For a smooth running of a business, an effective and efficient supply chain management is required. An efficient supply chain management (SCM) ensures that a firm has adequate material for all its processes at the right quantity, quality and price. When well managed, it is one of the strongest competitive advantages of a business.
Briefly, SCM focuses on inwards logistics, outwards logistics and reverse logistics (Larson & Halldorsson, 2004). According to Fortune 500 reports, 2002 to 2010, Wal-mart is the world’s largest retail outlet in volume and capacity.
The company maintains a strong supply chain system. It has an in-house developed supply chain. It sells to local and international customers, thus it operates a local and global supply chain system. This paper discusses the supply chain management employed by Wal-mart.
Brief history of Wal-mart
Wal-mart stores have been in operation since 1962, with the first branch at Rogers, Ark, in United State of America. In a span of ten years, the company had diversified to major cities in United States and had 11 branches. According to Fortune 500, 2002 to 2010, the company is the leading retail outlet in the world. It specialises in different merchandise from electronic to toys.
The profits made by the company rose from $219.81 billion in 2002 to $405 billion in 2010 despite the world’s economic situation. The number of employees in the same period rose from 1.29 to 2.1 million. The company has over 8,747 retail units situated in 15 countries and operating under 55 different banners. The quality of managerial decisions has led to the company’s success.
It adopts strategic management systems in all its operations. One of such strategic managed areas is supply chain management. The company have 40 Regional Distribution Centres, which each covers an area of over one million square feet’s, inside the distribution centres, there are five conveyer belts that move over 9,000 merchandise, they operate 24 hours, seven days a weeks (Walmart Corporate Website, 2010).
Wal-mart supply chain management
Parties in supply chain and functions
The companies supply chain takes two forms, from the manufacturer to the company’s stores, and from the stores to the customer. The parties to Wal-mart’s supply chain are:
Suppliers: they are manufactures who make different products that the company stocks. They are supposed to honour an order and deliver products of the right quality and quantity.
Customers: Wal-mart supplies goods to customers who buy certain volume using their trucks and when they are international customers they look for the best means to deliver them, this includes sea and air transport.
Wal-mart’s procurement department: the department is composed of heads of different sections whom advice the head of procurement on their section’s demand, both for inward and outwards logistics.
Freight section: this is transport/truck management section. The section is mandated with the task of ensuring right numbers of trucks are maintained in the company, they are operating well and allocates the right number of trucks to a department in need.
Detailed flowchart or diagram of your companies supply chain including domestic and Global
Wal-mart has domestic and international supply chain mechanisms. They are:
Chart 1: domestic customers supply chain management system
Chart 2: international supply chain management
(Haag, Cummings, McCubbrey, Pinsonneault & Donovan, 2006).
Does the supply chain fit the overall strategy of the company?
The supply chain management operated by the firm is among the largest in the world. Efficiency is crucial in ensuring that the company retains its leading position. In a single shop, the company operates eleven sections for the purposes of managing supplies. Section managers with a full team of procurement and supplies operate each section.
The division ensures that the same manager manages similar goods because their trend in demand is likely to be the same. For example, all Christmas merchandise are under one micro management and house hold goods under another.
Demand for these departments varies with seasons. Procurement manager in every department is supposed to manage the stocks kept and ensure it satisfies its customer’s expectations. When a certain order need to be made, he liaises with the head of procurement for purchase. The division is a mechanism to ensure that each section is management is efficient.
Head of procurement department have two major departments, the procurement section and traffic/freight. Traffic head ensure that he allocates each department the right number of trucks to transport good from the suppliers or to customers or otherwise. This kind of approach ensures that at any one time the company have the right number of stocks and delivers timely to its customers.
Supply chain is managed
For an efficient supply chain management, the company have developed certain strategic functions, which leads to overall efficiency. They are:
Inventory management
Wal-mart has a just in time supply inventory management mechanism; this means that it ensures its goods are delivered when they are needed; its aims at ensuring that there are no goods lying in the warehouse; goods are either on shelves displayed for sale or in transit.
To operate such a system, the company have updated information about the market. It knows when a certain good is in high demand and when it is not. With that kind of approach, the company is able to order for goods in the right quality and quantity.
Cross-docking logistics
This is a logistic mechanism where a company does maintain limited number of warehouses; this ensures that between loading and unloading of goods, there is minimal storage. This system of supply ensures that Wal-Mart suppliers get their goods timely in their best state. An efficient method ensures that there is fast delivery of materials and supply of goods to the final consumer.
To support this strategy, the company have employed dedicated drivers who have undergone training on customer service and time management courses. The system also saves the company warehousing costs like rent, maintenance and other associated costs.
The expectation and conduct of a driver is stated in Wal-mart, The Private Fleet Driver Handbook, it states how robust a driver should be to ensure that he delivers goods at the right time from or to the company.
Procurement and strategic alliances
The relations that Wal-mart maintains with its suppliers give it an upper hand. This is where the suppliers are willing to supply the company with goods; Wal-mart respects contracts of supply, for example, it pays its suppliers in time.
To be on the save side, the company contracts at least two suppliers for the same commodity, though this may be of different brands. For example, it stocks Samsung and Sony electronics, which to a certain extent they are, substitutes. In times of high demand, the company procures from both companies.
Green supply chain management
Wal-mart adopts a green supply chain management. This system ensures processes of a company are environmentally friendly. The kind of trucks that the company uses are highly fuel efficient with most of them using modern fuel efficiency mechanisms. The company services its trucks regularly to ensure that they are fuel-efficient.
When procuring for goods, it only contracts those suppliers who respect the environment. If the production method adopted by a supplier pollutes the environment, then the company avoids such a supplier. Wal-mart has contracted a company that deals with its wastes. The contracted company ensures that those recyclable wastes are recycled appropriately and those that cannot be recycled are disposed in the right way.
Integrated supply chain management
The company have adopted computers in their supply chain management. This is where it uses a real time stock managements system, which has set reorder levels of certain goods. After a sale at the cashier, a code records the sale in the main database.
When any good gets into the company’s stores, it must go through the database section for entering in the system. With such kind of management, Wal-marts procurements managers at section levels and head office are able to manage their stocks effectively (Kouvelis, Chambers, Wang, 2006).
Is the company’s supply chain a highly certain or highly responsive supply type chain?
Wal-marts supply chain management is highly responsive. This means that the system changes with the changes in demand and customers’ needs. Although the information that the company has on the trend of business assists it to be slightly certain of the amount of product they should procure at a certain point, the demands of customers keep changing, thus changing the supply system is important.
For example in December, Christmas shop is busy than it is in January, the supply chain system is able to adjust to such changes. It can for instance seek assistance from sports and fitness section to be able to cater for its increased demand in Christmas shop.
Identification of main issues and problems
Obvious supply chain problems your company is currently facing
Wal-mart operates an in-house supply chain management with minimal outsourcing of services. For example in the maintenance of trucks, the company operates its own garage. This system of management creates a bigger burden to the management and sometimes failing the system.
The system also requires the company to have ample capital to operate its in house fleets since it has to buy modern Lorries to supply to final customers or to exporting ports. Road accidents and theft are some of the minor problems that face the companies supply chain management (Mentzer, 2001).
Risk management tactics
One of the strong points of Wal-marts supply chain system is the drivers. It has highly trained drivers who guarantee customers timely delivery. Control of traffic is computerized and every driver is aware of his/her responsibilities. The role of supplying million of merchandise to customer’s everyday lies on drivers. One of the ways of preventing loss is through insuring trucks, drivers and products on transits.
This ensures that there is compensation in case of misfortune. When an international customer is procuring from the company, the company sells its goods at CIF (cost, insurance and freight) value. This ensures that the goods have adequate insurance from the company stores to the port of destination. Local customers do not pay for insurance the company cover that for them.
To control traffic, which could lead to inefficiency in the system, the company has developed an in-house computer traffic control. The system allocates different tracks to different departments according to the need that the department has expressed. It controls the lead-time and calls using loud speakers.
General evaluation and alternative solutions
Wal-mart supply chain management is an in-house system developed to fit the structure of the company. It manages trucks that transport goods to customers and from suppliers. It is a low cost of transportation method compared with hiring of such services. The division of different sections in shopping malls has assisted the company cope with the large traffic.
It has adopted high technology that assists the company in managing traffic and advising department heads on certain strategic actions they should take at a certain point. Knowledge management and use of business intelligence tools to analyze sales trend has assisted the company to manage its inventory at the right level and cost.
Some of the strategies that the company can make its system better include subcontracting some of the company’s in house operated functions like, repairs and vehicle management. This will give the company a chance to concentrate on its main line of business other than concentrating on fleet management.
Secondly, the company can take advantages of electric train system. It has the potential of connecting to the different countries electric railway lines. This will reduce transport and truck maintenance costs. Some of the companies it can contract to transport its goods include Maesk Logistics Company.
References
Haag, S., Cummings, M., McCubbrey, D., Pinsonneault, A., & Donovan, R. (2006). Management Information Systems For the Information Age. Ontario: McGraw Hill.
Kouvelis, P.; Chambers, C.; Wang, H. (2006). Supply Chain Management Research and Production and Operations Management. Review, Trends, and Opportunities. In: Production and Operations Management, 15(3). 449–469.
Larson, P.D., & Halldorsson, A. (2004). Logistics versus supply chain management: an international survey. International Journal of Logistics: Research & Application, 7(1), 17-31.
Mentzer, J. T.et el. (2001). Defining supply chain management. Journal of Business Logistics, 22(2), 1–26.
Walmart Corporate Website. (2010). Logistics. Web.