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Wal-Mart's Supply Chain

Autor:   •  February 12, 2012  •  1,528 Words (7 Pages)  •  1,286 Views

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Wal-Mart's supply chain

Being the global leader of retail industry, the only retailer on the top of Fortune 500's list, and largest corporation in the world does not come easily but rather with persistence to perfect and serve the customer's needs (Walmart 2011). Wal-Mart considers itself a leading force in sustainability projects to protect the environment and the growing populations throughout the world. They also have pushed their power to the extent of causing other businesses to follow in their footsteps less it fail. One of the many systems Wal-Mart implements is a strong supply chain. The components of the supply chain are not independent of each other rather intermingle to perfect success from the point of production to the end user. Six components of Wal-Mart's supply chain will be discussed.

Component 1: Production

Wal-Mart makes strategic decisions regularly regarding production, how it affects the customers' needs, the impact on the demand of the market, the quality of the product, as well as the volume of goods (Wal-Mart, 2011). Problems such as the quality of raw materials, new technology, and change in customers' preferences may certainly occur. Wal-Mart surveys its customers regularly via the internet as well as acting on their comments and complaints in store. There are marketing and merchandising departments that work only on finding the best products at the lowest price.

Component 2: Supply

One of the major components of Wal-Mart's supply chain is the outsourcing process. It is not feasible for Wal-Mart to manufacture the vast amount of product it sells so they need to rely on other companies to do the manufacturing; outsourcing. In this part of the supply chain the focus is on the quality of product, the flexibility of pricing, and the velocity of supplies. With suppliers not always located in close proximity, the rate of delivering quality product that is fresh and undamaged requires a networked communication system (Ross, 2007). The price Wal-Mart pays for supplies is crucial to the price passed on to the customer, which is what they are known best for. To maintain 'everyday low prices' Wal-Mart works with other corporations like Kimberly Clark, Proctor and Gamble, General Mills, and Frito-Lay, to name a few, guaranteeing their product in the store for the exchange of lower prices than are offered to others.

Component 3: Inventory

Managing inventory flow and quantity is a key element of the supply chain to reduce the costs due to overstock or the deflation of customers due to under stocking. The industry standard of space for storage in retail is 25% but Wal-Mart has recorded a 10% storage space capacity (Scribd Inc., 2011). This decrease in storage requires logistics to be top notch to ensure there is always product available between shipments. To increase the accuracy of Wal-Marts inventory counts an RFID (Radio Frequency Identification) system is used, know to the associates as the Telzon, to recall information such as quantity, location, and future shipment of stock. Suppliers and vendors for Wal-Mart are required to have a system with RFID technology (Href, 2010). Having this vast amount of clients and staff utilizing the same systems is a lot of traffic in a network and could slow it down or call malfunctions. Increasing server databases, keeping software updated and maintained will minimize these problems.

Component 4: Location

The location of a facility can make or break a business. Investigating the micro and macro environments prior to purchasing or building and establishment will show the firm if the location is potential profitable and consistent with the firm's objectives. Micro environments are elements the firm can use to provide greater satisfaction to the customers (Lancaster, n.d.). These variables that a company can control to reach the target market are called the 'four P's' of marketing; Product, price, place, and promotion (Lancaster). Macro environments are the other businesses within the area which could affect the business. Wal-Mart absorbs these environment issues and aspects to contour the store for this clientele. For instance, if there is a large ethnic culture in the area, they will stock the food and products this culture is accustomed to. Though all Wal-Marts are generally run the same, the firm acknowledges and plays off the customers' needs and cultures of each stores location. As far as actual sites, Wal-Mart has never acquired another business and always locates in the cheapest locations to save money and to allow for expansion (Scribd Inc., 2011). Without considering location or demographics Wal-Mart could be setting up shop to a only lose money and/or irritate the community. Careful research of micro and macro environments before choosing a location will prevent this from happening.

Component 5: Transportation

Transportation is intimately connected with inventory because inventory is what is being transported. Wal-Mart switched gears in 2010 in the way merchandise was transported. Instead of having the suppliers deliver to the distribution centers, the Wal-Mart trucks

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