Wal-Mart Supply Chain

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The US based Wal-Mart ranked first in the global Fortune 500 list in the financial year 2001-02 earning revenues of $219.81 billion. Wal-Mart is one of the largest retailing companies in the world. The company has grown larger then than its competitors, such as Target, Sears, K-Mart, and many more. Now, Wal-Mart operate more than 3,500 discount stores, Sam’s Clubs and supercenters in the US and more than 1,170 stores in all major countries across the world. So, one has to wonder, how do Wal-Mart’s supply chain works and how is it managed.

The use of technological infrastructure such as information technology and state-of-the art communication system is a very powerful tool in any business today that guarantees up-to-date and hasten process in the logistics operations which leads to being able to cater to the needs and demands of the customer in the least time possible. The use of the said state-of the art technology guarantees Wal-Mart to readily and steadily track down the sales and merchandise in all of its stores across the United States including the follow-up track down to the global operations. In fact, in 1983, Wal-Mart launches its own satellite communication system as they see the need to expand not only their operations but also their communication system such that they can sustain the growing demand of communication essential to keep terms in the operation of the increasing retail outlets or distribution centers.

Wal-Mart always highlights the need to reduce its purchasing costs and offer the best price to its customers. The company acquires goods directly from manufacturers, bypassing all intermediaries. Wal-Mart is a tough negotiator on prices and finalized a purchase deal only when it is fully confident that the products being bought were not available elsewhere for the same low price.

Wal-Mart had over 40 distribution centers located at different geographical locations in the US. Over 80,000 items are stocked in these centers for shipments to different supercenters. Wal-Mart’s own warehouses directly supplies 85-90 percent of the inventory, as compared to 50-65 percent for competitors. According to rough estimates, Wal-Mart is able to provide replenishments within two days, on an average, against at least five days for competitors. Shipping costs for Wal-Mart supplies worked out to be roughly 3 percent cost compared to competitors, where theirs’ are 5 percent cost.

Each distribution center is divided into different sections on the basis of the quantity of goods received and is also managed the same way for both cases and palletized goods. The inventory turnover rates are very high, about once every two weeks for most of the items. Goods meant for distribution within the US usually arrive in pallets, while imported goods arrive in re-usable boxes or cases. In some cases, suppliers delivered goods such as automotive and drug products directly to the stores. About 85 percent of goods which are available at the stores must pass through the distribution centers.

The distribution centers ensure a steady and consistent flow of products to support the supply functions. As Wal-Mart used sophisticated barcode technology and hand-held computer systems to manage the center, the work becomes easier and more economical. Every employee had an access to real-time information regarding the inventory levels of all the products in the center. They had to just make two scans – one to identify the pallet, and the other to identify the location from where the stock had to be picked up. Different barcodes are used to label different products, shelves and bins in the centers. The hand-held computer guides an employee with regards to the location of a particular product from a particular bin or shelf in the center. When the computer verifies the bin and picks up a product, the employee confirmed whether it is the right product or not. The quantity of the product required from the center was entered into the hand-held...
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