A Detailed Analysis of Wal-Mart's Supply Chain Management

This report provides a comprehensive analysis of Wal-Mart's supply chain management, examining its key components and strategies. It begins with an overview of Wal-Mart's business operations and its position as a leading global retailer. The report delves into the company's supply chain activities, categorizing them into procurement and distribution, logistics management, and inventory management. It highlights Wal-Mart's direct procurement from manufacturers, its use of EDI for order management, and its efficient logistics infrastructure, including cross-docking. The report further explores Wal-Mart's inventory management systems, such as the satellite communication system and the 'Magic Wand' handheld computers, and the POS system. It also discusses the application of modern operations management theories, specifically Business Process Redesign (BPR) and Reconfigurable Manufacturing Systems (RMS), and their impact on Wal-Mart's supply chain. Finally, the report examines Wal-Mart's commitment to sustainability throughout its value chain, including its use of the Sustainability Index to assess environmental and social issues related to its products and vendors. The report concludes by summarizing the key findings and emphasizing Wal-Mart's integrated approach to supply chain management and sustainability.

Running head: SUPPLY CHAIN MANAGEMENT 1
SUPPLY CHAIN MANAGEMENT
Student Name
Institution

SUPPLY CHAIN MANAGEMENT 2
Table of Contents
Introduction...............................................................................................................................................3
Overview of Wal-Mart..............................................................................................................................3
Wal-Mart Supply Chain Management/Logistics....................................................................................4
Procurement and Distribution..................................................................................................................4
Logistics Management...............................................................................................................................5
Figure 1: Cross-docking..........................................................................................................................6
Inventory Management.............................................................................................................................7
Modern Operations Management............................................................................................................8
Sustainability throughout the value chain...............................................................................................9
Figure 2: Opportunity Identification........................................................................................................9
Figure 3: Table showing Wal-Mart Sustainability Index.......................................................................11
References................................................................................................................................................13

SUPPLY CHAIN MANAGEMENT 3
Introduction
Supply chain management is the regulation of information and finances as they move in a
process from the supplier to the consumer. It involves coordination of these movements within
and amongst companies. The main objective of a supply chain management is to reduce
inventory. This technology has been embraced in today businesses to identify, get, share and
predict events and transactions to translate into useful information to e used in management. This
report is based on Wall Mart. This will entail providing an overview of the business, Supply
chain/logistics management from the source to the customers, the linkage between Wal-Mart
activities and theories in the supply chain (Modern operations management) and explanation of
sustainability throughout the chain.
Overview of Wal-Mart
Wal-Mart occupies the highest position in the world's largest retailer. In the fiscal year
2012, the company produced $446,950 million revenues (4-traders, 2017). Just like most large
retail companies, Wal-Mart has both online and offline business. However, most of its revenues
are generated from the five types of physical stores; discount store, Sam's club, supercenters,
Wal-Mart Express and outlets like a neighborhood market. Started by Sam Walton, the company
had its first store in Rogers, 1962. By 2012, it had developed to more than 10, 000 retail outlets
in 27 countries (4-traders, 2017). Although various parameters can be used to measure and
explain Wal-Mart's growth, its success is often attributed to efficient supply management
initiatives (Seuring, 2013). For example, in 2012, a report compiled by the company showed that
its distribution cost was 1.7%of the cost of sales (4-traders, 2017). This figure is twice less of its
competitors like K Mart and Sears. They have 3.5% and 5% cost of sales respectively.

SUPPLY CHAIN MANAGEMENT 4
Wal-Mart Supply Chain Management/Logistics
According to Supply Chain Digest, Wal-Mart is a true definition logistical and
operational triumph. It stocks products made in more than 70 countries. Moreover, it manages
inventory worth $32 million and operates more than 11,000 stores at any time in 27countries
(Gilmour, 2013).This shows how having an effective supply chain management strategy has
been the backbone for Wal-Mart. Thus, this section provides the company's supply chain
activities in three categories; procurement and distribution, logistics management and inventory
management.
Procurement and Distribution
To reduce purchasing cost and provide the best prices to customers, Wal-Mart directly
procures goods from manufacturers thus bypassing all intermediaries. The company is known for
being a good negotiator. It only decides to procure goods from a particular manufacturer when it
is certain that no other manufacturer is offering the same product at a lower price (Ellram, 2013).
In an interview, Claude Harris explained the reason Wal-Mart is tough on negotiating (4-traders,
2017). He said that when bargaining and negotiating, they always have the customer in mind.
They know vendors have their limit but want the most out of negotiations (Ward, 2016).
Therefore, they ensure that the negotiation result to the best customer prices.
Wal-Mart uses EDI, computer software for procurement purposes. It connects the
company's systems with suppliers'. This enables suppliers to access Wal-Mart purchase orders

SUPPLY CHAIN MANAGEMENT 5
including store-to-store information (Wynstra, 2013). After that, the suppliers distribute ship the
required goods to distribution centers.
Logistics Management
Wal-Mart logistics infrastructure is widely known for being fast and responsive. With
more than 3500 company-owned trucks, they can distribute goods within a short period. To
ensure efficiency in this phase, the company hires only experienced drives that have driven for
300,000 miles without being involved in an accident (4-traders, 2017).
The main strategy implemented by Wal-Mart in logistics management is Cross-docking.
This method has helped it replenish inventory efficiently. It entails the direct transfer of goods
and products from inbound or outbound truck trailers without extra storage (Heffner, 2014).
Meaning, an incoming semi-trailer truck or railroad car is directly unloaded into outbound
trucks, rail cars or trailers without in-between storage. The diagram below retrieved from
https://www.walmart.com illustrates the cross-docking strategy.

SUPPLY CHAIN MANAGEMENT 6
Figure 1: Cross-docking
Normally, suppliers deliver goods to Walmart's distribution centers first. Then they are
cross-docked and delivered to the company's stores. This strategy of logistics management has
enabled Wal-Mart to keep transportation and inventory costs low, eliminate inefficiencies and
reduce the time taken to transport goods (Aykin, 2016). Similarly, cross-docking strategy enables
products to be transported from suppliers to warehouses. Here, they are shipped to Wal-Mart
stores without taking long in inventory. Warehousing is the process of organizing, assorting and
storing finished goods or materials (Gilmour, 2013). The process involves the utilization of
warehouses; local storage for inbound materials before manufacture/ assembly (Ritala, 2014).
Warehouses could also be used to store outbound product prior to shipment to customer
(Wynstra, 2013).Unlike the common assumption that warehouses are used for storage only; Wal-
Mart uses the process to break bulk. That is, they take large deliveries from a single source, split,
and then recombine them into customer order of different product types (Soltani et al.,

SUPPLY CHAIN MANAGEMENT 7
2011).They can also be used to provide buffer; the quick unloading of large and low-frequency
deliveries is then delivering them at a high frequency to customers (Ellram, 2013).
Inventory Management
To merchandise inventories and track sales in its stores, Wal-Mart has heavily invested in
Information System. In 1983, the company created its satellite communication system. This
enabled stores to manage stock, mark prices and reduce pack sizes (Souza, 2013). This reduced
the overall inventory levels and increased room for products commonly ordered by customers.
Each employee at the stores is given a ‘Magic Wand' to keep track of inventories and deliveries
(4-traders, 2017). This is a hand-held computer that uses radio frequency terminals to link in-
store terminals. Apart from tracking inventories and deliveries, it also tracks backup merchandise
within the distribution centers.
The Point Of Sale (POS) system is used for store replenishment of goods and order
management. This is a type of information system that enables one to track store inventory levels
and trends (Sanders, 2016). This technology led the company to introduce voice-based order
filling in 1998. It guided staff to order locations.
Another important aspect of inventory management is a movement of goods within the
store. To enable faster location of and replenishment of goods, the company uses the link system.
Although it was costly to build it ($4 billion), it has enabled the company to track details of
transactions per day (Sanders, 2016). The link system was improved into the Internet enabled
Supply chain Management system with features of Collaborative Planning, Forecasting, and
Replenishment (Christopher, 2016). Apart from enabling tracking of inventory, it also allows
Wal-Mart and suppliers to determine product demand forecasting jointly.

SUPPLY CHAIN MANAGEMENT 8
Modern Operations Management
Wal-Mart organization draws its success from using modern forms of operations to carry
out business activities. This makes it appropriate to apply the concept of modern operation
management on it. There are four theories involved in this concept; Business Process Redesign,
(BPR), Reconfigurable Manufacturing Systems, six sigma and lean manufacturing. Therefore,
this section provides explanations of two of the theories (BPR and RMS) and their link to Wal-
Mart's supply chain management.
Formulated in 1993, BPR is a strategy that analyzes and designs workflow and business
process within the company. This helps to restructure it by providing a flow of business
processes from ground to top level (Kahkonen, 2011). Business analysts claim that BPR
invention was a necessary element in business models and it has enabled the establishment of a
link in organizational structure, tasks, people, and technology. This statement could not be any
truer at Wal-Mart. The organization is using information systems like VOF and CPRF to
establish communication long the supply chain to the end customer.
Similarly, Reconfigurable manufacturing system is a cost-effective strategy that enables
businesses to stay on par with competitors in the global market regardless of varying market
demand and economic pressures. It rapidly adjusts changes in product functionality and capacity.
This enables businesses to produce multiple products hence meeting demand. For example,
through the use of Wal-Mart retail link system, suppliers can track product performance,
calculate demand and inventory levels (4-traders, 2017). Wal-Mart applies Both BPR and RMS
to enable effectiveness and productivity in the business. Using these systems ensure easier

SUPPLY CHAIN MANAGEMENT 9
tracking of inventory size and determine a gap in supply. Also, they enable forecasting by
tracking consumer-buying trends.
Sustainability throughout the value chain
Wal-Mart is committed to the protection and sustainability of the environment. This
ensures that all products are produced and distributed using methods that have the least impact
on the environment. Sustainability at Wal-Mart begins at the point of opportunity identification.
The diagram below shows the opportunity identification process.
Figure 2: Opportunity Identification
In selecting their products, the company considers the whole value chain. This enables it
to reduce costs b evaluating the end-to-end supply chain. Moreover, they coordinate with other
organizations like NGOs to establish social and environmental issues in products. According to
The Sustainability Consortium (TSC), the hotspots for environmental and social issues in

SUPPLY CHAIN MANAGEMENT
10
products are dominant from the manufacturer down to the consumer (4-traders, 2017). Therefore,
the organization partners with big businesses to determine the issues. This involves using various
tools like the Sustainability index. It outlines an overview of environmental and social practices
and outcomes across a wide range of products. The following figure shows Wal-Mart
Sustainability index retrieved from https://www.walmart.com.

SUPPLY CHAIN MANAGEMENT
11
Figure 3: Table showing Wal-Mart Sustainability Index
PRODUCT
CATEGORIES
Measurement and
Transparency
Environmental Impact Affordable and healthier Dignity of workers
Produce  CDP
Supply
Chain
 Block
chain pilot
 Upstream and
downstream
food waste
 Sustainable
packaging
design
 Food safety
 Nutrition
education
 Easy healthier
choice
 Promoting
responsible
sourcing
 Labor
conditions
improvements
 Training
farmers
Meat & Diary  Brazilian
beef
monitoring
 Sustainable
beef and dairy
 Dairy and beef
deforestation
 Responsible
antibiotic use
 Animal welfare
Sea food  Sustainable sea
food
 Addressing
human
trafficking in
sea food
Packaged food  Great for
labeling
 Palm oil
deforestation
 Fertilizer
optimization
 Sourcing
sustainability
 Friendly
recycling
labels
 Reformulating
food
Consumable  Chemical
Ingredient
Disclosure
 Pulp & paper
deforestation
 Palm oil
deforestation
 Optimizing
packaging
 Sustainable
chemistry
Apparel  Factory energy
efficiency
 Waste and
energy used in
mills
 Safer working
conditions
General
Merchandise
 Product
efficiency
 Fertilizer
optimization
 Sourcing
sustainability
 Optimizing
packaging

SUPPLY CHAIN MANAGEMENT
12
In the Index above, it is easy to know that Wal-Mart's concerted efforts in ensuring the
safety of products to users, workers, and environment.
In conclusion, this study was based on Wal-Mart. It is the world's largest retail shop.
Instead of using intermediaries, the company sources for products directly from vendors,
distribute to its stores through a strategy called cross-docking. Wal-Mart supply chain is made up
of sourcing and distribution, logistics management and inventory management. To enable
efficiency and workflow, the company uses CPRF and VOF systems. Similarly, the company
uses Sustainability Index to assess social and environmental issues related to vendors' products
and their activities.
In the Index above, it is easy to know that Wal-Mart’s concerted efforts in ensuring safety
of products to users, workers and environment.
In conclusion, this study was based on Wal-Mart. It is the world’s largest retail shop. Instead of
using intermediaries, the company sources for products directly from vendors, distribute to its
stores through a strategy called cross-docking. Wal-Mart supply chain is made up of sourcing
and distribution, logistics management and inventory management. To enable efficiency and
work flow, the company uses CPRF and VOF systems. Similarly, the company uses
Sustainability Index to assess social and environmental issues related to vendors’ products and
their own activities.

SUPPLY CHAIN MANAGEMENT
13
References
4-traders. (2017, 7 11). Wal Mart Stores: Enhancing the Walmart Sustainability Value Chain.
Retrieved September 18, 2017, from 4-traders: http://www.m4traders.com
Aykin, N. (2016). Usability and internalization of information technology. CRC Press.
Christopher, M. (2016). Logistics & supply chain management. Pearson Higher Ed.
Ellram, L. (2013). Offshoring, reshoring and the manufacturing location decision. Journal of
Supply Chain Management, 3-10.
Gilmour, P. ( 2013). Benchmarking supply chain operations. Physical Distribution & Logistics
Management, 123-135.
Heffner, C. (2014, August 21). Classical and Operant Conditioning. Retrieved September 26,
2016, from Allpsych: http://www.allpsych.com
Kahkonen, A.-K. (2011). Conducting a case study in supply management. OSCM Journal, 31-
41.
Ritala, J. V. (2014). Service Chain Risk Management. Operations and Supply Management, 114-
120.
Sanders, N. (2016). How to Use Big Data to Drive Your Supply Chain. California Management
Review, 26-48.
Seuring, S. (2013). A review of modeling approaches for sustainable supply chain management.
Decision support systems, 1513-1520.

SUPPLY CHAIN MANAGEMENT
14
Souza, G. (2013). Closed‐Loop Supply Chains: A Critical Review, and Future Research.
Decision Sciences, 7-38.
Ward, P. J. (2016). The Strategic management of information systems: Building a digital strategy
. John Wiley & Sons.
Wynstra, F. (2013). Past, Present and Future Trends of Purchasing and Supply Management: An
Extensive Literature Review. A Review and Outlook. A Journey through Manufacturing
and Supply Chain, 199-228.