Wal-Mart: The Inventory Management

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Introduction

When the first Wal-Mart store opened in Arkansas some time back in 1962, the founder Mr. Sam Walton had but one vision; to save money and live better. Five decades later, that has remained the organizational culture while it has grown to become the world’s largest retailer (Walton, 2009). They sell almost every household items ranging from groceries to electronics. What has made them so unique is their cheap prices. Saving on expenditure has remained on of Wal-Marts cultures and unlike other big corporations; you will definitely not find the expensive mahogany desks which are delicately seating on a marble tiled floor.

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The executives of Wal-Mart lodge at economy hotels whenever they are out on business. All learnt well from the founder of the business (Walton, 2009). The operations that enabled Wal-Mart to be the world’s best retailer can be a good lesson to other organizations. Wal-Mart is reputed to have the most efficient inventory management System. It is a very magnanimous store and it stocks products from as many as 70 different countries. Inventory management helps solve the complexities associated with this. It ensures that they have just enough to meet their demand but not too much to tie up their capital and waste warehousing space (Crosby, 2010).

Classical Lessons

Wal-Mart has since its inception placed a lot of premium on reducing its purchasing cost so as to offer the most competitive rates to its customers. It did this by disobeying the rules of supply chain of manufacturer; distributor then retailer. They went direct to the manufacturer and bargained for the best price that could be given. Wal-Mart invested in time to ask questions and carry out research and they never bought from a manufacturer unless they were convinced there is no cheaper option available (Mohan, 2003).

Perhaps this is one of the reasons why my organization is not making progressive growth. We need to borrow a leaf from Wal-Mart and get into a B2B relationship with the manufacturers. Our volume of sales is not higher than that of our competitors because of the same prices we offer. For instance, instead of buying sugar from the authorized distributors, my organization can go directly to the manufacturers and get the best price and repackage the sugar and sell it at a very affordable price. What Walton observed about consumers has not changed in five decades; they are always attracted and retained by cheap prices.

Another lesson we can draw from Wal-Mart is the distribution of goods and services. Wal-Mart has a very efficient network to make sure goods and services reach the consumer right on time. While we may lack the capital to build such a massive infrastructure, we can at least think of franchising with other businesses located where we have clients but don’t have enough capital to go at the moment. The Inventory management team also has a tested and efficient way of stock control. The aim is too make sure the store has just enough. One hand, it is bad if customers come to buy and they can’t find what they wanted and on the other, it is bad to stock too much since money is tied up in stock. A scientific analysis can be done to regulate the stocks to be at the best equilibrium.

But perhaps our biggest set back is our non-scientific approach to inventory management. We have traditionally relied on past experience and intuition to know our restock levels. What Wal-Mart did was ground breaking. They partnered with an I.T firm which used an Information system to track the stock levels. If the system noticed that a certain commodity was running out, it automatically sent a request for more. This way, there is always enough for everyone, yet not too much to waste space (Mohan, 2003).

Another reason why Wal-Mart grew fast was because it is a discount retailer. Since they buy from the manufacturer and buy in bulk, they not only get good prices but good discounts too. This enables them to sell their goods at very competitive prices and customers like it. We can borrow from this too. Once we have an efficient inventory management system, we will now be in a position to buy directly from the manufacturers in bulk. Since the inventory management will establish when the goods will be sold, we can actually get the goods from the manufacturers and by the time the cheque matures, we have already sold their good or at least part of it.

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Conclusion

There are three main reasons why Wal-Mart became the world’s largest retail store. Their willingness and boldness to investment in new technology, the customer friendly pricing policy and the efficient distribution and inventory control. There is nothing as frustrating to a shopper as walking into a store and he/she can not get his/her favorite products because they are out of stock. This is the reason why shoppers kept coming back to Wal-Mart. They knew they wouldn’t arrive too late.

Any organization that wishes to be on the cutting edge ought to learn from this great and prolific example. An efficient Inventory control will save on time and space and this will eventually translate into affordable services and goods to the customers.

References

Crosby,T. (2010). How Inventory Management Systems Work. Web.

Mohan, P. (2003). Wal-Mart’s supply Chain management Practices. Nagrjuna Hills: ICFAI.

Walton, R. (2009). Wal-Mart 2009 annual report. Bentonville Arkansas: Wal-Mart Stores Inc.

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BusinessEssay. (2022, May 24). Wal-Mart: The Inventory Management. Retrieved from https://business-essay.com/wal-mart-the-inventory-management/

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BusinessEssay. 2022. "Wal-Mart: The Inventory Management." May 24, 2022. https://business-essay.com/wal-mart-the-inventory-management/.

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