Supply Chain Management at Wal-Mart (Case Study Sample)

Supply Chain Management at Wal-Mart
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Supply Chain Management at Wal-Mart
Introduction
Wal-Mart Stores Inc is the largest corporation, which runs discount department stores and warehouse stores in the United States of America and other leading countries in the world. The corporation runs over eight thousand stores in more than fifteen different countries, but the majority of these are in the United States, where the majority of its revenues are drawn. Since its establishment in 1962, Wal-Mart has grown to be the leader in its field, outdoing its competitors by far using efficient distribution systems that maximized on efficiency as well as minimizing the costs. This strategy significantly propelled Wal-Mart to the current position and saw it grow to be a giant public multinational corporation. In the year 2010, Wal-Mart had total revenue of US$ 421.846 billion, a strong indicator of its financial performance (Fraser, 2008, p.2).
Situation analysis
Since its start over fifty years ago, Wal-Mart’s main driving strategy has been the use of efficient chain management, which has effectively been able to keep its competitors fighting to catch up with little success. The approach that the company adopted enabled it to effectively eliminate unnecessary expenses that are associated with distribution, such as those that arise from the intrusion of intermediaries in any of the distribution system. Wal-Mart organised its transport department to be efficient, while strategically positioning its stores to achieve maximum coordination among different stores as well as using advanced technologies to monitor its distribution. Wal-Mart is credited for having been the first store of its kind to employ the use of vendor-managed inventories to ensure that supplies were in steady supply. All these seem to have caught its competitors by surprise, and soon they were trying to follow suit.
Major Problem
The company has operated with its supply chain as its main source of competitive advantage. With competitors now trying to emulate what it has done, the company needs to put into place new mechanisms that will see it become more competitive in the wake of growing competition. The company formulated a strategy that would see it hold its inventory growth to half the level of its sales growth. However, the company has been unable to meet this self-imposed target and the inventory growth. As the vice president of logistics stated, supply chain needs to remain a key source of competitive advantage for the firm.
Decision criteria
Currently, what poses a serious problem in the supply management chain at Wal-Mart is the continuous growth of its inventory relative to the growth in sales. The company had aimed to ensure that the inventory growth would remain as low as fifty percent rate of sales growth. To enforce this, there is a need to ensure that there is in place a more effective and function inventory control system, which will monitor the stock effectively and help to minimize holding and carrying costs. One of the major hurdles to minimizing inventory growth now is the inability to adequately monitor the stock that is being held at any particular moment, resulting in some form of artificial and technical shortage in the shelf. This occurs when the stock in question is missing in the shelves while at the same time it is available in the holding rooms (Fraser, 2008, p.6).
The current use of RFID to monitor stock has proved to be effective as it can help to monitor the stock in real-time with pin accuracies. However, the major limitation with this method is the enormous cost involved, as the cost of the system amounts to seventeen percent the cost of the inventory. To deal with this problem, it is essential that the strategy adopted will be efficient and easy to adopt, low in cost and extremely effective. This will help to counter the increase in inventory growth beyond what the company wants. It must also touch on all areas from handling of raw materials, the actual production, dealing with the finished goods as well as maintenance, repair and operation.
Alternatives
As a substitute for use of RFID technology, several measures can be applied to manage the inventory growth. These are based on the objectives of achieving a fifty percent growth rate in the cost of inventory compared to the growth of sales. These alternatives include the use of bar-code scanner, employing a just-in-time stock control method and organising operations to have a first-in-first-out form of stock control
Analysis of alternatives
The use of first in first out the form of stock control is effective for all goods, especially the perishable goods. The good thing about it is that it allows goods to be used in a systematic order, avoiding a situation whereby some goods are left in the warehouse for a long time. There has been the problem at the Wal-Mart stores, whereby the sometimes goods run out on the shelf and new ones are ordered because the stock in the stores cannot be accounted for with great precision. This results to an increase in unnecessary costs due to untimely ordering and other transportation logistics (Fraser, 2008, p.9).
By ensuring that the goods that are first to arrive in the warehouse are the first to leave, the stock can be easily monitored by assessing the date and time, that should be labelled on goods. In this way, it would be exceptionally easy to determine what is in the store by comparing the last stock sold and the last stock that was brought into the store, in terms of date and time. The main advantage of this is that nothing will be skipped since the time and date approach is remarkably effective. However, challenge will arise in the keeping the enormous volumes of data involved in the process. There is also a large workforce required to implement this, since the inventory records must be manually read and recorded. This will therefore lead to an increase in cost as well as being liable to human error. The approach is therefore not the best solution, although it would go a long way in helping to monitor the stock movement.
Just-in-time stock is an approach that is useful due to the simplicity. In this case, the stock requirement over a given period of time is determined so as to determine the exact amount of stock to order. When this is done, the exact stock that is needed at a particular time is then ordered and delivered in real time, avoiding the problem of delivering a lot of stock that may not be needful at the moment. In order to do this, company would need to do research in order to find the stock requirement at every particular time, also keep track on the rise, and fall in demand, so that the future increase in demand can be predicted with time.
The main disadvantage with this approach is that it requires a lot of market research in order to predict changes in demand. This would be extremely costly for a corporation the size of Wal-Mart. It would require them to monitor the market trends effectively for each of the chains eight thousand stores. This increased coat would translate to higher inventory cost, the very thing that it is meant to reduce. Additional...