Walmart’s Competitive Advantage
Supply chain plays a significant role in the life cycle of an organization. With the help of supply chain, many products and information travel in an organization. The organization can take effective management on supply chain with the help of control over the web or the network on resources and participants. An organization whether service based or product based can take out maximum benefit with the supply chain if they have full and effective control over its internal capabilities and external resources. On the other hand, Supply chain management is the designing of all actions in relation to supply chain network so that to maximise the customer satisfaction and achieve a competitive edge in the industry (Srivastava, 2007)
Figure one – Logo of Company
Walmart is an American multinational retail organization, established back in 1962 by Sam Walton. This retail chain runs on big discount department stores and warehouse stores. It is also one of the fastest developing organization in supply chain and retail management. According to Forbes (2017), Wal-Mart is on rank 24 in the list of world largest public companies. Wal-Mart headquarter is situated in Bentonville, Arkansas. As per the year 2018, the company have around 11,718 stores worldwide with over 2.3 million employees.
Walmart food product category includes various items related to grocery, snacks and beverages, organic certified foods, baked foods, frozen foods, coffee, meat, cookies and many more.
The distinctive competitive advantage of Wal-Mart is due to their targeting strategy as the company targets small and rural communities that help them in lowering the operating cost (Kampf, 2007). In addition to this, their store location strategy is also innovative; however, various other aspects have played a significant role in making the company a top retail mountain chain. The vision statement of Wal-Mart is short and clear, as they want to save people money to help them in living a better life. In addition to this, the founder i.e. Sam Walton also said that “if well all work together, the cost of living for everyone can be decreased and the world will get an opportunity to realise how can everyone live with a better life (Hollenbeck and Zinkhan, 2010).
Internal Manufacturer
This supply chain diagram states various relationship from the processing of the raw materials to the fulfillment of the demand of various markets. The major four nodes of this supply chain are Suppliers, manufacturers, distribution centres and demand markets (Craighead et al, 2007).
Supply Chain Diagram of Walmart
Sam Walton established the chain of Wal-Mart Stores back in 1962. As Wal-Mart developed in the 1960s to 1980s, the company starts taking the advantage of the better transportation facilities and other resources. They have several strengths in their supply chain, which includes RFIDS deployment, in-house transit engagement, digital technology to manage sales inventory, and share sales information with suppliers.
Their supply chain focused on several functions, which includes purchasing of the products from the suppliers, reducing the distribution cost, choosing the best transit mode and formulating retail strategy so that the product can be sold at the bulk level. These retail strategies include all the activities from logistic level to store level with addition to reduction in the operational cost. This strategic and intellectual supply chain of Wal-Mart helps the company in getting significant share within the US stock market (Neumark, Zhang and Ciccarella, 2008).
In the supply chain of Wal-Mart, the vendor (suppliers) administered the level of stocks and availability for the customer. This starts the distribution with the help of VMI, which stands for Vendor Managed Inventory. In this inventory system, the vendor is accountable for sustaining the customer stock levels (Darwish, and Odah, 2010). This is the first stage of the company towards the supply chain collaboration, which also increased speed and service.
In their distribution channel, the company plans strategy regarding reshaping the cost structure so that to advanced their supply chain management by enhancing competitive advantage. Walmart innovation already started back in 1980s, where the company starts working directly with the manufacturers to cut the cost at various places and managing the supply chain in an efficient manner. They also plan for the strategic sourcing where they started to prioritize the suppliers which are in a position to match the customer demand in a timely manner. They started makes a strategic partnership with the various vendors who have the potential for long terms work and relationship in exchange of lowest possible prices (Ketchen and Hult, 2007). This makes the smoother flow of the network and it also seems to be behaving like a single firm consisting of suppliers, warehouses and retail stores.
For further improvement, they started using RFID technology in their distribution channel where the product scanning is based on the numerical codes. They also encourage their suppliers to use this technology in replacement of the bar code scanning. This not only help the company in saving operational cost but the cost relation to the labour aspect also goes down with the rise in productivity as employees efforts are used at other places of the operations.
Upstream Element
The other aspect of their supply chain includes their strong and efficient logistics infrastructure system. More than 5,600 trucks and 6,900 drivers in 48 states serve Wal-Mart distribution centres. In addition to this, their private fleet also offers the delivery with efficient transportation services to the stores. In the current phase, the Wal-Mart private fleet transportation operates in 28 states with around 36 transportation offices (Holmes, 2011). In addition to this, Walmart inventory management is also one of the biggest contributors to the success and growth of the company. The company is known for its cutting-edge applications in the technological environment, which also help them in optimizing the performance of the inventory management. Walmart manage their inventory effectively by implementing vendor-managed inventory model which allows suppliers to access data from the information system of Walmart such as level of inventories, the rate of goods sold to the consumer etc. (Olson and Xie, 2009). which helps the suppliers to gather the information and decide when to release the stock level to send additional goods to Wal-Mart.
In a supply chain, both primary and secondary distributions are included, which add value in the form of customer satisfaction. Primary distribution is for accumulation a value for the merchandise by an inbound flow into warehouse production plant or a distribution centre. In both hierarchies of the supply chain, the retailer presence has been increased. This enables them to practice their own logistics assests, which are generally involved in suppliers’ tasks. In addition, they have to carry out the operations of logistics at the doors of manufacturers, which has led to the Factory Gate Pricing (FGP). This defines that the transportation costs are not counted by the provider in the price of the commodity (Morgan and Dewhurst, 2008).
For upstream operations, the evaluation is based on the cost and productivity performance whereas for downstream operations, the measurement of flexibility and delivery need to be steer based on the speed, design and flexibility (Fung, Chen and Yip, 2007).
RFID technology can also be used in the monitoring of the stock turnover so that the food products are transported to the stores and this enables a continuous flow of goods in respect with the demand of customers.
The upstream suppliers in Walmart are also align with the purchasing managers who are accountable for selecting right suppliers and check whether performance is meet with set standards or not. In addition to this, the planning, forecasting and scheduling of the flows of material between the suppliers is managed by the material manager. All these managers are accountable for the driving enhancement in the supply chain.
Downstream Element
Wal-Mart also implemented the technological advancements into their supply chain so that the performance and efficiency can be increased with the decrease in the various costs. They have replaced barcode scanning technology with the RFID scanning (Zhu, Mukhopadhyay and Kurata, 2012). This helps them in improving the various operations related to procurement and inbound logistics in the supply chain of the organization.
Source: (Hunt, Puglia and Puglia, 2007)
Radio Frequency Identification (RFID) is an emerging technology, which helps many organizations in solving problems relating to inventory management, timely deliveries, tracking shipments and thus making the process much faster with more efficiency and fewer errors. RFID combines with the EPC (Electronic Product Code) that can address the pain points and gives a complete range of advantages across several segments like production, retail, distribution and logistics (Bottani and Rizzi, 2008).
RDIF technology can be very helpful in the organic food products, which includes items like meat, bread and milk. Wal-Mart can regulate their demand in the market by tracking of the real time data and information of these organic foods and thus enables effective satisfaction of the demand market.
With the help of this technology, the trading partners in the supply chain collaborate more efficiently and achieve a new level of responsiveness and effectiveness. In a dynamic and real time supply chain, the lines between planning and execution continue to blur.
RFID tags help the management and the other parties to get the information related to the product like where it is, where is has been and much more information. This technology can produce mountains of data related to the location of cases, pallets and individual product in the supply chain (Attaran, 2007). It also gives the respective data relating to when and where the merchandise is manufactured, picked, packed and shipped.
Another major advantage for Wal-Mart of using RFID in the supply chain is the automatic reading of tags with the help of electronic readers. This saves a lot of labour cost, time and efforts, which is used during the barcode scanning.
RFID also helps in reducing Bullwhip effect, which arises as orders are placed from retailers to wholesales, to producers, with the increased variations increase at each step in the arrangement (Dai and Tseng, 2012). This decreases the costs associated with inventory, transportation and shipping.
In referring to the different parties in the supply chain, RFID help them in synchronizing information and physical movement of goods across the supply chain from manufacturers to retail outlets at the right place and right time. In addition, it can also check and track returns goods in the supply chain and thus avoid counterfeit. This assists the management of Walmart to reduce out-of-stock items.
Technology in Walmart’s Supply Chain Management
In this channel, the function of the products passes to the end consumer. Downstream supply chain management is related to control the stream of goods and information with the customer and clients. The wholesalers and retailers carry out major activities of the downstream channel, as they are responsible for the delivery of goods to the end customer (Carter and Easton, 2011).
Wal-Mart is more of a push system as the work release is based on the downstream demand predictions where the pull system focuses actually more than the customer demand. It uses pull system in upstream supply chain as Wal-Mart as a retailer tells the manufacturer what to produce and how to produce?. In this down-stream channel, the secondary distribution channel is followed.
Wal-Mart plans their downstream activities in a very effective manner so that one can be benefitted and get the best value at the retail level. In addition, Wal-Mart also focuses mainly on the demand planning and forecasting with the help of its every retailer, wholesaler and demand markets (Wang, Liu and Wang, 2008). Outbound logistics are also a key activity in the supply chain to add value to the customer by fulfilling their needs on time. Another significant part of downstream supply chain includes the inventory planning, which is based on effectiveness of all the partners in the downstream supply chain, i.e. distributor, wholesales and retailer.
As a leading organization in the world, Wal-Mart ensures that their distributors have maintained adequate levels of inventory so that to full-fill the needs of the demand market on time. They also focus on other channel member’s activities in the downstream supply chain, which includes logistics, transportation, marketing and sales. This all controlled and managed through their internal information system connected by several intranets and extranets. With the help of this, the organization successfully integrates the vertical and horizontal activities of the supply chain.
Cloud computing is the use of various services including software, servers and storage on the integrated network of internet, often referred to as “cloud” (Armbrust et al, 2010). In networking term, Cloud computing did not build computing infrastructure as its uses resources as a utility. It is based on large scale computing, where the facilities are deliver to the individual or customer on the application and fast speed internet also plays a significant role. .
On a global scale, various business including service organizations realized the potential of cloud-based solution which can help them in to their supply chain strategies so that to increase the proficiency and printability. Integrating cloud computing with supply chain also gives an organization a competitive advantage in the industry which is necessary for the growth of the business.
Logistics Infrastructure System of Walmart
Considering Wal-Mart, installing cloud-based sensors can help in the safety of food products and these sensors can help in producing information on location, monitor status and other parameters that can help Wal-Mart to track their product items at every stage of the supply chain. This enable them to isolate the specific time and place of any inconsistency. There are various other advantages also for Wal-Mart of using cloud computing as a technology in their downstream supply chain. The agility of the data compilation and sharing is an important aspect in the supply chain (Swafford, Ghosh and Murthy, 2008). In case of Wal-Mart, the company requires a supplier audit that was completed in Canada and the results are needed in Australia about a demand of certain product. Therefore, within an hour, the decision needs to be made in the alignment of supplier’s collaboration. With the help of cloud computing, the management of Wal-Mart can easily compile the data and share this with HQ in the blink of an eye. In the integrated computing, Wal-Mart can easily source the data from one cloud to other, which gives their distributors a wide range of capabilities. In addition, Wal-Mart can manage real time inventory that ensures that any of their distributors never losing tracks on their inventory levels. In Wal-Mart, all their integrated individuals i.e. vendors, retailers and suppliers can operate in a shared cloud where accessibility is more scalable. For a multinational company like Wal-Mart, the parallel lines of communication and collaboration in a real-time are necessary for their survival (Gunasekaran, Lai and Cheng, 2008). This technology will give Wal-Mart a transparency solution in their supply chain that leads to competitive advantage in the retail industry. It will also help the company to movie digitally and serve their customers on a priority basis.
Wal-Mart is a leading organization, which has many areas to grow and increase their market share. Wal-Mart should immune itself against the economic mishaps, manage risk factors appropriately, use updated and advanced technology, rationalize or cut their cost relating to supply chain and production and thus promote their market and brand into international developing market. In addition, there are various effective measures, which can ensure long-term sustainability of the firm and promotes efficiency in the whole value chain.
In the upstream element of their supply chain, implementing the practices of Radio Frequency Identification (RFID) can bring the effectiveness and efficiencies that help in resolving the supply chain issues like inventory management (Domdouzis, Kumar and Anumba, 2007). This technology can help Wal-Mart to seize the correct data on the site and position of physical objects throughout the supply chain.
RFID enable products leads the various food firms and other stakeholders of the supply chain to verify the authenticity and safety of products inside a package as each tag has a unique ID for the information tracking. In addition, this technology mechanism makes incorporation easy for food, beverages and packaging companies.
Wal-Mart should not only use RFID in simply replacement of the barcodes, rather than they can use them by equipping cargoes with the tags viewing the content so that the customs clearance can be made in an automatic way. This will help Wal-Mart in creating a borderless supply chain (Shi, Tao and Voß, 2011).
They can also share the information with the suppliers and developing alliances and thus achieve strategic objective of lowering the cost at various places.
Therefore, this technology enables Wal-Mart to significantly change their business processes, supply chain management, and connect the true corporate value of the technology by driving innovation and profits.
The other technology is the cloud computing which can be used to create more efficiencies in the downstream section of the supply chain. The main benefits to the Wal-Mart in implementing cloud computing in their downstream portion of the supply chain will lead to cost efficiency, flexibility, simplifications and sustainability.
Considering Wal-Mart, from demand forecasting to warehouse or transportation planning, there are multiple applications, which can help the supply chain to link with the single-cloud based platform. This can help the partners in the supply chain have contact to such platforms on their personal environment or corporation regardless of their place and this can all be possible through a common device. This process can enable Wal-Mart to be more agile and lead them to quickly enter new markets with the new commodities and services.
In addition, the Cloud-based system can help management in providing real-time visibility of inventory and shipments and thus enhance tracking in logistics segments. (Marston et al, 2011). In Wal-Mart, implementation of these systems can be treated as a virtual warehouse for their products in their pipeline and offer the company to make strategic order full-fulfillment decisions. Cloud based ERP system can ensure comprehensive food safety management capabilities that can help the company to easily produce traceability records instantly in a single solution as the supply chain in this global economy is more complex and extensive.
For managing the upstream and downstream element of the supply chain efficiently, Wal-Mart can adopt various other technologies also which will enhance the overall productivity. These technologies include IoT, ERP, Drones and Immersive technologies including VR (Virtual Reality) and Artificial Reality (AR) so that to enhance employee and customer digital experience. For example, for improving warehouse efficiencies, Wal-Mart can use the VR technologies with the help of scene recognition during the order picking process. Vision Picking helps the company by enabling hands free order picking at a faster pace and fewer errors. In addition, Wal-Mart can also use ERP software applications which improves efficiency in handling procurement and supply of goods across the supply chain. From manufacturing and warehouse resources to the transportation and finishing process, these applications of ERP offers cross-platform visibility on all the elements of the supply chain.
In managing the supply chain, the field of cloud computing can seem as relatively new but it is rapidly increasing over time and thus implementing them in a timely manner can give the company a competitive advantage.
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Supply chain diagram of Wal-Mart
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