A Wal-Mart Case Study
10th October, 2013
Words count: 1643
The American based company “Wal-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 Wal-Mart success is that it is considered a “best-in-class” company for its supply chain management practices (Alyea, 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 Wal-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 Wal-Mart’s inventory and logistics management.
PART ONE Distribution and logistics system
1. Distribution Centres
A distribution centre is a warehouse which is stocked with products to be redistributed to retailers and wholesalers, or directly to customers. When Wal-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, Wal-Mart uses sophisticated barcode technology and hand-held computer systems, which will be discussed in the second question. Wal-Mart has also adopted an integrated logistics system by establishing an alliance with its main suppliers in order to exchange information regarding its sales and inventory. This helps vendors to manage Wal-Mart’s inventory and to formulate their own production and distribution schedules. The same system allows vendors and suppliers to send Wal-Mart an ASN “advanced shipping notice” of every delivery to a distribution centre. Wal-Mart uses the ASNs in order to schedule the dispatch of goods from distribution centres to stores. The wide range of information being exchanged in the system helps Wal-Mart to reduce warehousing and inventory carrying costs as well as reducing stock-outs at its stores (Zinn & Parasuraman, 1997).
2. Trucks and Truck Drivers
While Wal-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, Wal-Mart maintains a private fleet of trucks and a skilled staff of truck drivers. Wal-Mart’s considerable truck fleet enables the company to adopt JIT “just in time” activities. Distribution centres 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 centres with short lead time. Inventory levels as a percentage of sales have noticeably decreased over years to reach about 10% by 2005 (Cherie, 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 behaviours, Wal-Mart introduced the ‘Private Fleet Driver Handbook’ to educate the drivers with regard to the code of conduct.
In order to develop its logistics system and make it works more effective, Wal-Mart applied a new methodology named “cross-docking”. Cross docking is a...
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