Supply Chain At Wal Mart Management Essay

Published Date: 23 Mar 2015

In this paper, we are going to discuss about the supply chain in Wal -Mart, the retail store, by discuss IT supply chain, logistic management, and supplier relationship to figure out how Wal-Mart use their supply chain as the weapon to gain the profit and become the leader in the retail industry. Wal mart the biggest retail sotre in the world use the supply chain as a strategy to save the money cost and provides thousands of item for customer needed.

Background

In 1962, Sam Walton operated the first Wal-Mart discount store on July 2 in Rogers Arkansas. Seven years after, he made the company incorporated as Wal-Mart Stores, Inc. After that, in the 1970, the companies start to trade its shares on OTC markets, Over-the-counter, and in 1972 Wal-Mart were listed on the New York Stock Exchange. Now day, Wal-Mart becomes the largest enterprise company around the world with operated division such as Wal-Mart Stores U.S. Wal-Mart Discount Stores, Wal-Mart Supercenter, and Neighborhood Market. Wal-Mart and the company with employees, about 2.1 million members distributed in 15 countries with 8416 unit count around the world making their business the total net sales are 405 billion U.S. dollars, net income is 24 billion U.S. dollars, and net sale increase is profit 1% in 2010. () Besides, according to Wal-Mart annual report 2010, in fiscal 2010 Wal-Mart U.S. significantly increased its cash flow and return on invested capital by gross margin improvements, tight expense control, strong inventory management ,and efficient capital allocation. Wal-Mart reduced year-end inventory by $1.8 billion, or 7.6 percent, and increased inventory turns also. Wal-Mart is more than three consecutive years in the U.S. magazine "Fortune" Global 500 companies topped. (http://walmartstores.com/ and Wal-Mart annual report in 2010)

What is supply chain -Value chain & Retail industry

According (Tan, 2001) in his paper of "a framework of supply chain management literature" he used (P.Fraser, 2006)idea about "supply management focus on how the firms utilize their supplier's processes, technology, and capability to enhance competitive advantage and also the idea from Lee and Billington (1992) ,which the idea is about that supply chain mean the coordination of the manufacturing, logistics, and materials management functions within an organization (P.40). Besides, according to (Ketchen, Rebarick, Hult, & David, 2008)they mention that the "supply chain is a system of people, activities, information, and source involved in creating a product and then moving it to the customer" (P.235). In other words the supply chain could be the phenomenon which the firms connect with each other as an integrated to be uniting based on its function in the all system to maximum the advantage and be more competitive for them during the process and also create the ended value of the product for the customers.

By using the supply chain to the companies, the participants of the supply chain can create the competitive advantage and improve their performance while supply chain could cause many organizations as elements to willing to integrate and coordinated with each other in the system of supply chain in order to improve performance and make it be efficiency to create the win-win situation.( David J et al. 2008,P235) Besides the products or service also creates its value of product during the process of the supply chain. (Stevenson, 2008) Furthermore, the supply chain is focus on total value added to the customer with provided high quality, performance by concerned speed, cost quality, and flexibility and this four supply chain priorities is also the key to influence the basic ideas of supply chain on strategic sourcing, logistic management, supply chain information, and relationship management (Meredith & Shafer, 2006). The supply chain as system and each organization integrated as the part of system by exchange the information and provide the product or service based on their function. (Ketchen, Rebarick, Hult, & David, 2008)

Wen we mention about the retailer industry P.Fraser John (2008), he describe that the retailer competitive could be identity as the three distinguish area; local, regional, and national besides the retail industry not only include the traditional retail store, one store owner operated but also included format such as discount store and specialty store, supermarket, supercentres, internet retailer and catalogue biggest global retail such as Wal-Mart.( (P.Fraser, 2006).In 2009,according to Brain J.G.el. the article about the study 2009 ,they provide some idea about how the retailer operate in supply chain during this decade they tells us that Supply chain in the retail has some main changed with more ecommerce to increase new opportunity on the competition and create new selling channel for retailers. Besides, the supply chain from typical focus on cost and operational root to be more focus not only on integrative discipline of the participant which is included the process and strategy, influence other function and facilitates cross organization collaboration.(P.1) Wal Mart one of the well know groceries retail company could be one of the example use the supply chain as a successful strategy to reduce cost, improve service and responsive soon.

The IT system in supply chain- RFID,

In the supply chain the Information system could be "participants have data at the same time or after the product's movement" or "participants have data prior to a product's movement" and which mean the member of supply chain was allowed to read the data from other participant and also sharing to data to other participants while protecting each company's proprietary information (Ketchen, Rebarick, Hult, & David, 2008)Wal-mart use the satellite technology and point of sale to track the location and quantity of item immediately brsides,in order to batter track the products, Wal- Mart install the new technology and corporate with their supplier to use radio frequency identification-RFID. According to Jack R. Meredith and Scott M. Shafer, RFID is an technology which can help user to better track the product and

"RFID provide much more information than bar code and come to two vision, passive and active. The passive tag are as small as the head of a pin and as thin as a sheet of paper; reader can interrogate them as they pass by, typically 20 feet. Active tag broadcast their information and can be read from much greater distances" (Meredith & Shafer, 2006).

This new technology assist wal mart's ability to track the inventory and increasing the rate to replenish the product exactly in real time and it also provide the data to let the employee know where the product is and the time to replenish the product more efficiency exactly. By using the RFID, Wal Mart not only reduce the tracking cost but also increase the rate of in stock Besides, Wal -Mart also get the benefit from get the data to know the which product promotion effectiveness from the stores' data, to cutting out of stock sale losses ,and overstock expenses (P.Fraser, 2006)

In other words, Wal Mark improvement of inventory management by using the RFID to reduce the cost losing based on out of stock and mis-shelved in the backroom and also increases the ability to track the inventory and support the item immediately and exactly. However while the reduce the 16percent from out of stock it also cost 17 cents cost for each item to use FRID tag (P.Fraser, 2006).

In article Wal-Mart stores inc. dominating global retailing (Ramaswamy, 2004), it describe that by using the RFID, WAL-MART makes its suppliers more close to the customer because the system also provides the data for the manufacturer, supplier, to understanding the customer's preferences and to monitor inventory and the stock moved in each store. It also helps the supplier to have the possibility to redesign and packaging their product reducing process cost (Ramaswamy, 2004)Wal-Mart create the win-win situation to make the itself and its supplier to reduce the cost by using the supply chain with new technology tool to make supply chain more efficiency and save to time and money from unnecessary cost also by offer data sharing it links the product desired between the customer and product company than before.

Logistic-Distribution requirement.

The Logistic management could be the "transportation mechanism" or "strategic inventory mechanism" in the logistics management, the distribution is an idea of logistic during the supply chain (Ketchen, Rebarick, Hult, & David, 2008)According to Jack R Meredith and Scott M. Shafer, "when the retailers order the item from local warehouse, the warehouse are supplied from regional centers and regional center draw from the central distribution facility, which gets its inventory directly from factory" (Meredith & Shafer, 2006)The conception of the distribution could be an idea to explain how retail store operate their business by using the supply chain and to know the supply chain system work in retail industry. In the early 1970s, Wal-Mart start to use the supply chain as their strategy to operate the business and investment their money to build the distribution centre and they select area which are low rent with close to a major highway and the average distance from the distribution centers and store are probably around 130 miles where the distance can make their distribution reach the economies of scale. (P.Fraser, 2006)Using the distribution, Wal-Mart In the 1980s already create the efficient logistic network system compared with other retail stores competitors (P.Fraser, 2006)Besides, the logistic system in Wal Mart is based on faster and responsive transportation system. Wal - Mart has 75000 person logistic division.7800 drivers and the truck is serve between the store and distribution centers to deliver the majority of merchandise sold at stores with 114 distribution centres in the U.S.. (P.Fraser, 2006) Wal- Mart in housing trucking division based on the data they got and picked up the item from the supplier's warehouse and then shipping the item to the Wal-mart's distribution centers. Besides, the driver is expected to take a loaded truck retailer from the distribution center to the retail store then return back with empty trailer. the driver also need to loaded truck trailerat the retail storeand spend time based on the unloading schedule time, the gap of each unloading time for trailer is two hours (Chandran, 2003)In order to make sure process of the ship case can move efficiency, Wal -Mart also use the cross-docking to the shipment and also negated with the supplier to standardize the case size and labeling to allow the case generally directly transferred from the inbound to outbound without any extra storage and by using the cross-docking, wal-mart not only reduce the inventory cost but also the costs from the handling and operating (P.Fraser, 2006)Recently years, the Wal-Mart used the idea of the cross-ducking has already change the idea of the supply chain which refer the cross-docking cause the retailer switch the role of demand chain from the retailer to "pushing" products into the system to be it as the customers could "pull product" based on the data they got from the supplier and the data they has to know which product is needed to replenish in where and when (Chandran, 2003)Besides, it also made the distribution center and supplier from play an important role on centralized control the merchandising, price, and promotion to be less centralized than before. The cross-docking system, as the revolution for the logistics management, makes the distribution center and supplier from centralized controller not as important as earlier (Chandran, 2003)

supplier relationship- Wal-mart v. P&G

According to David J et al. in paper "best value supply chains" (Ketchen, Rebarick, Hult, & David, 2008)two ways to efficiency integrated the participants in supply chain to make it successful. First is "cooperation" and the other is collaboration. The cooperation such as out sourcing and subcontract it is the contractual relationship with high structured and complex. It also needs more negotiation during the relationship and it must be aligned among the supply chain participants (Miles, Miles, & Snow, 2005).The other way to link the relationship in the supply chain is "collaboration". The relationship of "collaboration" is based on the trust each other by shared purposed as the centered sense during this relationship and the each partner regard the other as an extension of itself. Therefore, to build the collaboration relationship is required sophisticated and needed much time and energy. (Miles, Miles, & Snow, 2006)

Selecting supplier is an important step in the supply chain and it can relate to provide the product and service with deliver on time and promote good quality. When select the supplier, the companies need to concerned price, quality and the prestige of the supplier and also need to concerned service after it's sold. Wal- Mart use the collaborative planning Forecasting and replenishment, CPFR and EDI, Electronic Data interchange as the technologic strategy to integrated the participants to share information and continuous replenishment process (CRP) in the supply chain to approach the customer needed and enhance the supply chain be more efficiency.

By sharing information and CRP with its supplier, Wal mart not only reach the supply chain work efficiency but also reducing the cost of inventory based on the supply chain making better performance "in financial returns ,service level ,and turnaround times" (Grean, 2002). In the manufactures side, gaining the information data from the retailer, the manufacturer enforce their opportunity to know the frequency, quantity, and time of shipment and then to manage the schedule to deliver the produce when and what the customer needed instead of waiting the retailer ask for order. (Clack & Lee, 2000)It is as like the manufacturer stands in first line to know what customers preference rather than spend the cost to do marketing researching to understand the customer trend.

Actually, Wal mart develop the relationship with it supplier from the relationship of seller and buyer into partnership by sharing the information electronically to improve the performance. P& G and Wal-MART could be one of the examples about the way that manufacture and retailer integrated into the supply chain partner and build the benefit from each other by reducing cost and improving service. P&G is one of the manufacturers to link up with wal mart computer system and at 90s Wal mart has become the largest of P&G customer which account P&G around 10% of the total revenue (Ghemawat, Bradley, & Mark, 2004) P&G start to collaboration with wal mart since the end of the 80s. While the P&G decided to install the IT system, EDI,Electronic Data interchange, which is recommended from wal mart and allow wal- mart the get the data and sharing its data to corporate the supply chain to reduce the cost and make the revenue. Beside WAL MART and P& G using the CRP to reduce the order cycle time. In these system P&G replenishment the product from WAL-MART's inventory data performance which received from the Wal mart distribution centers and used the this data assist P& G to manage inventory level and to make sure that P&G product are in stock all the times (Grean, 2002)