Transportation economics is as important to business as it is the production. Production by itself cannot bring about profit without goods reaching the intended customers. Transportation economics serves as a vital linkage between products and clients. Large-sized business organizations that have taken a major step of upholding globalization play a significant role in driving forward the world economics. They operate their businesses by putting in place an efficient supply chain management system. The effectiveness of supply chain management is determined solely by the efficiency of transportation economics in the business environment.
Wal-Mart is the largest retail chain store in the United States. The business’s headquarters is located in Bentonville, Arkansas, and has stores in twenty-eight countries across the world. The company’s great success is highly attributed to its efficient supply chain management system and continuous innovation and adoption of technology (Roberts & Berg, 2012). The system eases managerial activities that are centralized despite the numerous stores distributed across the world.
Transportation management plays a significant role in Wal-Mart. The chain store is unique and has remained focused on the retail industry despite its massive growth over the years. Retail business demands that a company buys merchandise from the wholesalers or directly from the manufacturers and transport them to the warehouse. However, Wal-Mart has taken advantage of its size and popularity to influence producers to transport the goods to its warehouse (Roberts & Berg, 2012). The strategy has played a significant role in lowering the cost of products to customers. Wal-Mart’s transportation system helps to ship goods from warehouses to the stores. Online business has grown over the period, and the system plays a significant role in ensuring that the ordered products are available in stores for shipping and other forms of delivery methods.
Transportation Economics and Decision Making
Transportation economics plays a significant role in the decision-making processes of Wal-Mart. Movement of goods from the warehouse to stores often takes the time to prepare and execute. In the preparation stage, various factors are put into consideration, which determines the speed of the execution and the type of goods to be transported. The inventory management system is used to determine the flow of certain goods in the store and predict their demand to ensure their availability on shelves (Roberts & Berg, 2012). The transport department manages transportation economics. The traffic manager is responsible for fleet management and ensures that the shipment of goods is made efficiently. In some cases, the company uses delivery vehicles to ship products to customers.
Individual stores run independently since stocking is done according to the demand for goods. In the United States, where stores are close to one another, the products are stored in centrally located warehouses. Hence, transportation economics influence how the products are shipped to the various stores. The company may use a single vehicle to deliver goods to different stores to minimize operations costs. Online shopping has opened a new method of transportation econometrics. Wal-Mart ensures that only products, which are in the inventory, are sold on the online platform and delivered to the customer through courier and logistic service partners (Roberts & Berg, 2012). The customer pays for the shipping costs, and the company ensures that various orders are pooled together to ease transportation logistics and reduce shipping costs.
Supply Chain Management and Customer Service
As aforementioned, Wal-Mart is ranked as the largest retail chain store in the United States. The massive growth is attributed to effective supply chain management under a centralized system. The greatest benefit of centralized management is consistency in service delivery to customers in all the business stores. Additionally, a centralized management system guarantees that there is standard quality service delivery across the retail outlets. In the contemporary world, technology has eased business administration and enabled enterprises to operate in different regions under the same code of ethics and maintain regular customer services (Dietrich, 2014).
Wal-Mart has managed to reach many customers across the world through supply chain management. The company ensures that goods are shipped to different stores on time to make sure that they do not run out of stock. The company has a supply chain management system that monitors the demand for products across different stores. Consequently, the management ensures that products are not only shipped on time but also accurately. An inadequate supply management system may result in the delivery of goods to the wrong store. Such an incidence may result in some stores running out of products making it hard for customers to get goods on time. Wal-Mart guarantees quality client services by making sure that they access all the products that they require. According to Burns (2015), Wal-Mart tracks the transportation of all its goods to make sure that they reach the stores safely. Thus, the company can respond promptly in the case of delayed shipment of products. Jacobs and Chase (2013) argue that Wal-Mart has organized its supply chain management system in a way that it helps the company to maintain optimal inventory. Failure to manage the inventory results in a business running out of stock at a time when customers need them. Wal-Mart ensures that it has adequate products in the inventory. As a result, the company’s stores cannot run out of stock.
Wal-Mart maintains constant communication with customers to determine their needs and respond accordingly. The company has a system that monitors customer preferences and facilitates their inclusion in the supply chain. Jacobs and Chase (2013) claim that the firm’s supply chain is designed to help it distribute and ship goods to the right stores and time to clients. Additionally, the company ensures that damaged products are sales returns are quickly collected from customers and transported back to the appropriate warehouse. In the case of damaged products, the company replaces them on time to avoid inconveniencing the clients.
Technology and Inventory Control in Wal-Mart
Wal-Mart is committed to cutting costs with the objective of lowering consumer prices. Technological advancement helps the business to restock its shelves and make sure that goods are available whenever they forecast a rising demand. Inventory control is done to ensure that customers find products on the shelves at all times (Roberts & Berg, 2012). The company has an inventory management system, which monitors the number of goods available in the store. The system updates the inventory record when products are sold and also when an order is delivered to the outlet. Additionally, the system is tailored in a particular way to supervise inventory in all stores and is accessible from the headquarters. It helps in decision-making processes at the managerial level concerning the inventory of certain goods and their demand in the stores.
The success of supply chain management in large companies organizations requires state-of-the-art technology and network system (Prentice & Prokop, 2015). The system allows the prediction of inventory levels, the creation of transportation routes, and the management of customer relationships. In the situation where customers order goods online, the system establishes the transportation route and logistics. Wal-Mart’s inventory system is integrated into the company’s website and enables the online business to grow tremendously over time because of its efficiency.
The benefit of Transportation Economics to Shareholders’ Value
Successful transportation economics facilitates the efficient flow of goods in the business system. Wal-Mart stores are usually the busiest in the United States, and the heavy customer flow is attributed to the quality of client services, low prices, and availability of goods. According to Li (2014), supply chain management thrives where there is efficient transportation economics, and therefore leading to profits (Li, 2014).
Business growth is attributed directly to the quality of service delivery. Customers are the best tools for marketing in business. Contented customers go back to the stores and more often bring referrals. Efficient transportation economics helps to ensure that goods are available on shelves at all times. In return, Wal-Mart’s sales volume goes high contributing to an increase in profit. Additionally, it helps to minimize the operations costs within the store. Coyle, Langley, Novack, and Gibson (2012) posit that transportation economics enables Wal-Mart to sell products at competitive prices. Consequently, the company competes with rivals effectively. The company has grown rapidly due to the exploitation of transportation economics. The price of the company’s share continues doing well in the stock exchange market, thus sustaining shareholder value.
Other organizations that operate in retail businesses need to imitate strategies that Wal-Mart has implemented for they have proved to be efficient. Transportation economics needs to be aligned with the inventory management system. Goods move from the manufacturer to the consumer through retail stores (Arli, Dylke, Burgess, Campus, & Soldo, 2013). For retail stores to maximize profit, there is a need to reduce the cost of acquiring goods from the producer. Wal-Mart has managed to cut costs by luring manufacturers to transport their products to its warehouses. The effort would encourage businesses to lower their prices, therefore attracting more customers.
Chain stores should design their supply chain management systems in such a way that they can identify the goods that require being shipped from the warehouses to the outlet at any given time. Wal-Mart has implemented such a system, which facilitates inventory management and shipment of goods to the right destinations. Companies operating in the chain store industry should use the operations costs, inventory management, and prices of their products to gauge success. Companies whose operations costs are high and are unable to manage inventories and offer competitive prices have a long way to go.
A business that seeks to succeed in the chain store industry has to implement a supply management system and exploit transportation economics. The system will enable it to monitor and improve customer services. On the other hand, transportation economics will allow the business to make sound logistical decisions, thus ensuring that clients get products on time. Currently, Wal-Mart is considered as the most successful chain store in the world. Other retail stores should compare their sales with that of Wal-Mart and take necessary measures to realize growth.
Arli, V., Dylke, S., Burgess, R., Campus, R., & Soldo, E. (2013). Woolworths Australia and Wal-Mart US: Best practices in supply chain collaboration. Journal of Economics, Business, & Accountancy, 16(1), 17-39.
Burns, M. (2015). Logistics and transportation security: A strategic, tactical, and operational guide to resilience. London, UK: Taylor & Francis.
Coyle, J., Langley, C., Novack, R., & Gibson, B. (2012). Supply chain management: a logistics perspective. New York, NY: Cengage Learning.
Dietrich, A. (2014). An analysis of the success of Wal-Mart. Berlin, Germany: GRIN Verlag.
Jacobs, R., & Chase, R. (2013). Operations and supply chain management. New York, NY: McGraw-Hill Education.
Li, L. (2014). Managing supply chain and logistics: Competitive strategy for a sustainable future. New Jersey, NJ: World Scientific Publishing Co Inc.
Prentice, B., & Prokop, D. (2015). Concepts of transportation economics. New Jersey, NJ: World Scientific Publishing Co Inc.
Roberts, B., & Berg, N. (2012). Wal-Mart: Key insights and practical lessons from the world’s largest retailer. London, UK: Kogan Page Publishers.