Walmart: Masters of Supply Chain
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Walmart: Masters of Supply Chain

A look into some of the highlights of Walmart's efficient logistics system

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Walmart: Masters of Supply Chain

Walmart utilizes strategic and innovative management of its supply chain in order to reap the financial benefits of efficiency and accuracy within it. To manage its supply chain, Walmart practices extremely tight management and control over manufacturing, inventory, and distribution. The company synchronizes these elements through various electronic interchanges which aid in communication between differing segments of the chain. Although Walmart, like other large firms, outsources many of its products, it employs close relationships with important vendors across the world. These partnerships are crucial, as they deter miscommunications and promote productivity among both entities. For example, Walmart’s relationship with Proctor and Gamble has aided in ensuring swift product replenishment in all of its locations. In addition, Walmart takes advantage of tactics like cross-docking and a hub-and-spoke distribution networks to push goods speedily through the chain. Because supply chains include multiple firms with potentially conflicting objectives, it is possible for issues to arise that negatively impact the company. If Walmart and its vendors do not coordinate their endeavors properly, a bullwhip effect could ensue. This means that a buildup of inventory occurs resulting in decreasing revenue for both retailers and manufacturers. In addition, without proper communication and control in a supply chain, there could be delays in delivering goods or perhaps even quality control problems. One conflict mentioned in the case study centered on Walmart’s suppliers outsourcing without Walmart’s consent or knowledge. When a fire killed 112 workers in one of these subcontracted factories, it reflected negatively on the retailer. Walmart solved this conflict through enacting a zero tolerance policy on suppliers subcontracting. Walmart has been extremely proactive in increasing product availability and lower merchandise acquisition and transportation costs. In the 1980s, Walmart partnered with Proctor & Gamble to build one of the first collaborative planning, forecasting, and replenishment systems. This system linked P&G to Walmart’s distribution centers, so that when inventory levels of P&G products were low, the vendor was alerted to ship more products. In addition, the software allowed Walmart to track when a P&G shipment arrived at a distribution warehouse, which granted the retailer the ability to better plan its shipments to stores. This coordination resulted in savings for both firms and was beneficial to customers, as it allowed for lower prices. Additionally, Walmart drove the adoption of UPC barcodes and pioneered the use of EDI for computerized ordering from vendors, again fostering great efficiency. The retailer is able to ship products from its warehouses to stores within a day’s travel through its usage of hub-and-spoke networking and cross-docking. The goods are transported using a relatively speedy fleet of trucks, and this short travel time makes the company much quicker to deliver merchandise to locations across the world. Walmart was one of the earliest adopters of RFID technology, and today tests its usefulness for apparel products. In the future, if the retailer chooses to expand this technology to other products, it could see a faster flow of goods throughout the chain.

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