When it comes to Walmart, the first thing that comes to mind is Supply Chain excellence for a gigantic network of retail. Without it, Walmart could not be able to keep price competitive amid managing inventory for over 5,000 retail branches with a 1.3-million workforce effectively and stably without it. This excellence is what executives and professionals dedicate a lot of time and effort to observe and analyze what Walmart does, to master their own craft. Above and beyond, aside from mastering conventional logistics, Walmart has invested and introduced various technologies that transforms the normal. Today, Walmart’s distinction extends beyond Supply Chain into intuitive investments in various technologies that can be applied to target customer groups online and viable e-commerce platforms that further stabilizes its market share. Such excellence is noticeable in 3 areas:
1. Decades in Making
Walmart has been dealing directly with manufacturers since 1980. As supply efficiency relies on inventory and warehouse manageability, the strategic alliance resulted in a Vendor Managed Inventory (VMI), where the manufacturer authorized full access to the distributor’s inventory data to maintain its inventory. In other words, as oppose to integrating vertically, it’s a business model where the manufacturer handles the inventory for the distributor to optimize 2Es (efficiency and effectiveness) by cutting out redundant workflows, i.e., logistics from initial producer to the retailer. It requires corporate realignment, enterprise systems and modern technology that Trans-interacts in real-time to ensure products fill the shelves fast and will always be available. Walmart, however, commenced the technology before VMI was developed, in 1975, with the application of computer systems to handle inventory and distribution networks.
Today, the Walmart-Manufacturer VMI system acts as a clearinghouse that determines supply and inventory, point of sales and real-time sales. Suppliers know before Walmart does which products are approaching out-of-stock, needs restock, not selling or experiencing problems, and so on. Walmart had its own satellite system in 1987, which made effective communication with supply chain operators and strategic partners possible. In 1989, Walmart realized the benefit of supply chain management as cost associated with distribution could be as high as 1.7% of overhead. It is safe to say that vision and planning was, not only the key success factor for Walmart, but it was way ahead of its time, with regards to intuitive negotiation with strategic partners and exploitation of cutting-edge technologies that saw competitors left in the dust. It literally rewrote the textbook for Supply Chain Management (SCM).
2. Beyond Technology
Walmart has an extensive network of over 160 distribution centers, covering approximately 120 million square feet of which MWPVL, a supply chain and logistics consulting firm, estimates to cater about 81% of Walmart’s logistics. TradeGekco, an inventory management software company, reported that the retail king arranges cross-docking zones for inbound packaging and distributed through outbound routes with minimal distance and turnaround time. The result is reduced storage, inventory management and transportation costs as well as maximized speed. Having its own logistics fleet also allows for higher minimum operational standards in comparison to competitors. For example, to become a driver an applicant must have at least 25,000 miles of driving experience with zero incidents of negligence-induced accidents in the last 3 years before applying. Be it the distribution network expansion, driver’s qualifications all the way to investments to viable technologies; the time and effort Walmart puts into SCM, from up to downstream and beyond, is conspicuous.
3. Components of Supply Chain Management (SCM)
Walmart’s SCM approach has raised the bar for the entire industry. The craft is mastered by applying purchasing systems, distribution and integration concepts to its strength.
Purchasing: The selection process of products to be put on the shelves, strategic partners and suppliers, and the negotiations that leads to streamlined joint operations.
Operation: The focus is on predictive models, demand-led strategies and inventory systems. Forecast is based on big data from past to present to determine viable trends, to include promotions and competitiveness in different seasons. Demand-led strategies solidifies forecast accuracy and serves as an important process in SCM optimization. Stock levels are compared and matched to demand patterns to assure retail availability and appropriate supply.
Integration: Is a combination of various approaches to manage the flow of inventory between manufacturers, distribution channels, retail branches and most importantly, delivery to end customers. Each stage comes with predefined standard operating procedures with processing information in real time over a wide network of sources across the continent, all of which synchronizes and optimizes SCM 2Es.
All the above catalyzes Walmart’s SCM success and therefore its ability to minimize operational costs and inventory overheads, optimize in-house operation and control, and last but nonetheless, the exponentially enhanced ability to deliver goods to customers at a lower price. Businesses around the world have adopted the SCM model in the 3 areas and succeeded. It’s never too late to put a winning plan to implementation. Por-Piang Philosophy suggests; that while the Progressive Outlook calls for learning to be a lifelong journey, the first step onto the Expertise Cornerstone requires grasping what needs to be learned, next, before hands-on pursuits to master the craft. Integrity, on the other hand, renders the objectivity required to weed through short term aberrations and identify long term viabilities in the most accurate manner possible, based on big data patterns.
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