Wal-Mart Stores, Inc., the largest company in the world, has achieved leadership in the retail industry as a result of its efficient supply chain management practices. Setting record sales and earnings for fiscal year 2008, Wal-Mart’s total net sales were $374.5 billion, an 8.6 percent increase over the previous fiscal year and a record for any retailer.
Wal-Mart’s mission to ‘save people money so they can live better’ has impacted more than 176 million consumers in thirteen countries. A global company, Wal-Mart has positioned itself as the unbeatable price leader in offering a variety of affordable products that range from health and beauty, to apparel and jewelry to electronics and food items. While expansion, strategic acquisitions and emphasis on return on investment have propelled the company to retail stardom, the key driver to Wal-Mart’s success is its ability to move product from place to place quickly and efficiently. The exploration of Wal-Mart’s streamlined supply chain management practices provides insight into how the company uses Operations Management to continuously improve its competitiveness.
Wal-Mart was founded by Sam Walton in 1962 when he opened the company’s first discount store in Rogers, Arkansas. The company officially incorporated as Wal-Mart Stores Inc. on October 31, 1969. Today, Wal-Mart Stores, Inc. operates its Wal-Mart supercenters, discount stores, Neighborhood Markets and Sam’s Club warehouses in more than 4,100 facilities in the United States and more than 3,100 additional facilities in Argentina, Brazil, Canada, China, Costa Rica, El Salvador, Guatemala, Honduras, Japan, Mexico, Nicaragua, Puerto Rico and the United Kingdom. Wal-Mart employs more than 2 million associates worldwide, including more than 1.4 million in the United States and is the largest private employer in the U.S. and Mexico and one of the largest in Canada. The company has also established operations in India via a joint venture with Bharti Enterprises for wholesale cash-and-carry and back-end-supply management operations.
SUPPLY CHAIN MANAGEMENT PRACTICES
Wal-Mart’s ability to focus on customer needs and reduce costs through efficient supply chain management practices has attributed to its growth. Wal-Mart’s automated distribution centers, for example, reduce shipping costs and time, while its computerized inventory system speeds up the check out time and recording of transactions.
Wal-Mart’s concept of every day low prices (EDLP) promises customers a variety of high quality branded and unbranded products at the lowest possible price, offering better value for money than its competitors.
Similarly, the company emphasized strengthening its relationships with customers, suppliers and employees. Low transportation costs, resulting from its owning its transportation system, can deliver goods to stores within 48 hours or less, enabling Wal-Mart to replenish its stock four times faster than its competitors.
Wal-Mart has tremendous bargaining power due to economies of scale in purchasing large quantities from suppliers. The EDLP ensures sales volumes are high and consistent. Wal-Mart can afford to offer higher discounts than other retailers based on the velocity that its products move through the supply chain. Increased purchase volume leads to more choice for consumers and lower prices, leading to more purchase volume.
Reduction in lead time, faster inventory turnover, accurate forecasting of inventory levels, increased warehouse space, reduction in safety stock and better working capital utilization are all examples of how Wal-Mart uses supply chain management principles to stay competitive. These practices have resulted in increased efficiency in operations and improved customer service. Old stocks have been eliminated and the quality of goods is maintained. Bar coding and radio frequency technologies have ensured the accurate...