The American based company “Wall-Mart”
The American based company “Wall-Mart” is the world’s biggest retailer in terms of sales. Supply chain management is one of the core focuses of the American giant. Many analysts believe that the most principal reason for Wall-Mart success is that it is considered a “best-in-class” company for its supply chain management practices (Alley, Jimmy, 2012).
Sam Walton, the founder of this successful company, provided lots of suggestions on establishing a better retailing company: hiring talented and experienced employees, offering significant discount on product prices. And locating the stores in more convenient places. The strategy was to sell high volumes of discounted products and in order to achieve this goal Wall-Mart needed to achieve high levels of efficiency in its supply chain. In this paper, we will discuss two areas: distribution and logistics system, and the benefits the IT brought to Wall-Mart’s inventory and logistics management.
PART ONE Distribution and logistics system 1 .
Distribution Centers A distribution centre is a warehouse which is stocked with products to be distributed to retailers and wholesalers, or directly to customers. When Wall-Mart decides to enter a new area, It Is first determined whether the chosen location can endure enough stores to support a distribution centre. After building a distribution centre, stores will be opened around it steadily in order to satiate the area. Within the centre, different sections are provided on the basis of the quantity of the goods received.
In order to ensure a steady and consistent physical distribution, Wall-Mart uses sophisticated barded technology and hand-held computer systems, which will be discussed In the second question. Wall-Mart has also adopted an Integrated logistics system by establishing an alliance with Its main suppliers In order to manage Wall-Mart’s inventory and to formulate their own production and distribution schedules.
The same system allows vendors and suppliers to send Wall-Mart an ASSN “advanced shipping notice” of every delivery to a distribution centre. Wall-Mart uses the Sans in order to schedule the dispatch of goods from distribution centers to stores.
The wide range of information being exchanged in the system helps Wall-Mart to reduce warehousing and inventory carrying costs as well as reducing stock-outs at TTS stores (Zion ; Paranormal, 1997). 2. Trucks and Truck Drivers While Wall-Mart owns a well-performed distribution centre and has a high reputation on it, it also enjoys the good fame on its logistics infrastructure.
Being known as a fast and responsive transportation system, Wall-Mart maintains a private fleet of trucks and a skilled staff of truck drivers. Wall-Mart’s considerable truck fleet enables the company to adopt SIT “Just in time” activities.
Distribution centers are able to make frequent and small deliveries to each store as trucks are available and ready to serve. As a result inventory at the store level is reduced to the minimum as stores depend on continuous replenishment provided by distribution centers with short lead time. Inventory levels as a percentage of sales have noticeably decreased over years to reach about 10% by 2005 (Cheerier, et al. , 2008).
The company hires only experienced drivers who have driven more than 300,000 accident-free miles and whom it believes will be committed to customer service.
With the purpose of applying a strict control among drivers and their behaviors, Wall-Mart introduced the ‘Private Fleet Driver Handbook to educate the drivers with regard to the code of conduct. 3. Cross-docking In order to develop its logistics system and make it works more effective, Wall-Mart applied a new methodology named “cross-docking”. Cross docking is a warehousing strategy that involves movement of material directly from the receiving dock to the shipping dock with a minimum dwell time in between (Pate, Day M. , ; S.
Afghanistan, 2000). J Goddard suggests that the “cross-docking” system is but one element of but one of many distinctive competences that could be drawn upon to explain Wall-Mart’s success. This logistics strategy has enabled Wall-Mart to have economies of scales and yet avoid the usual handling and inventory costs (Cheerier, et al. , 2008). In Wall-Mart’s case, when manufactures and distributors had a contract of producing required goods within a specified time, all the goods supplied are directly delivered to the place called “staging area”.
Products are packed there according to the requirements from different stores and then directly sent to the customers. Cross-docking enables Wall-Mart to achieve the economies that come with purchasing full truckloads of products while avoiding the usual inventory and handling costs Ramadan, Vaudevillian, ; Ross, 2003). In order to achieve the maximum gain from cross-docking, Wall-Mart changed its management approach on merchandising, pricing and promotions from “supply’ to “demand”, which means instead of retailers introduce new products into the market, customers can make requirement on when and what goods they need.
Advances in the information technology tools offer a wide range of opportunities for companies to find new ways of conducting their business in order to cope with increased competition more efficiently and effectively. No doubt that Wall-Mart, whose core competency is supply chain management, has been doing great by applying IT equipment, especially innovative ones which gave it huge benefits and competitive advantages, in logistic and inventory management.
Benefits for logistics management While traditional logistics management is labor-intensive and paper-based, the use of hand-hold computer systems made it easier and more economical to manage the distribution centers, which were highly automated and able to significantly reduce shipping costs and time. Since the hand-hold computers served as the guidance of employees with regard to packaging and shipping of a particular product, a great mount of time was being saved without unnecessary paper work.
Also the centre supervisors were enabled to monitor their employees closely to give directions, resulting into the improvement of efficiency of the distribution centre management operations. And it is not necessarily one type of technology that has influenced this new environment for logistics, but it is the electronic, systemic and integrative nature of these information- and computer-based technologies over the last decades that have provided a radical change in the logistics function for organizations Joseph Sara’s, Laura M.
Made and Carnivals Titular, 2004).
To satisfy customer needs quickly and obtain market competency, there are kinds of IT facilities that have been used by Wall-Mart to enhance management efficiency and reduce costs of labor, transportation and even mistakes, which could be hardly avoided and continuously cause losses. For example, the bar coding and radio frequency technology enable accurate distribution of goods by labeling different products , shelves and bins in a centre. Wall-Mart owned the largest and most sophisticated computer system in the private sector. With the help of Massively Parallel Processor (MAP) system, the company can track the movement of goods.
What is much more impressing is that Wall-Mart has its own powerful satellite communication system. Technicians in the satellite room are able to make immediate contact with any distribution centre when problems arise, which definitely minimize the unwanted influences of troubles. In fact, all these IT tools above can not only serve for the logistics management but the entire SCM including inventory management 2. Benefits for inventory management Through some innovative information technology tools, Wall-Mart’s has made inventory management a simple and clear work that is easy to operate and manage,
While these tools significantly developed efficiently with time-shorten and money- saving. The successful applications on information sharing and inventory management make Wall-Mart one of the most successful supply chain companies in the world (Aril et al.
2013). There are four elements connect tightly to Wall-Mart’s success. First of all, a particular satellite communication system has been set up satellite communication system likes a brain to a body, managing and monitoring the whole inventory situations of all the Wall-Mart stores with the timely information.
Secondly, Wall-Mart cooperated with P&G in building an automated reordering system which using internet and computers to cater to customer’s preference on inventories. The system has made P&G inventories replenish conveniently and fast that benefits both companies. It is also said the system effectively reduce the bullwhip effects on products, which satisfied the variability of increasing demands in phases of supply chain (Kopeck and Johnson 2003).
Thirdly, every employee in stores was equipped with a hand-held computer which connected to the in-store network.
This helped employee easily know and manage the whole process of inventory, such as delivery, backup, and so on. Finally, there are some other useful systems in Wall-Mart. The Point-of-Sales system can track the status of stock of goods on the shelves in store; the algorithm system can calculate the numbers of merchandise to be delivered according to the conditions of the inventories in each store with high accuracy; the centralized inventory data system can give detailed information on inventories level, loaded location and status.
The applications of all systems simplified and automated the process of inventory management and quite convenient for employees to operate and communicate.
The strategy of Wall-Mart is to link the suppliers with its retailers to eliminate unnecessary cost and distribution processes, which innovative IT made the strategy realized (Tartan 2004). Conclusion Supply chain management has come to the fore, such that experience in the field now represents a viable path to CEO positions, as has been the case at Wall-Mart (S. Gamesman et al, 2009).
The success of Wall-Mart is of significant inspiration and its focus on SCM continuously guiding people to deepen the exploration in SCM. As we discussed, explored and learned above, generally, Wall-Mart’s scientific distribution ND logistics system and innovative IT application in SCM, such as cross-docking and bar coding technology, resulted in increased efficiency in operations and better customer service. And that is why Wall-Mart achieved respectable leadership and success in the retail industry.