Case Analysis of Walmart's Success (Case Study Sample)
For each case, you will be required to write a short paper (approximately2-3pages)focused on the supply issues inherent in the case. The paper should be more analytical than descriptive. The heart of your paper should focus on identifying the factors related to strategy decisions, the rationale for the decision, and an evaluation of the soundness of those decisions.
Read thecase and respond to the following questions:
What are the advantages and disadvantages of the staple stock-flow distribution center model?
What are the advantages and disadvantages of the cross-dock flow distribution center model?
What is the financial impact of stock-outs caused by the lower line fill rates in the cross-dock DC model?
How different will the needs of Walmart China be in five to ten years? What are the implications for supply chain infrastructure?
How will the capabilities of Walmart China's suppliers evolve over the next decade?
Walmart's success is primarily attributed to its efficient and effective transportation and distribution systems. The company utilizes staple stock-flow and cross-dock flow models in its supply chains. The staple stock-flow model is commonly used in the United States, while the cross-dock flow is used in European operations. These two models have their advantages and disadvantages. Among the benefits of staple-stock flow is that it allows the stocking of inventory where it can be held over a certain period depending on the shelf life of the products. Secondly, the staple stock-flow model provides flexible and more straightforward scheduling. This enables picking items and dispatching them to stores or centers far from the distribution center (DC). The process allows organizations to overcome various supply chain problems such as delivery delays and short shipments. Thirdly, this model enables the organization to have an in-stock position, allowing it to protect its branches when the suppliers cannot meet their obligations. Fourth, this model enables the firm to scale its operations by increasing its branches and efficiently service them.
The staple stock-flow model also gives the firm a competitive advantage because the lead-time and wastages are significantly reduced, which allows the branches to receive inventory when demanded. Lastly, this model enables the organization to react effectively if there is a sales increase in a specific product, especially during festivals, events, and seasonal changes CITATION Fra15 \l 1033 (Johnson). Additionally, it enables volume buying during this period or buying opportunities which allow the firm to get some leverage. However, despite the numerous advantages, the staple stock-flow model has several disadvantages. It requires storage space, thus more considerable capital investment. The capital investment would include purchasing equipment and construction costs of the warehouse to certain specifications such as specific cubic footprint and ceiling heights. Secondly, although this model tends to be flexible in scheduling, its handling costs are higher than those of the cross-dock DC model. Lastly, this model cannot handle an increased number of stock-keeping units (SKUs), limiting its ability to fulfill sudden inventory orders of certain products at short notice.
Compared to the staple stock-flow model, the cross-dock flow has considerable advantages. Under this model, one does not incur construction costs since there is no need for a warehouse, especially when using 3PLs. Secondly, the storing cost and packaging or repackaging will be reduced because the firm will maintain minimal inventory. Thirdly, this model can handle more SKU capacity, making it an ideal choice for firms with high seasonal assortments. Last, the cross-dock flow model has lesser to no inventory management risks. Considering that the firm does have any or limited inventory since a warehouse is not needed. The model has several disadvantages, including its high dependency on suppliers to adhere to obligations and schedules. Secondly, there are challenges with capacity management since the model is run on simultaneous arrival, loading, and dispatching of products. Lastly, for this model to be cost-effective, a high volume of inventory must be handled or perishable products.
The financial implications of stock-outs brought out by lower line fill rates can be classified into short and long-term impacts. In the short run, the firm's stores will not receive adequate inventory timely. Secondly, the firm will incur losses due to lower filling rates, probably too low, or lack of deliveries from suppliers CITATION Tho19 \l 1033 (Thomas Net). In most cases, contracting firms pay a fixed price for the cross-docking services if stock-outs are caused by delays from the contracting firm's suppliers. There will be a future loss of profits in the long run due to the lack of products on the firm's shelves. A customer who cannot find the desired product will go somewhere else searching for that product and may not return.
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