Productions & Operations Management
Week 4 Paper - Janeth Diaz
Q: Wal-Mart became the world’s largest retailer in large part because of its excellent management of inventory. How has Wal-Mart accomplished this feat? How do they continue to remain profitable? Consider such items as: Wal-Mart’s history, usage of RFID, Vendor Managed Inventory (Retail Link), supplier relationships, transportation/supply chain efficiencies, customer service, low cost leadership, etc.
Wal-Mart the World’s largest retailer store began its operation in 1942 in Newport, Arkansas with one store, and worked its way up in the 50s and 60s. Expansion became rapid in the 70s, but was in the 80s when Wal-Mart became one of the most successful retailers in the United States with annual sales of $26 billion dollars by 1989. In the 2000s Wal-Mart began to open businesses outside of the USA, Mexico, Europe, Asia and in some South American countries (1)
How did Wal-Mart become so successful? What is the recipe? Wal-Mart’s success is attributed to its outstanding supply chain management practices. Wal-Mart is recognized to be one of the pioneers with starting the practice of digitally sharing sales data with major suppliers, which allows the company to supply a wide range of products at the lowest cost and short delivery times. (2)
Wal-Mart’s supply change management competitive advantage is studied in all universities when they talk about supply management efficiency and best practices/model.
“I don’t believe there is a university in the world that doesn’t talk about Wal-Mart and the supply chain,” said James Crowell, director of the Supply Chain Management Research Center at the Walton College of Business. “They are just so well respected because they do it so well, and certainly I know a lot of peer institutions around our country … will bring a Wal-Mart guest to speak.” (3)
So what are Wal-Mart’s main supply chain operations successes? Below I will list some of the main ones.
1. Wal-Mart became an innovator in the way stores track inventory and restock their shelves, this will allow them to cut costs and pass savings onto customers
2. Fewer links, Wal-Mart cut some supply chain links, working directly with manufactures which will allow to manage inventory more efficiently and cut cost
3. Wal-Mart operates under VMI — vendor managed inventory, where the manufacturers are responsible for making sure they had the correct inventory in Wal-Mat’s warehouse.
4. Implemented “cross docking”- this is a concept developed by Wal-Mart, direct transfers from inbound or outbound truck trailers without extra storage,
5. The use of RFID tags has also been part of Wal-Mart’s successful supply chain operations. They have been using the RFID tags in recent years, moreover the giant retailer has begun using smart tags, which are tags that are readable by a handheld scanner, and this system allows employees to find out quickly what products are running. For this system to work