Introduction
Many of Walmart’s rivals and other businesses operating in entirely different marketplaces have embraced the techniques that Walmart invented. Walmart pioneered ideas that have become industry norms. Several of these ideas are overtly related to how the firm constructs and manages its supply chain. Walmart has integrated automation and technology: they have revolutionized its supply chain to manage and refill inventory effortlessly whilst transferring discounts to its consumers. Therefore, Walmart has become a very lucrative corporation and one that competitors aspire to imitate by perfecting how it manages inventory, from the buying phase to product placement on store shelves.
Literature Review
In the last two decades, Walmart has become the biggest and most dominant retailer globally. The enterprise boasts the greatest sales per square foot, stock turnover rate, and operating profit of all bargain retailers. Walmart’s growth and influence in the retail industry are immediately evident from its stock performance record. The company has evolved from a local shop to a worldwide behemoth, and its name is strongly associated with the idea of effective supply chain management.
The integration of Walmart’s supply chain is the primary factor in the company’s rise from a tiny shop in rural Arkansas to a worldwide giant. Using barcode scanning technology, a point-of-sale system, and real-time data collecting has helped Walmart rise to the top of the retail industry (Nguyen, 2017). Walmart’s dominant standing in the retail sector results from effective supply chain management techniques offered by automated warehouses and electronic inventory platforms (Paksoy et al., 2021). Walmart is renowned for efficiently running its transportation system and developing a cutting-edge cross-docking logistical method that enables the delivery of goods from incoming to outgoing trailers without intermediary warehouses (Khan & Yu, 2019). Furthermore, according to Parsa et al. (2020), Walmart is not only a corporate pioneer but also a technological champion in terms of its supply chain coordinating approach for collaborative planning, forecasting, and restocking (CPFR) and vendor-managed inventory (VMI) (Nguyen, 2017). The CPFR system assists Walmart in minimizing demand information inaccuracy and coordinating the business strategy with supply chain allies. In particular, over the last several years, Walmart and Procter & Gamble (P&G) have worked together to help customers learn how to reduce their household water and energy use by selecting more water- and energy-efficient products and adopting more eco-friendly routines (Cortes, 2022). At the same time, the data for VMI is exchanged between Walmart and its vendors to ensure the lowest price of its stock.
More importantly, Walmart effectively utilizes information technology’s capabilities. Specifically, the Radio Frequency Identification (RFID) technology enables Walmart to develop real-time databases and combine more efficient inventory management targeting. Inventory reduction is a strategy for sustaining a competitive edge in cost minimization (Sheffi, 2017). In addition, as a consequence of excellent inventory management, Walmart can cut expenses, including insurance premiums and inventory taxes, which are the reasons that motivate businesses to seek profitability and efficiency. Nonetheless, according to Sarkar et al. (2020), Walmart’s main challenge in retaining its competitive advantage lies in merchants’ collaboration. Companies are adopting the idea of shaking hands to obtain more profit instead of taking risks through competition. Thus, rather than taking chances via competition, businesses are embracing the practice of handshake to improve profitability.
Walmart’s Supply Chain Management System
Logistics and Distribution Centers
Walmart has a robust internal trucking infrastructure at the core of its supply chain system. A strong transportation system highlights the logistical network of Walmart. With 12,000 drivers, 10,000 tractors, and 80,000 trailers functioning as distribution hubs, the corporation runs one of the biggest and safest fleets in the United States (Cortes, 2022). These truck deployments allow the logistics department to quickly complete the transportation of items from distribution centers to retailers and regularly refill inventories. Theophilus et al. (2019) point out that Walmart uses a cutting-edge cross-docking supply chain technique to increase distribution effectiveness. This approach allows brands to quickly and directly transfer from incoming to delivery trailers without needing additional storage after being classified and transported from processing plants to Walmart storerooms (Theophilus et al., 2019). Through cross-docking, Walmart can save on storage space, labor, and other operational expenses while improving distribution reliability and lowering inventory costs.
Further, when Walmart expands into a new geographic region, one of its primary strategies is to grow its business around distribution facilities. The corporation seeks locations that have the potential to host a cluster of additional shops rather than a single new site. Subsequently, it constructed a brand new distribution facility strategically within the region and simultaneously launched its first retail shop (Sheffi, 2017). The distribution facilities will serve as the supply chain’s first entry point into the new region. It does so at a minimal extra cost, encouraging the development of many new shops in the region. Customers will benefit from these cost reductions when they are passed on to them.
The green plan at Walmart is centralized and has a well-defined path forward. In its effort to provide all of its energy needs from renewable sources. As a first step toward achieving its 2040 corporate goal of being a zero emissions company throughout its global operations, Walmart is starting trucking pilot programs to explore the usage of liquid hydrogen, electric, and natural gas-powered trucks (Cortes, 2022). These new measures for sustainability may be interpreted as Walmart management’s attempt to hide the company’s declining work environment conditions and dismal financial performance. To ensure that the sustainability plan is not only seen as a publicity gimmick to distract public concern, Walmart must also continually maintain its initiatives and invest in the green program while resolving workplace issues.
The Use of IT in Inventory Management
The deployment of information technology is crucial to Walmart’s efficient inventory management. Walmart makes use of information systems capabilities to manage the quantity of inventory. In particular, Walmart utilizes IT to gather data on consumer demand and then stock more preferred goods to meet that need, decreasing inventory. Computer systems also enable Walmart to communicate with its suppliers. A good illustration of the firm’s cooperative planning, forecasting, and replenishment (CPFR) initiative is the partnership with P&G. Through this collaboration, Walmart can keep track of the inventory in its retail locations and set up a reordering strategy that connects P&G’s servers to its facilities and shops (Nguyen, 2017). Every time the system determines that a specific item needs to be supplied, P&G will get a notification, and before items are shipped to distribution centers or stores, a restocking order will be issued to the closest P&G using this technology.
Additionally, Walmart’s enormous data ecosystem regularly analyzes many gigabytes of new and historical data. Walmart has lately adjusted its product delivery policy based on big data studies. Walmart used predictive analytics to raise the minimum order value for free delivery on online purchases. Walmart’s new supply policy raises the threshold for free delivery from $45 to $50 and adds numerous additional goods to improve the buying experience of its clients (Muñoz et al., 2018). Predictive analytics is at the core of the supply chain strategy that enables Walmart to decrease overstock and keep the most in-demand items adequately supplied. Vendors to Walmart are expected to utilize a real-time VMI system that allows them to reduce their stock of a product if it is not selling well (Nguyen, 2017). This allows businesses to conserve money to purchase items more likely to profit from growing demand. RFID may also assist inventory control since this technique helps businesses to accurately determine the location and quantity of inventory items without tallying them manually, sparing Walmart time.
The “big box” store format permits Walmart to effectively merge a warehouse and a store into a centralized facility, thereby achieving significant operational synergy. The big box is sufficient to hold large quantities of products, comparable to a storeroom (Hu et al., 2018). It saves time and money that would be spent transporting goods from a warehouse to a shop if this stock were kept in the same place where customers made their purchases. These cost reductions are, once again, transferred to the consumer.
Using Electronic Data Interchange (EDI) with suppliers offers the organization two significant advantages. Firstly, this reduces the transaction fees linked with purchasing items and settling invoices. Ordering merchandise and paying bills are largely clarified and regular activities that, with the help of EDI, may be made much more effective and economical. Secondly, these automated ties with vendors provide Walmart with a high level of oversight and synchronization in the planning and receipt of shipments (Nguyen, 2017). (Nguyen, 2017). This ensures that all Walmart partners supply the appropriate items in time to the required distribution facilities. Furthermore, similar to how coupling these logistical systems with a satellite network has provided enormous advantages to Walmart in past years. These have transformed the method of dispensing fast-moving commodities, such as vegetables, from lower to higher levels of automation. With the help of these innovations, a single distribution hub may feed a group of stores, and new food supply facilities can be added to the supply chain to deal with fast-moving consumer items.
Critical Analysis of Walmart’s Supply Chain Management System
Walmart has become a dominant player in the retail sector with its fastest discount provisioning network development by minimizing operational expenses and limiting nominal growth. Walmart outperforms its competitors by maintaining the strongest supplier connections, constantly modifying its processes, providing an extensive business base, and coordinating with the sector (Muñoz et al., 2018). Apart from meeting the needs of its clientele, Walmart keeps an optimal inventory level and keeps its vendors abreast of product sales in real-time. With the help of its strengths, the company climbed to the top of the retail industry. In particular, by developing a reliable information system that supports all movements and payments, Walmart’s supply chain section can monitor commodity demand and trace its flow from other locations (Nguyen, 2017). Additionally, this department can monitor sales performance and consumer trends per market intelligence and act as a go-between for bulk distributors and dealers.
A highly interconnected supply chain is a crucial commercial advantage for Walmart’s rapid and stunning expansion and its global retail sector leadership position. Ferrell et al. (2020) define an integrated supply chain as the collaboration between suppliers and customers to maximize their team effectiveness in manufacturing, delivering, and maintaining final goods. Sheffi (2017) note that an integrated supply chain is seen as an enhancer of logistics that improves supply chain performance and provides enterprises with a competitive edge. Regarding Walmart’s efficient supply chain, the data on sales and inventories between collaborators is shared throughout the supply chain, which cooperates among partners’ activities, reduces the volatility spillover effect, and reduces inventory levels (Brown et al., 2018). Further, it restricts short supplies to buyers’ habits if clients increase orders when they anticipate a scarcity of products in the future, intending to ensure the operations and maintain the stability of the company.
Walmart firmly understands the interconnected nature of its supply chain. The company has a supply chain that has a high degree of operational and organizational connectivity. This means that new product design, supplier relations, order satisfaction, customer engagement processes, and domestic and foreign associations are integrated into the business. This is done to reduce the interruptions that can occur due to unforeseen situations in suppliers or demands in the supply chain (Muñoz et al., 2018). Since Walmart is a retailer and not a company that develops new services or products, this business began operating closely with local manufacturers in the 1980s to generate the private logo products of Walmart and auction them at a substantial discount. This strategy allowed Walmart to avoid focusing a great deal of attention on the process of developing new services or products (Nguyen, 2017). When differentiated from other suppliers, Walmart’s margins earned from this marketing for branded items were larger.
The supplier engagement method outlines the techniques for establishing the company’s connection with downstream and upstream suppliers. This procedure outlines identifying, monitoring, and assessing upstream suppliers, interacting with essential suppliers to create new services or products, negotiating, and communicating operational knowledge (Sheffi, 2017). Walmart maintains strong ties with its suppliers, constantly personalizes its activities, provides a prominent venue for its brands, and integrates with the industry (Singh & Misra, 2021). Notably, most of the firm’s leading suppliers were situated nearby, making it easier for the organization to pick and work with its suppliers to gain assistance from them. In addition, Walmart effectively bargained with its suppliers when it stressed a single invoice price and overlooked the expenses of joint promotion, discounting, and distribution (Muñoz et al., 2018). Furthermore, to reduce time and simplify data transmission between Walmart and its vendors, this corporation utilized information technology such as barcodes or, more recently, RFID and VMI. These technologies allowed workers and suppliers to obtain information on the status of items, which improved the service level of suppliers and inventory tracking and management.
Walmart’s order fulfillment process includes client planning, demand, supply planning, production, and logistics. The objective of supply planning is to properly handle inventories and arrange resources to produce an adequate supply (Sheffi, 2017), When delivering goods to end consumers, the manufacturing process is based on demand and supply planning, followed by logistical considerations about ownership, location, method selection, capacity, and cross-docking. In contrast to significant rivals, Walmart’s stores were positioned in low-rent, suburban regions and just a few miles from a distribution center so that a single distribution center could service many shops to obtain scale benefits (Brown et al., 2018). In addition, this company possessed one of the largest private truck fleets and an innovative cross-docking logistics technique that expedited the delivery of its products from distribution centers to stores, reduced operating costs and inventory, increased inventory turnover, and accelerated cash flow.
Customer engagement management is a crucial activity in a connected supply chain. This strategy seeks to uncover, attract, and develop connections between suppliers and consumers, facilitating the conveyance and monitoring of the purchasing industry (Singh & Misra, 2021). Walmart invested heavily in creating information technologies, including a centralized database, store-level point-of-sale systems, a satellite system, and a Retail Link between the 1980s and 1990s (Muñoz et al., 2018). Such information technologies enabled the establishment of real-time databases, which assisted Walmart in reducing inventory levels and fast adapting to client demand. In addition, to create relationships with consumers, Walmart devised a unique technique known as a community store, in which each shop could provide customized items based on the particular preferences of the local community.
Walmart’s integrated supply chain concentrates on internal and external connections, including between the firm and its employees and between the corporation, its suppliers, and its consumers. In terms of institutional ties, Walmart developed common standards for functioning in stores to reduce discrepancies between truckers, workers, and coordinators. Currently, Walmart shares detailed information about periodical store sales with staff members during regular informal meetings. The firm regularly alerts workers of the most recent documentation regarding the company’s advancement through satellite networks (Nguyen, 2017). According to Sheffi (2017), the company also prioritizes strengthening its external ties. When Walmart began working with its suppliers, the company standardized box sizes and labeling to ensure items’ smooth transportation (Muñoz et al., 2018). Walmart collaborated with its suppliers on price rollback initiatives to boost sales and achieve its financial goals.
Further, Walmart made it possible for its suppliers to access the sales information of its products via the Retail Link database. Suffices it to say that Walmart implemented the CPFR program and the VMI program to foster the relationship with its suppliers, reduce the deformation of demand information, and organize the strategic plan with supply chain partners (Nguyen, 2017). Walmart’s CPFR initiative is a breakthrough strategy due to the close collaboration between the company and its vendor.
Conclusion
This paper has highlighted crucial insights into the critical supply chain management strategies that have turned Walmart into a retail giant. Principally, Walmart has adopted strategic procurement techniques since its founding to locate goods at the greatest prices from vendors who can satisfy demand. The business then forms strategic alliances with the majority of its suppliers, providing them the possibility of long-term, increased orders in return for the lowest operational charges. Similarly, Walmart optimized supply chain management by creating liaison and communication channels with distributors to increase inventory flow and reduce stockpiles.
Furthermore, Walmart’s distribution network relies heavily on technology, which is the core of its supply chain management. Compared to other private companies, this Walmart has the most advanced IT network globally. This cutting-edge technology and well-planned infrastructure make the company successful in demand forecasting, stock monitoring, route planning, client relation management, and rapid service turnaround logistics.
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