in a timely manner to avoid any shortage and uproar. Technology serves a key role for this retail giant in order to minimize cost and save billions.

Walmart has been known to have the largest information technology infrastructure of any private company in the world. its high tech technology lab and network design lab allowed to forecast demand accurately, track and predict inventory levels, create highly efficient transportation routes to minimize high levels of traffic and manage customer relationships and services responses logistics. To illustrate this:

Walmart was one of the first retail company that implemented the universal usage of bar code product system in its stores compare to any other retail company. the universal bar code system as seen on page 7 figure 2 ; enabled it to collect store information immediately and analyze it and later send it through a retail ink, which was a

Global satellite system connected to analyst; who forecast’s supplier’s demand to the supplier network. The supplier network displays the real time sales data from the cash register and to

walmart’s distribution centers. Within no second the supplier and manufactures within walmart’s supply chain network synchronize their demand projections under a collective planning and start to fulfill the request of demand projected by the data. in this extremely associated supply chain link, every link is connected through technology that includes a central database, store level point of sale system, and a satellite network.

But all this was back in the 1900s that Walmart not only used for itself but also shared it with its partners in order to provide better and efficient service to its customers (bustillo). other retailers who were also using a similar system to the above but they were not investing in innovative research and were using the third party to help them collect data and forecast demand, thus costed them a huge amount in terms of dollars, which led them to pass down this cost to their customers by increasing the prices for the goods available in their stores. it would have been much better if they had invested in something like a technology lab like walmart did that could enable them to improve their operations management system and save thousands that they can later use to achieve a competitive price in the industry.

Walmart shifted its operations control from centralized control to an approach of cooperation, collaboration and teamwork among its stores, distributions centers, suppliers and vendors. Technology still is the heart of Walmart’s operations, in recent years Walmart has introduced another system called radio frequency identification tags (rfid).

On page 7 figure 1 there is an rfid picture to help you visualize what it looks like. The rfid system uses numerical codes that can be scanned from a distance to track pallets of merchandise moving along the supply chain. Walmart has introduced another innovative technique to lower its operations cost and minimize its out of stock issues.

the another technology that walmart has started using is the use of smart tags handheld scanner as seen in the picture on page 7 figure 3, it allows employees to quickly learn which item needs to be replaced; so that shelves are consistently stocked and inventory is closely watched to avoid shortage of items, meanwhile walmart is also looking in to smart shelf pads that are placed underneath the product when it is stocked on the store shelves, this pad collects how many items are left until the shelf goes empty and sends this information to network computer to forecast and order the items as soon as possible before it goes empty.

This technology helps keep shelf full and items available to the customers. Another technology that walmart has recently started to use is the use of self-check counters available in stores for customers who want to move fast in the checking line. A picture is given on page 7 figure 4 to help you visualize how it looks like. This helped walmart in order to experiment how its customers will feel if they no longer have to wait for cashier to check their items or wait in a long line for hours due to rush hours on weekends. People like it but there were some issues related to the use of these types of counters, overall there was positive response form customers. In future if walmart decides to expand self-check counters to large numbers in its stores it will eventually cut down huge employee cost that walmart has to endure to pay cashiers on the counters, which will help even more in savings.

“according to the research at the university of arkansas, there was a 16% reduction in out of stock since walmart has implemented the use of rfid technology system in to its supply chain operations (lu), meanwhile the use of electronic code system allowed walmart to refill shelves three times faster than the traditional way. Another thing that walmart did is that it networked its suppliers as well through “computers for instance it join forces with the proctor and gamble (p&g)

for sustaining the inventory in its stores and built a computerized reordering system” (bustillo), which is connected with all the computers between p&g factory through a satellite communication system. by allowing p&g to join with walmart, p&g can either deliver the items to the walmart distribution centers, or directly supply them to needed walmart stores.

]walmart’s operation management strategy has provided the company with various competitive advantages including lower product costs, reduced inventory, and low carrying costs, improved in store variety and selection, and highly competitive pricing for its consumers. this as well helped walmart to become a leading force in a competitive worldwide market. as new technology continues to grow, walmart continues to focus on ground-breaking procedures and systems to improve and expand its supply chain and attain superior competence.

References

  • Bustillo, Miguel <http://www.wsj.com/articles/sb10001424052748704421304575383213061198090>
  • Lu, Clara <http://www.tradegecko.com/blog/incredibly-successful-supply-chain-management- walmart>
  • <http://www.usan(franonline.com/resources/supply-chain-management/walmart-keys-to- successful-supply-chain-management/#.vsr9ppnf8fo>
  • <http://www.epc-rfid.info/rfid>
  • <http: https://www.google.com/search/images>

Learning value sumaya tariq: in this assignment i have earned that how operation’s management can greatly influence and benefit a company.

After researching on walmart’s operation strategy, i was able to figure out that there are many ways to achieve cost cuts and stay competitive. Most people would think providing low prices means less revenue and cutting huge price on goods, but after reading about walmart; i now think that there are thousands of ways retailers can cut price and at the same time provide quality services. also with the help of technology retailers and other firms can outperform and improve their operations.

It means technology is also playing a huge role in creating new innovations that can help improve operations of a firm and provide efficiency in their systems. so for firms to improve and better perform compare to their competitors, they will need to not only invest in areas like marketing and product designs, product detail but also in r&d of their operation’s management to find new and faster ways to provide goods and service that are not only reachable to consumers but affordable as well.