Direct Sourcing
Over the course of the last two decades, Wal-Mart has emerged among the most influential retail companies, both in the USA and internationally. The firm’s main defining quality, aside from substantial size, is its exceptionally structured supply chain system it operates. In the recent past, this has enabled it to rise to the top of the global retail business by innovatively organizing its supply chains to maximize efficiency and reduce overhead costs (Alvarado & Kotzab, 2001).
While this might not appear particularly inventive since most companies do it, Wal-Mart’s vertical integration has evolved to a point where it practically redefines the expression. Initially, the founder sought to improve supply chain management by purchasing directly from suppliers and trying to cut out expensive intermediaries. Today, it has managed to connect with its suppliers and involve them in sales through Vendor-managed inventory. VMI allows the firm an almost guaranteed order fulfillment rate since suppliers are directly responsible for managing their products in Wal-Mart’s warehouses.
Cross Docking
Storage is a vital necessity, but one that cuts deeply into the profit margins of many large-scale retailers. Nevertheless, Wal-Mart has successfully applied innovation to minimize, and in some cases, eliminate storage costs altogether. One of the strategies driving the firm’s storage efficacy is cross-docking, where items are transferred directly from inbound to outbound vehicles (Wen, Larsen, Clausen, Cordeau & Laporte, 2009). Prior to this tactic, suppliers would deliver goods to Wal-Mart warehouses, where they were stored awaiting transportation to their destination stores.
Cross-docking has solved this by ensuring as soon as the goods arrive, they are ready for collection and shipping. They are unloaded from suppliers’ trucks or railroad cars directly into Wal-Mart’s outbound trucks for prompt delivery. In addition to reducing storage costs, this technique also minimizes the time and labor used in the supply chain (Wen et al., 2009). Cross-docking has become central in Wal-Mart’s strategy for efficient and timely inventory replenishing, and it saves the firm millions annually.
Technology Application
Among the innovative core areas in which Wal-Mart has excelled is technology, which has had a monumental impact on its effectiveness and profitability. It has developed a system where virtually every part of the supply chain connects and communicates with a central grid. Additionally, they encourage and even assist their partners in the supply chain to do the same (Sarac, Absi & Dauzère-Pérès, 2010). Using technology to track consumer demands has helped the company to study customer trends such that customers “pull” goods instead of Wal-Mart “pushing” them onto shelves.
Recently, they developed radio frequency identification tags (RFID) that apply numerical codes, which their technicians can remotely use to track merchandise (Sarac, Absi & Dauzère-Pérès, 2010). The company recognizes that it needs to be in synchrony with its suppliers, and it has taken steps to motivate them to apply innovations in expediting performance. To minimize situations where shelves run out of goods, Wal-Mart uses smart tags, which aid their staff in detecting and restocking of depleted commodities.
The supply strategy employed by Wal-Mart has been instrumental in helping it achieve market leadership and a significant competitive edge, both regionally and globally. Despite its present success, it shows no signs of complacency and keeps on working towards further streamlining its supply chains and developing even more innovations to increase and sustain its remarkable success.
References
Alvarado, U. Y., & Kotzab, H. (2001). Supply chain management: the integration of logistics in marketing. Industrial marketing management, 30(2), 183-198.
Sarac, A., Absi, N., & Dauzère-Pérès, S. (2010). A literature review on the impact of RFID technologies on supply chain management. International Journal of Production Economics, 128(1), 77-95
Wen, M., Larsen, J., Clausen, J., Cordeau, J. F., & Laporte, G. (2009). Vehicle routing with cross-docking. Journal of the Operational Research Society,60(12), 1708-1718.