Wal-Mart is one of the major private sector employers on the planet, with employee power of greater than 2. 1 million. The business's creator, Sam Walton has always focused on bettering sales, constantly minimizing costs, adopting efficient circulation and logistics management systems and using innovative information technology tools. (P. Mohan Chandran, 2003)
Discount Industry Value Chain
Wal-Mart Value Chain
Wal-Mart's skills in developing and using POP data collection to control inventory
Long-term romantic relationship with vendors
For years, Wal-Mart's POP system was rare
Ability to allure customers by least expensive costs
Costly to Imitate
Wal-Mart's shorter value string compared to its competitors
If Wal-Mart continues to expand and support sales, there must be no fear of immediate substitution in in close proximity to future
Wal-Mart has always emphasized the need to reduce its costs of buying and provide the best prices possible on the market to customers. Wal-Mart procures goods straight from produces, bypassing all the intermediaries. Whereas its industry opponents have a longer value string as shown above. In case there is Wal-Mart, it has built a key competency for itself by being a head in the distribution and retail department, which in turn has led them make a competitive gain for itself. Wal-Mart is a tough negotiator on prices and finalizes a purchase offer only when it is sure that the price of which they are simply procuring in the minimum possible. Wal-Mart spends a significant timeframe with vendors and understanding their cost composition. The retailer means that manufacturer does indeed the better to decrease prices. Wal-Mart feels in establishing long-term relationship with the suppliers.
Wal-mart has syndication centers located at different physical locations in america. Wal-Marts own warehouses provides 85% of the inventory, as compared to 50-60% for its competitors. Wal-Mart is able to provide replenishments within two days, whereas, its competitors in at least five times. Shipping costs for Wal-Mart is roughly 3% compared to 5% for its competitors. The distribution centers ensured a steady and consistent stream of products to aid the supply function.
As Wal-Mart uses sophisticated barcode technology and hand-held personal computers, managing the center becomes easier and less expensive. It's technological systems ensures that information about the inventory degree of all the merchandise is accessible to every worker. The hand-held computer enables the employee to keep an eye on the positioning of a specific product from a specific bin or shelf in the guts. The number of product required from the guts is entered into the hand-held computer which gets modified in the server. The hand-held computer also permits the packaging section to get correct information about products to be filled. It exhibits all information about the storage, packaging and shipping of a specific product thus, saving time on unneeded paperwork. This enables the company to gratify customer needs quickly and improve the degree of efficiency of the distribution center management functions.
The main feature of Wal-Mart's Logistics infrastructure is its vehicles system. The circulation center is serviced by more than 3500 trucks of its. These dedicated pickup trucks that Wal-Mart is the owner of help them in shipping goods from the syndication centers to the stores within two days and replenish the store racks twice a week. Wal-Mart thinks that it requires drivers who are devoted and focused on customer service. The business hires only experienced drivers who have driven more than 3, 00, 000 crash free miles, with no major traffic violation.
To make its syndication process more efficient, Wal-Mart also used a logistics approach known as 'cross-docking'. In this technique, the finished goods were immediately picked up from the manufacturing facility of a dealer, sorted away and then directly supplied to the clients. The system reduced the handling and storage space of completed goods, virtually reducing the role of the distribution centers and stores.
In Cross docking, requisitions received for different goods from a store were changed into purchase or procurement requests. These purchase requests are then forwarded to the manufacturers who express their capability or inability to supply the products within a specific time frame. Where the manufacturer agrees to provide the required goods within the specified time, the products are directly forwarded to a place called staging area. The products are loaded here based on the requests received from different stores and immediately delivered to different customers. Typically, decisions about merchandising, costs and promotions have been highly centralised and were generally taken at the organization level. The cross docking system, however, changed this practice. The machine shifted emphasis from "supply chain" to "demand chain" (Byrnes), which designed that instead of the merchant 'pushing' products in to the system; customers could 'pull' products, when and where they need it.
Wal-Mart has spent closely in IT and communication systems to effectively monitor sales and products inventories to get across the country. With rapid extension of Wal-Mart stores across US, it was essential to have a good communication system. Hence, Wal-Mart setup its own satellite television communication system in 1983. Its benefits are as Sam Walton rightly said that he is able to go to any specialist and talk on the phone to any store that might have a problem with system and gauge how a particular day is certainly going. On the screen, he could see total of the day's standard bank credit sales accumulated as they happen. If something important is to be conveyed to the stores and syndication centers, he or any Wal-Mart executive can walk to it studio and get on the satellite transmitting and get it right there.
Wal-Mart can reduce unproductive inventory by allowing stores to control their own companies, reducing load up sizes across many product categories, and timely price markdowns. Instead of cutting inventory over the board, Wal-Mart made full use of computer features to make more inventories available in case there is items that customers required the most, while lowering the entire inventory levels. Wal-Mart has also networked all its suppliers through computers. Employees at Wal-Mart have hand-held computer systems which are linked to the in-store terminals through a radio regularity network. These help them trail the inventory to get, deliveries and back up products in stock at the syndication centers. The order management and store replenishment of goods were completely executed with the aid of computer systems through the Point-of-Sales (POS) system. Through this system it is possible to monitor and track the sales and goods stock levels on the store shelves. Wal-Mart also made use of the sophisticated algorithm system which enabled those to forecast exact quantities of each item to be sent, predicated on inventories in each store. Wal-Mart also runs on the centralized inventory data system using which the personnel at stores can find out the level of inventories and the positioning of each product at any given time.
In 1991, Wal-Mart has spent roughly $4 billion to create a retail website link system. A lot more than 10, 000 Wal-Mart retail suppliers used the retail website link system to screen the sales with their goods at stores and replenish inventories. The details of daily deals, which roughly amounted to more than 10 million each day, were refined through this integrated system and are supplied to every Wal-Mart store by 4AM the next day. Wal-Mart tied up with Atlas Commerce for upgrading the system through the Internet enabled technologies. Wal-Mart has the largest and the majority superior computer system in the private sector.
By making effective use of personal computers in every it's company functions, Wal-Mart is successful in providing continuous service to its customers, suppliers, stockholders and trade lovers.
Wal-Mart strongly assumed and constantly emphasized on strengthening its relationship with its customers, suppliers and employees. The company made work to capitalize every cost keeping opportunity. The cost savings on cost were always offered the the clients, therefore adding value at every level and process. Wal-Mart enjoyed the great things about low transportation costs since it possessed its own travel system which assisted Wal-Mart in providing goods to different stores within 48 hours. The company relished good bargaining ability as it purchased huge amounts. Low pricing ensured that the sales size were high and steady. The advantages of an efficient resource chain management system included decrease in lead time, faster inventory turnover, appropriate forecasting of inventory levels, increased warehouse space, decrease in safe practices stock and better working capital usage. In addition, it helped decrease the dependency on the circulation center management personnel resulting in minimization of training costs and problems. The stock-out of goods and the next loss arising from it was completely taken out. Wal-Mart's Supply chain management practiced led to increased efficiency in procedures and better customer service. Combination docking also helped Wal-Mart to lessen inventory storage area costs. In addition, it helped to decrease the labor and other managing costs in loading and unloading of goods.