Running a superior and effective supply chain is vital for the success of any business venture. By examining the supply chain management at Wal-Mart, this paper will illustrate important aspects that help in maximizing the efficiency and overall productivity of the business.
Background of Organization
Wal-Mart is a nongovernmental profit making organization. Its core business is retailing with a very wide variety of products ranging form foodstuffs, grocery, clothing, stationary and many other goods. Although it has stores in relatively few countries, Wal-Mart has a strong global presence as it has effectively created an empire in the retailing business. The low price it offers to its customers is the major factor that sets Wal-Mart apart from other retailers. Offering these competitive prices has enabled Wal-Mart to offer strong competition to other retailers and it often runs them out of business. A cutting edge management and supply chain structure; which is the main focus if this paper, is the driving force behind Wal-Mart’s ability to offer the low prices. The following section illustrates how this has been achieved.
Wal-Mart’s supply chain design
More than any other aspect, automation at Wal-Mart stores has greatly helped in improving the efficiency of the supply chain. As the first company to make use of the barcode technology, the company has continued to act as a trendsetter in supply chain technology (Russell, 2010). This and other kinds of technologies have enabled the company to run an effective inventory management process that presents less logistical challenges hence giving them an immense amount of leverage when dealing with suppliers. It is this kind of leverage that gives Wal-Mart the opportunity to negotiate the most competitive prices and in turn the ability to outdo competitors. To illustrate how automation achieves this, one can take the example of the effect of a single purchase on the supply chain. When something is picked from the shelves and runs through the barcode, the central warehouse is notified within seconds that the shelves need replenishing for the bought item (Fishman, 2006). In turn, the manufacturer gets the information in due speed and necessary arrangements are made. There are other numerous applications of technology that have enabled the company to run an effective supply chain. These include “a private satellite system that helps in tracking of deliveries, credit card facilitation, audio and visual transmission, sales data management etc”(Chopra & Meindl, 2007). The system therefore greatly enhances the efficiency of the whole supply chain.
Another aspect is the logistical design that allows the company to purchase goods in very large amounts. By doing this, the company can use bigger means of transport at cheaper costs hence bringing down the cost of transportation and logistics. This is an added advantage for suppliers since they know that they are minimizing risks by being part of Wal-Mart’s supply chain system. As a result, suppliers offer the most competitive prices and huge discounts to Wal-Mart; in contrast to others that do not have such an effective system and do not buy large amounts of goods. With such a reputation, suppliers are very careful in dealing with the company since they know that it will only take the most competitive prices which competing companies are very ready to offer and. The logistic design ensures that it is cheap and easy for Wal-Mart to get alternative suppliers in case they have problems with current ones (Russell, 2010).
In addition to the above, Wal-Mart also understands the importance of properly training and retaining its staff. As such, the entire workforce understands that the business is centered on an efficient supply chain which enables selling at low prices. Unlike other companies, the management strategy and core values of the business are not left with the top management. They are understood by the staff, suppliers and customers; which works for the good of the whole business.
From the facts presented in this paper, it is clear that the supply chain management practices employed by Wal-Mart are highly efficient. The design adopted by the company has enabled it to immerge as a giant in its core business. The choice of Wal-Mart for this paper is informed by the nature of the retailing business whose success is pegged on the efficiency of the supply chain. This is not to imply that supply chain management should not be emphasized for businesses in other fields. In fact, business studies suggest that in the years to come, the business landscape will change such that the most successful business will be those that have highly efficient supply chain designs (Fishman, 2006). This is due to the fact that rapid technological improvements have shaped a society where timely delivery and business transactions are highly valued. Just like Wal-Mart, businesses will have to embrace technology and logistic designs that will secure efficiency in the supply management. The efficiency of the supply chain in any business is vital for the overall success.
Chopra, S. and Meindl, P. (2007). Supply chain management: strategy, planning, and operation illustrated. NY: Pearson Prentice Hall, 3rd Edition.
Fishman, C. (2006). The Wal-Mart effect: How the World’s Most Powerful Company Really Works– and how it’s transforming the American economy. N.Y: Penguin Group.
Russell, M. (2010). Logistics at Wal-Mart. Web.