Walmart: Transportation Strategy

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Organization’s Goals

Walmart takes its own business niche and contains the key components of success, including price, operating activity, culture, key item promotion / product, expense / cost control, talents, and services. The key seven components of success of Walmart refer to its goals. They are also the seven key areas the transportation manager should focus his or her attention while developing the strategy of performance. To discuss the internal strategies and tactics are to be developed based on such missions as “a wide assortment of good-quality merchandise; the lowest possible prices; guaranteed satisfaction with what you buy” (“Walmart.com’s history and mission,” 2017). It also seems essential to identify the company’s supply chain strategy.

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Organization’s Supply Chain

Walmart started with the goal of delivering the product to customers anytime and anywhere. Then they focused on the development of the cost structure, which allowed offering daily low prices. The next point of the strategy was the foattention to more structured and advanced supply chain management. Today’s supply chain of Walmart involves transparent and close collaboration with partners, vendor partnership, cross docking, and technology utilization.

Organizational Strategy: Cost

The unique and proprietary solution for Walmart is to pay attention to the average consumer at the expense of low prices. Putting it differently, one may note that the company strives to provide low prices every day as a permanent competitive advantage. Price is a great part of what Walmart appoints for customer goods, into which all Walmart products turn, and this includes even well-known brands all over the world. Sam Walton, the founder of the organization, has long understood that consumers from all over the world are guided by the same principle – to buy the same product at the lowest possible prices. Due to lower prices, Walmart raised the standard of living around the world. Aligning the mentioned price strategy to the transportation solution, it is possible to recommend following the same approach and focusing on the reduction of costs.

Organizational Strategy: Service

Every Walmart employee is expected to think and act in such a way that will satisfy customers and provide them with goods they want at an affordable price. The network grows, new stores appear, and new costs arise. If transportation managers looked forward a step, they would find a solution to the problem of managing supply chain more effectively by applying a centralized method of network management, when the cost of the information system is minimal, and management is timely and efficient. Centralized procurement management allows one to consolidate orders and achieve more favorable terms from suppliers (Udalov, 2014). Managing the range and pricing from a single center helps to conduct a flexible assortment and pricing policy, depending, for example, on the location of the stores. Unity, details, efficiency, and completeness of information about all objects of the network promote obtaining topical analytical estimates for each facility and the entire company, which ensures the most efficient use of working capital. Ultimately, centralization plays a great role, uniting the flow of information about goods, people, and finances without delays and distortions, allowing making the right transportation decisions.

Considering the existing supply chain management of Walmart, it is possible to recommend applying quick reaction capability (QRC). Similar to that in the military, the fundamental idea of the mentioned method is to act to obtain temporary competitive advantages. The use of the rapid reaction logistics method became possible after the development of appropriate information technologies, in particular, electronic document management (EDI), bar coding, the electronic point of sale system (EPOS), and laser scanners. The essence of the QRC method is to evaluate the demand in real time, as far as possible, and as close as possible to the end user. As for logistic technology information to optimize the level of stocks, the advantage of this method is shown when a high level of service is required. The QRC method requires high fixed costs, but the incremental costs of improving the service will be relatively low.

The reduction of the order execution cycle is another property of the QRC method. This may lead to a reduction in the level of stocks, which helps reduce the time for placing an order. The method allows optimizing the most important logistic parameters such as the level of stocks and the duration of logistic cycles. Automation of accounting of logistical processes is likely to allow the network to become the absolute world leader in retail. The introduction of bar-coding and a logistics management system improve the quality of accounting and planning of the global activity of the trading network, as well as the speed of settlements with each individual buyer. The order in the data within the business and the efficiency in working with clients are the success factors of Walmart based on the use of information technology (IT).

Organizational Strategy: Desired Position

The approach of Walmart means frequent and informal cooperation between stores, supply centers, and suppliers, as well as centralized control. Moreover, the company’s supply chain, tracking purchases, and demand allows customers to effectively influence the logistics of suppliers, rather than forcing companies to push their goods onto the shelves.

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Organizational Strategy: Technology

First, the company introduced new applications to optimize the movement of goods throughout the supply chain. On their basis, mechanisms for coordinating relationships with suppliers began to develop. Improving the quality of coordination allowed Walmart to introduce an effective system of assortment planning and regular replenishment of stores. Only after all these investments were made and new technologies were introduced, Walmart built a data warehouse where complex queries are processed based on information from different sources and different levels of analysis.

Organizational Strategy: Partnership

Walmart developed a strategic logistics management system to find products at the best price from suppliers who objectively know what is in demand. The next step is to continue establishing strategic partnerships with the majority of the existing producers, offering them potential long-term and bulk purchases in exchange for the lowest possible prices. Cross docking means direct delivery of products from an incoming or outgoing trailer without additional storage. It refers to unloading goods from the incoming trailer and loading these goods to outgoing machines or wagons without storage between processes. Manufacturers brought products to the supply centers of Walmart, where they are to be cross docked and went straight to the shops of the company. This technology keeps the costs of inventory and transportation at a low level, reduces the time that passes after it, and corrects the inefficiency. Walmart owns plenty of unrelated drivers who continuously bring goods to supply centers (they are located on average 130 miles from the store) where they are unloaded, repacked, and shipped without being held in the warehouse. By continuing to use cross docking, Walmart will significantly reduce costs and allow the saved money for its customers, attracting them with highly competitive prices.

Conclusion

Walmart logistics supply chain strategy has given the company several stable competitive advantages, including lower product prices and storage costs as well as the increased diversity and choice in stores. It was this strategy that allowed the company to become the dominant retailer in the world market. Regarding technologies, Walmart should continue focusing on innovative processes and systems, improve transportation planning and achieve greater efficiency.

References

Bjelland, O. M., & Wood, R. C. (2015). To nurture transformational technology, build a community like Sam Walton’s. Strategy & Leadership, 43(2), 41-46.

Ghazzawi, I. A., Palladini, M., & Martinelli-Lee, T. (2014). The Wal-Mart stores, Inc.: An American dream that touched the world. Journal of the International Academy for Case Studies, 20(1), 9-16.

Spicer, A., & Hyatt, D. (2017). Walmart’s emergent low-cost sustainable product strategy. California Management Review, 59(2), 116-141.

Sternbeck, M., & Kuhn, H. (2014). Grocery retail operations and automotive logistics: A functional cross-industry comparison. Benchmarking: An International Journal, 21(5), 814-834.

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Udalov, F. E. (2014). A centralized management system, good or bad? Problems of Economic Transition, 57(6), 50-55.

Véronneau, S., & Roy, J. (2014). Security at the source: Securing today’s critical supply chain networks. Journal of Transportation Security, 7(4), 359-371.

Walmart.com’s history and mission. (2017). Web.

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BusinessEssay. 2022. "Walmart: Transportation Strategy." September 15, 2022. https://business-essay.com/walmart-transportation-strategy/.

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