Walmart is the world’s largest retailer by revenue, with more than 11,300 stores across 28 countries globally. Its enormous retail presence can be attributed to its reputation for selling high-quality products at the lowest prices. Walmart is able to maintain low prices while simultaneously generating revenue due to its efficient supply chain practices. Walmart has made significant investments in its supply chain processes, allowing them to shorten its supply chain and ensure the smooth functioning of its operations.
Walmart’s Supply Chain Strategy
Walmart’s supply chain strategy aims to reduce operational expenses for the company, maintain low product prices for the consumers and automate the order fulfilment process. This strategy involves developing strong relationships with suppliers, implementing technological solutions to enhance supply chain efficiency, effective use of logistics management and global expansion for new market opportunities. Employing these simple strategies makes Walmart’s supply chain robust and successful in the retail industry.
1. Distribution
Walmart procures products directly from manufacturers, eliminating all middlemen and, as a result, reducing the number of links in the supply chain. Walmart invests a substantial amount of time in developing relationships with manufacturers and gaining an understanding of their cost structure to ensure that they are reducing costs in every way possible. Walmart will only purchase a product from a manufacturer if they are certain it cannot be found elsewhere for a lower price.
Walmart’s distribution process entails the shipment of goods from manufacturers to distribution centres, which are sent directly to retail stores. These distribution centres keep products moving to Walmart stores 24 hours a day. Walmart also utilises high-tech consolidation centres for high-volume products, separating them into smaller shipments and sending them to distribution centres. Walmart has 210 distribution centres and operates one of the world’s largest distribution networks. Walmart has six disaster distribution centres that rapidly respond to consumer needs in emergencies and natural calamities.
Walmart also utilises an omnichannel distribution strategy. They sell products in both their physical stores and on their e-commerce website. Many Walmart stores also serve as fully functioning fulfilment centres to deliver online orders efficiently.
2. Inventory Management
Walmart primarily outsources its inventory management to its vendors. This system is called Vendor Managed Inventory (VMI), which means that the vendors are responsible for optimising and managing their inventory levels. Vendor Managed Inventory has proven to be efficient for Walmart, as it increases replenishment rates at retail stores, improves the speed of distribution, reduces unforeseen errors and, most importantly, significantly lower inventory costs for the company as they do not handle the inventory.
Walmart utilises four types of inventories: finished goods inventory, transit inventory, buffer inventory, and anticipation inventory. Most of Walmart’s inventory consists of finished goods; these products are delivered directly to Walmart stores, replenished frequently, and readily available for purchase. Transit inventory supports the replenishment of finished goods; these goods take a considerable amount of time to reach the stores. Walmart’s buffer inventory is intended for those unforeseen instances in which a product suddenly experiences a surge in demand and runs out of stock. Anticipation inventory is similar to buffer inventory, except that it is kept on hand to account for seasonal fluctuations, such as holiday sales.
3. Cross Docking
Cross Docking is the just-in-time inventory solution utilised by Walmart’s supply chain management. During cross docking, Walmart’s inventory is transferred from an inbound truck to an outbound truck without intermediate storage. As a result, the products are delivered directly to the stores from Walmart’s distribution centres. The major advantage of cross-docking is the reduction in inventory size. Fewer products are stored in warehouses, which also reduces waste by limiting expired products. In addition, cross-docking allows Walmart to expedite the delivery of products to its stores.
Cross Docking heavily relies on effective communication between Walmart’s vendors, distribution centres, and each point of sale (POS) system in every store. To enable this swift communication, Walmart operates its own satellite network, which communicates POS data with its vendors.
4. Logistics Management
Walmart is able to move merchandise from distribution centres to store shelves because it maintains in-house logistics utilising its own private fleet of trucks and employs skilled truck drivers. Walmart logistic hubs determine the most efficient routes for their drivers, limit the driver’s idle time, and oversee the entire shipping process. Consequently, Walmart is able to use less fuel, drive fewer kilometres, and maximise merchandise delivery while minimising its carbon footprint.
5. Robust Value Chain
Walmart’s value chain consists of primary and support activities. Primary activities involve functions that bring products or services to market. Support activities enhance the efficiency of the organisation’s primary operations. Walmart uses these activities to generate a cost advantage and then passes on the savings to its customers in the form of low prices.
The primary activities of Walmart’s value chain include inbound logistics, operations, outbound logistics, marketing, sales and services. Inbound logistics is responsible for receiving and stocking the products. Operations include buying and merchandising the products. Outbound logistics is responsible for getting the products from the suppliers to the stores. Marketing, sales, and service devise strategies to leverage sales and ensure a positive shopping experience.
Support activities of the value chain include firm infrastructure, human resource management, technology development and procurement. Firm infrastructure refers to an organisation’s internal support systems, such as its accounting and finance, legal, quality control mechanisms, research and development. Human resource management includes recruiting, hiring, training, and employee benefits management. Technological developments involves employing modern day technology to enhance supply chain processes and functioning of the company. Procurement includes locating suppliers, negotiating contracts, and overseeing the delivery of goods and services.
6. Moden Technology
Walmart is well-known for implementing modern technology to enhance its operations and boost its sales. Walmart has invested heavily in automating its supply chain management. For example, Walmart installed a voice-based order-filling system (VOS) in all its retail stores, facilitating order picking. Walmart also uses web-enabled EDI to have instant communication between suppliers and stores, allowing stores to stock their shelves as quickly as possible. Walmart’s transition from bar code verification to RFID (Radio Frequency Identification) technology has been one of its most significant technological advancements. Using RFID technology has enabled Walmart to reduce supply chain costs and enhance labour productivity by eliminating the need to physically scan the products.
Conclusion
Walmart’s supply chain has created an effective merchandising strategy by monitoring customer demands. The supply chain’s effectiveness results in time savings, more cost-effective inventory management, and enhanced product demand forecasting. The continuous upgrades in supply chain processes, adoption of modern technology to stay ahead of the competition, and customer-centric approach have ensured that it remains the market leader.
