- by eSellerHub
Walmart is the witness to the greatest logistical and operational victories. Supply Chain Digest has provided the statistical figure that it has more than 11,700 operational stores falling under 59 company names. It has 2.3 million employees in 28 countries worldwide while handling $32 billion in inventory on average.
It is imperative to have an effective and efficient supply chain management strategy to manage these many numbers. The whole organization runs on a business model of lowering costs out of supply chains to help consumers save money and live better. Over the years, this has become possible with the concept of successful supply chain management.
Walmart’s primary goal is to offer its customers the goods they needed, at anytime and anywhere they wanted. The company then concentrated on developing cost structures that permit them to provide goods at low pricing every day. Following that, Walmart focused on developing an even more highly structured and progressive supply chain management strategy to exploit and improve their competitive advantage and take up a market leadership position.
Some of their critical success factors are outlined below.
- Less links in the supply chain
From the initial stages of Walmart, its supply chain management has contributed to most of its success. Walmart’s supply chain management innovation started with the company eliminating a couple of the chain’s links from its inception. Later, in the 1980s, Walmart started working directly with the manufacturers, further bring down costs, and manage the supply chain more efficiently.
Under the Vendor Managed Inventory (VMI), Walmart’s supply chain initiative, the manufacturers were responsible for handling their products in Walmart’s warehouses. Owing to that, Walmart could expect close to 100% Walmart fulfillment on every single piece of merchandise.
In 1989, Walmart was entitled Retailer of the Decade, with estimated distribution costs at a meager 1.7% of its sales cost. It was far greater than competitors like Kmart (3.5%) and Sears (5%). The company’s supply chain has become even more effective since then.
- Walmart’s Strategic vendor partnerships
Walmart has always followed strategic sourcing methods to explore and find products at the best price from suppliers who are capable of making sure that they can meet the demand. The company then signs up strategic partnerships with most of its vendors. It provides them the potential for a high volume purchase for the long term in exchange for the least possible prices.
Additionally, Walmart streamlined its supply chain management by building communication and relationship networks with the suppliers to enhance material flow with minimal inventories. Thus, the collaboration with the whole network of global suppliers, retail stores, and warehouses function like a single entity.
- Cross-docking – an inventory tactic
Cross-docking is a type of logistics practice that is the linchpin of Walmart inventory management strategy to stock up inventory efficiently. It means the direct product transfer from inbound or outbound truck trailers. It unloads the products from an incoming truck or other vehicle. It loads them directly into outbound trucks, trailers, or rail cars and vice versa, needless of any extra storage in between.
Various suppliers have been sending products to Walmart’s distribution centers, where they are cross-docked and then sent to the respective Walmart stores. Cross-docking can keep down inventory and transportation costs. It also minimizes transportation time and eradicates inefficiencies.
Walmart’s fleet of truck drivers regularly delivers goods to the distribution centers that are situated at an average of 130 miles from the store. Here, the products get stored, repackaged, and distributed devoid of sitting in storage. The goods generally cross from one loading dock to another in 24 hours or less. Company trucks else would return empty unsold merchandise, which is a waste of time and money.
This strategy has considerably brought down Walmart’s costs and lets the company offer its customers highly competitive pricing from those savings.
- Investing in advanced inventory technology
Walmart’s endless chase for low consumer prices has acknowledged and invested in technology to become an innovator for effectively tracking inventory in stores, replenishing their shelves, and considerably enhancing their eCommerce competence.
Technology plays a vital role in Walmart’s supply chain, helping to be the foundation of their supply chain strategy. Walmart has the most robust information technology infrastructure with state-of-the-art technology and network design of any private company globally. It lets Walmart to
- precisely forecast demand,
- forecast inventory levels,
- track inventory
- generate highly well-organized transportation routes,
- manage customer relationships,
- service response logistics.
In 1983, Walmart implemented the first company-wide usage of barcodes for collecting and analyzing store level information immediately. Later, Walmart leveraged this technology into an advanced innovation called the Savings Catcher. It lets the consumers scan the product barcodes on their smartphones for the best price comparison.
Later, Retail Link was devised, which is a colossal database. Retail Link is connected through a global satellite system to analysts who can predict supplier demands to the supplier network. It shows real-time sales data from the cash registers and to Walmart’s distribution centers.
The above are some of the key points adopted by Walmart to have a well-performing supply chain management. We develop Walmart supply chain management software and Walmart inventory management tool as per your business needs. To know more about our services, get in touch with our experts now!