Supply Chain Management Walmart

Supply Chain Management at Wal-Mart

Nathan Powell

November 30, 2015

International Logistics

MKT 3323

INTRODUCTION

        Wal-Mart has been a front runner and innovator in the supply chain management world since it opened in 1962. Sam Walton hit the market at the perfect time and had a tremendous business idea that has thrived for over fifty years. Sam’s ability to get the inventory straight from suppliers to his store was vital in his success. The ability to adjust to changing legislations and maintain his idea of everyday low pricing is what has made his corporation a dynasty. Wal-Mart’s distribution’s cost compared to its competitors has been a strong competitive advantage for the company.

Summary

        Sam Walton opened up his first Wal-Mart store in 1962. He had a previous chain of stores under a different name but changed it when he decided to expand. In 1969 he received the funds to build his first very own distribution center. Wal-Mart’s supply chain has long been considered its main factor to keep its competitive advantage. In 1989 Wal-Mart was named the retailer of the decade partially because of their extremely low distribution costs. Wal-Mart’s distribution costs were at 1.7% which was less than half of their nearest competitor’s marks.

They also lead similar stores in their ability to quickly turnover their inventory.

        One of the methods Walton used in his distribution strategy was to cluster many retail stores in close vicinity to his distribution centers. He tried to focus on putting his stores in suburban areas with low rent close to highways. By the 1980’s Wal-Mart had grown an enormous logistics system. They had accumulated over 6,000 trucks and 50,000 truck trailers to distribute their inventory to their stores. They had a 75,000 man logistic team that was using these resources to the fullest. They clustered the stores so well that the average distance from distribution center to retail store was around one hundred and thirty miles.

        Wal-Mart’s system of being able to bypass distributors has helped them maintain their tagline of everyday low pricing and keep customers satisfied. Merchandising specialists with Wal-Mart made different templates to setup each of their stores. Even though there are templates for how the stores are to be set up, no two are the same. The store tries to stock certain items that are used highly in the area in which the store is located. Two stores in the same town will not have the same layout, and most likely even carry different products. To maintain even lower operating costs, the temperature and lighting settings of all stores were controlled by the central location in Arkansas. Everything is setup to cut all costs possible so that the savings can be passed down to the customer.

        Gathering and analyzing information about his systems of stores has always been important to Sam Walton. Even in the sixties he went to an IBM school in New York trying to find the most intelligent student to bring back to Arkansas to computerize his operations. Walton would pilot his single engine air plane to each of his store to monitor operations. In the 1980’s they were the first chain store to fully adopt UPC bar codes. Wal-Mart worked with suppliers to make sure they were running as efficient as possible.

        Walton was considered by many as a phenomenal boss to work for. He would visit all of his stores and encourage all employees to contribute ideas to help benefit the company. Every Saturday morning Walton would host a meeting at seven in the morning with his top level management. All twenty eight thousand Wal-Mart branded stores are ran and kept up with in the central location in Arkansas.

        Even in recent years Wal-Mart is still focusing on improving their supply chain at all times. As recent as 2005, Wal-Mart came out with a program called Remix trying to prevent items from going out of stock in stores. That wasn’t the only thing special about 2005, that year Wal-Mart also became the United States’ largest grocer. In 2006 Wal-Mart implemented programs to help speed up checkout speed, customer service, and store appearance. They believed remodeled stores could improve customer flow and increase profit margins.