Problem Statement
One of the main problems of Walmart’s supply chain is the problem of effective inventory management. Walmart provides a large number of goods that the store does not have time to sell.
Situation Analysis
Inventory management in supply chains is about optimizing the processes directly related to handling and processing shipments and interaction with purchasing and sales services. It also includes determining the ideal number and location of warehouses and reducing restocking and delivery costs. The problem of this company, namely the difficulty in distributing inventory, is influenced by critical points such as opening small branches where there is no place to store goods (Mark, 2012). Multiple competitors and higher prices have affected this store’s sales, increasing inventory.
This problem depends on possible fluctuations in the timing of inventory recovery and the variability of demand for the items in question over the life of the order. In reality, businesses often attempt to create an inventory management system without determining its values – meeting needs or minimizing costs (Muchaendepi et al., 2019). This develops the problem, making it fundamental to the business and the sale of goods. To solve this problem, it is necessary to think about a more effective distribution strategy for goods, consider the demand for goods, and develop a sales system.
Recommendation
Inventory management ensures the supply chain has the optimal inventory level for each product. This means having the right amount of product at the proper levels of the supply chain, at the right time, and at the lowest cost. To ensure high turnover, the essential components of good inventory management are developing an inventory control system, analysis, and forecasting (Roszkowska, 2021). It also includes defining purchasing and storage strategies and optimizing inventories to ensure optimal levels.
Several inventory accounting systems are available, ranging from handwritten ledgers and stock cards to sophisticated software packages (Roszkowska, 2021). They allow for demand forecasting, auto-ordering, reporting, and cost comparisons. The choice of system depends on the business’s maturity level, financial capabilities, assortment policy, and the complexity of the supply chain.
The essential software is inexpensive and designed for small to medium-sized businesses. This simple automation is often done in the cloud and links to point-of-sale software. It can generate automatic, real-time inventory updates, generate analytics and reporting, and create orders. This company is advised to use advanced inventory tracking software that can integrate with other software within the company, allows the formation of auto orders at all supply chain levels, and builds demand forecasts. Such software products are more expensive and require a more complex implementation process.
Most new trade enterprise designs lack warehouses, and the stock of items in current storage is shown on the sales floor. Store deliveries must be regular and rhythmic under these conditions, with items divided into tiny bundles and ready for sale. Unfortunately, not all suppliers can provide these conditions, which can disadvantage this supply chain management method. With the current retail patterns, the objective demand in these areas has grown even more urgent. The distribution center is a node in the retail chain’s logistic network. Businesses hold over 500 storefronts and rely on direct supply from manufacturers and suppliers. However, in this case, they have to allocate large areas in each store to preserve goods. At the same time, they are overdependent on suppliers, the disruption of which can jeopardize the stable operation of the store.
Implementation Plan
Based on the analysis and classification of demand, the optimal location for storing inventory is determined. This requires finding a balance between overall costs and the level of service. Unique to the region, high-turnover goods should be placed as close to the consumer as possible (Muchaendepi et al., 2019). An essential step in inventory management is also the definition of a replenishment strategy. There are two fundamentally different strategies: placing orders at any time and at certain times. The choice of strategy depends on the nature of demand for a particular product and supplier conditions.
In this case, it will be rational to use a systematic strategy. It implies that inventory levels are checked at set intervals. Depending on the specific needs, a replenishment order may or may not be placed, but only for a specific period (Muchaendepi et al., 2019). The movement of goods is subject to fluctuations due to changes in assortment, demand, supply, and seasonality. Therefore, approaches to inventory management require periodic reviews. Eliminating inventory surpluses through promotions, reallocating inventory, or changing replenishment parameters can help here, and renegotiating contractual terms with counterparties is also possible.
Exhibits
Walmart’s supply chain vision is to be one of the best retailers. However, the problem of inventory distribution can inhibit the company’s development (Mark, 2012). Suppose the inventory management organization in supply chains needs to be set up correctly. In that case, distribution centers will not reduce logistics costs but will create additional problems: shortages for some items, surpluses for others, and usually for low-turnover goods, which leads to other negative consequences.
To reduce the impact of forecasts, they must be implemented in the supply chain where the forecast is most accurate: as close to the source as possible – to the producing plant. Long replenishment times cause shortages and the need to keep high inventories, which block shelf space and limit the ability to adjust supply to actual market preferences (Muchaendepi et al., 2019). Scarcity and high inventory levels restrict product availability, lower sales, and raise inventory investment.
References
Mark, K. (2012). Half a century of supply chain management at Wal-Mart. Harvard Business School Press, 9B12D010.
Muchaendepi, W., Mbohwa, C., Hamandishe, T., & Kanyepe, J. (2019). Inventory management and performance of SMEs in the manufacturing sector of Harare. Procedia Manufacturing, 33, 454-461. Web.
Roszkowska, P. (2021). Fintech in financial reporting and audit for fraud prevention and safeguarding equity investments. Journal of Accounting & Organizational Change, 17(2), 164-196.