Trends Of Purchasing And Supply Management In Wal-Mart

Overview of Wal-Mart

Discuss About The Trends Of Purchasing And Supply Management?

Supply chain management is the regulation of information and finances as they move in a process from the supplier to the consumer. It involves coordination of these movements within and amongst companies. The main objective of a supply chain management is to reduce inventory. This technology has been embraced in today businesses to identify, get, share and predict events and transactions to translate into useful information to e used in management. This report is based on Wall Mart. This will entail providing an overview of the business, Supply chain/logistics management from the source to the customers, the linkage between Wal-Mart activities and theories in the supply chain (Modern operations management) and explanation of sustainability throughout the chain.

Wal-Mart occupies the highest position in the world’s largest retailer. In the fiscal year 2012, the company produced $446,950 million revenues (4-traders, 2017). Just like most large retail companies, Wal-Mart has both online and offline business. However, most of its revenues are generated from the five types of physical stores; discount store, Sam’s club, supercenters, Wal-Mart Express and outlets like a neighborhood market. Started by Sam Walton, the company had its first store in Rogers, 1962. By 2012, it had developed to more than 10, 000 retail outlets in 27 countries (4-traders, 2017). Although various parameters can be used to measure and explain Wal-Mart’s growth, its success is often attributed to efficient supply management initiatives (Seuring, 2013). For example, in 2012, a report compiled by the company showed that its distribution cost was 1.7%of the cost of sales (4-traders, 2017). This figure is twice less of its competitors like K Mart and Sears. They have 3.5% and 5% cost of sales respectively.

According to Supply Chain Digest, Wal-Mart is a true definition logistical and operational triumph. It stocks products made in more than 70 countries. Moreover, it manages inventory worth $32 million and operates more than 11,000 stores at any time in 27countries (Gilmour, 2013).This shows how having an effective supply chain management strategy has been the backbone for Wal-Mart. Thus, this section provides the company’s supply chain activities in three categories; procurement and distribution, logistics management and inventory management.

To reduce purchasing cost and provide the best prices to customers, Wal-Mart directly procures goods from manufacturers thus bypassing all intermediaries. The company is known for being a good negotiator. It only decides to procure goods from a particular manufacturer when it is certain that no other manufacturer is offering the same product at a lower price (Ellram, 2013). In an interview, Claude Harris explained the reason Wal-Mart is tough on negotiating (4-traders, 2017). He said that when bargaining and negotiating, they always have the customer in mind. They know vendors have their limit but want the most out of negotiations (Ward, 2016). Therefore, they ensure that the negotiation result to the best customer prices.

Wal-Mart Supply Chain Management/Logistics

Wal-Mart uses EDI, computer software for procurement purposes.  It connects the company’s systems with suppliers’. This enables suppliers to access Wal-Mart purchase orders including store-to-store information (Wynstra, 2013). After that, the suppliers distribute ship the required goods to distribution centers.

Wal-Mart logistics infrastructure is widely known for being fast and responsive. With more than 3500 company-owned trucks, they can distribute goods within a short period. To ensure efficiency in this phase, the company hires only experienced drives that have driven for 300,000 miles without being involved in an accident (4-traders, 2017).

The main strategy implemented by Wal-Mart in logistics management is Cross-docking. This method has helped it replenish inventory efficiently. It entails the direct transfer of goods and products from inbound or outbound truck trailers without extra storage (Heffner, 2014). Meaning, an incoming semi-trailer truck or railroad car is directly unloaded into outbound trucks, rail cars or trailers without in-between storage. The diagram below retrieved from https://www.walmart.com illustrates the cross-docking strategy.

Normally, suppliers deliver goods to Walmart’s distribution centers first. Then they are cross-docked and delivered to the company’s stores. This strategy of logistics management has enabled Wal-Mart to keep transportation and inventory costs low, eliminate inefficiencies and reduce the time taken to transport goods (Aykin, 2016). Similarly, cross-docking strategy enables products to be transported from suppliers to warehouses. Here, they are shipped to Wal-Mart stores without taking long in inventory. Warehousing is the process of organizing, assorting and storing finished goods or materials (Gilmour, 2013). The process involves the utilization of warehouses; local storage for inbound materials before manufacture/ assembly (Ritala, 2014). Warehouses could also be used to store outbound product prior to shipment to customer (Wynstra, 2013).Unlike the common assumption that warehouses are used for storage only; Wal-Mart uses the process to break bulk. That is, they take large deliveries from a single source, split, and then recombine them into customer order of different product types (Soltani et al., 2011).They can also be used to provide buffer; the quick unloading of large and low-frequency deliveries is then delivering them at a high frequency to customers (Ellram, 2013).

To merchandise inventories and track sales in its stores, Wal-Mart has heavily invested in Information System. In 1983, the company created its satellite communication system. This enabled stores to manage stock, mark prices and reduce pack sizes (Souza, 2013). This reduced the overall inventory levels and increased room for products commonly ordered by customers. Each employee at the stores is given a ‘Magic Wand’ to keep track of inventories and deliveries (4-traders, 2017). This is a hand-held computer that uses radio frequency terminals to link in-store terminals. Apart from tracking inventories and deliveries, it also tracks backup merchandise within the distribution centers.

Procurement and Distribution

The Point Of Sale (POS) system is used for store replenishment of goods and order management. This is a type of information system that enables one to track store inventory levels and trends (Sanders, 2016). This technology led the company to introduce voice-based order filling in 1998. It guided staff to order locations.

Another important aspect of inventory management is a movement of goods within the store. To enable faster location of and replenishment of goods, the company uses the link system. Although it was costly to build it ($4 billion), it has enabled the company to track details of transactions per day (Sanders, 2016). The link system was improved into the Internet enabled Supply chain Management system with features of Collaborative Planning, Forecasting, and Replenishment (Christopher, 2016). Apart from enabling tracking of inventory, it also allows Wal-Mart and suppliers to determine product demand forecasting jointly.

Wal-Mart organization draws its success from using modern forms of operations to carry out business activities. This makes it appropriate to apply the concept of modern operation management on it. There are four theories involved in this concept; Business Process Redesign, (BPR), Reconfigurable Manufacturing Systems, six sigma and lean manufacturing. Therefore, this section provides explanations of two of the theories (BPR and RMS) and their link to Wal-Mart’s supply chain management.

Formulated in 1993, BPR is a strategy that analyzes and designs workflow and business process within the company. This helps to restructure it by providing a flow of business processes from ground to top level (Kahkonen, 2011). Business analysts claim that BPR invention was a necessary element in business models and it has enabled the establishment of a link in organizational structure, tasks, people, and technology. This statement could not be any truer at Wal-Mart. The organization is using information systems like VOF and CPRF to establish communication long the supply chain to the end customer.

Similarly, Reconfigurable manufacturing system is a cost-effective strategy that enables businesses to stay on par with competitors in the global market regardless of varying market demand and economic pressures. It rapidly adjusts changes in product functionality and capacity. This enables businesses to produce multiple products hence meeting demand. For example, through the use of Wal-Mart retail link system, suppliers can track product performance, calculate demand and inventory levels (4-traders, 2017). Wal-Mart applies Both BPR and RMS to enable effectiveness and productivity in the business. Using these systems ensure easier tracking of inventory size and determine a gap in supply. Also, they enable forecasting by tracking consumer-buying trends.

Logistics Management

Wal-Mart is committed to the protection and sustainability of the environment. This ensures that all products are produced and distributed using methods that have the least impact on the environment. Sustainability at Wal-Mart begins at the point of opportunity identification. The diagram below shows the opportunity identification process.

In selecting their products, the company considers the whole value chain. This enables it to reduce costs b evaluating the end-to-end supply chain. Moreover, they coordinate with other organizations like NGOs to establish social and environmental issues in products. According to The Sustainability Consortium (TSC), the hotspots for environmental and social issues in products are dominant from the manufacturer down to the consumer (4-traders, 2017). Therefore, the organization partners with big businesses to determine the issues. This involves using various tools like the Sustainability index. It outlines an overview of environmental and social practices and outcomes across a wide range of products. The following figure shows Wal-Mart Sustainability index retrieved from https://www.walmart.com.

PRODUCT CATEGORIES	Measurement and Transparency	Environmental Impact	Affordable and healthier	Dignity of workers
Produce	·         CDP Supply Chain ·         Block chain pilot	·         Upstream and downstream food waste ·         Sustainable packaging design	·         Food safety ·         Nutrition education ·         Easy healthier choice	·         Promoting responsible sourcing ·         Labor conditions improvements ·         Training farmers
Meat & Diary	·         Brazilian beef monitoring	·         Sustainable beef and dairy ·         Dairy and beef deforestation	·         Responsible antibiotic use ·         Animal welfare
Sea food		·         Sustainable sea food		·         Addressing human trafficking in sea food
Packaged food	·         Great for labeling	·         Palm oil deforestation ·         Fertilizer optimization ·         Sourcing sustainability ·         Friendly recycling labels	·         Reformulating food
Consumable	·         Chemical Ingredient Disclosure	·         Pulp & paper deforestation ·         Palm oil deforestation ·         Optimizing packaging	·         Sustainable chemistry
Apparel		·         Factory energy efficiency ·         Waste and energy used in mills		·         Safer working conditions
General Merchandise		·         Product efficiency ·         Fertilizer optimization ·         Sourcing sustainability ·         Optimizing packaging

In the Index above, it is easy to know that Wal-Mart’s concerted efforts in ensuring the safety of products to users, workers, and environment.

In conclusion, this study was based on Wal-Mart. It is the world’s largest retail shop. Instead of using intermediaries, the company sources for products directly from vendors, distribute to its stores through a strategy called cross-docking. Wal-Mart supply chain is made up of sourcing and distribution, logistics management and inventory management. To enable efficiency and workflow, the company uses CPRF and VOF systems. Similarly, the company uses Sustainability Index to assess social and environmental issues related to vendors’ products and their activities.

In the Index above, it is easy to know that Wal-Mart’s concerted efforts in ensuring safety of products to users, workers and environment.

In conclusion, this study was based on Wal-Mart. It is the world’s largest retail shop. Instead of using intermediaries, the company sources for products directly from vendors, distribute to its stores through a strategy called cross-docking. Wal-Mart supply chain is made up of sourcing and distribution, logistics management and inventory management. To enable efficiency and work flow, the company uses CPRF and VOF systems. Similarly, the company uses Sustainability Index to assess social and environmental issues related to vendors’ products and their own activities.

References

4-traders. (2017, 7 11). Wal Mart Stores: Enhancing the Walmart Sustainability Value Chain. Retrieved September 18, 2017, from 4-traders: https://www.m4traders.com

Aykin, N. (2016). Usability and internalization of information technology. CRC Press.

Christopher, M. (2016). Logistics & supply chain management. Pearson Higher Ed.

Ellram, L. (2013). Offshoring, reshoring and the manufacturing location decision. Journal of Supply Chain Management, 3-10.

Gilmour, P. ( 2013). Benchmarking supply chain operations. Physical Distribution & Logistics Management, 123-135.

Heffner, C. (2014, August 21). Classical and Operant Conditioning. Retrieved September 26, 2016, from Allpsych: https://www.allpsych.com

Kahkonen, A.-K. (2011). Conducting a case study in supply management. OSCM Journal, 31-41.

Ritala, J. V. (2014). Service Chain Risk Management. Operations and Supply Management, 114-120.

Sanders, N. (2016). How to Use Big Data to Drive Your Supply Chain. California Management Review, 26-48.

Seuring, S. (2013). A review of modeling approaches for sustainable supply chain management. Decision support systems, 1513-1520.

Souza, G. (2013). Closed?Loop Supply Chains: A Critical Review, and Future Research. Decision Sciences, 7-38.

Ward, P. J. (2016). The Strategic management of information systems: Building a digital strategy . John Wiley & Sons.

Wynstra, F. (2013). Past, Present and Future Trends of Purchasing and Supply Management: An Extensive Literature Review. A Review and Outlook. A Journey through Manufacturing and Supply Chain, 199-228.