Iycee Charles de Gaulle Summary One their competitors. Walmart’s founder Sam Walton

One their competitors. Walmart’s founder Sam Walton

One of the essential characteristics for a company in this
modern era of the commercial environment, is the capacity to control their
production lines and how they distribute their goods through chains. This
characteristic is called Supply chain management (SCM) which is an essential
element that dictates whether a firm will be successful. In addition to that if
the supply chain is implemented successfully it will give firms an advantage
over their competitors. Swaminathan (2001) described supply chain management is
management which is efficient of the end-to-end operation which begins with the
design of the product until the product itself is being sold, consumed, and eventually
disposed by the consumer. The whole process incorporates product design,
planning, forecast, distribution, procurement and after sales report. This essay
will consist of three sections. Initially, a representation of Walmart’s supply
chain will be laid out. Secondly, this will discuss the crucial SCM capability
related to Walmart’s current implemented operation and how this capability is successful
and beneficial to Walmart ‘s supply chain. Finally, the last section of the
essay will discuss how Walmart can maintain and improve their current supply
chain management focusing on the efficiency capability.

 

Walmart’s supply chain

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  In this part of the essay, Walmart is deemed
as one of the leading retail stores in the world and the reason for that is the
supply chain which they have instilled which gives them an edge over their
competitors. Walmart’s founder Sam Walton stated that the reason Walmart became
so successful was because they replaced inventory with information (source).  Walmart’s supply chain consists of different elements
such as purchasing, operating, integrating, and distributing

 which is implemented into their
operations (source).  These elements
which are integrated to Walmart supply chain sets a standard which all of their
competitors in the retailing field would try to reach that standard (source). The
supply chain initially starts off with purchasing. This stage is where decisions
have to be made on what products are going to be sold while identifying vendors
and arranging the best deals for products. These decisions are usually made by
purchasing managers. Secondly, the operating portion of their supply chain
comes into play where they focus on three different elements; 1) Demand
Planning, 2) forecasting, and 3) inventory management (source) Demand planning is
used by Walmart so they can create precise forecasts which eventually leads to
an effective and efficient inventory management (source). From there on, the distribution
function is the third element of the supply chain where Walmart moves the
products from manufacturing plants and warehouses to stores and evidentially to
customers. The final function of the supply chain is the integrating where it maximises
efficiencies by interlinking work and information among all other channels (source).

 

 

 

Walmart main capability

 

As one of the leading corporations in the retail business,
the success that Walmart has achieved is owed to their precise selection of supply
chain capabilities. According to Grant (1991) capabilities are an instrumental concept
where resources are utilized to perform specific tasks which is crucial to an
organisation to maintain an edge over their competitors. Hayes and Wheelwright
(1984) went on to say that capabilities are operational strengths which
enhances performance if applied correctly by the organisation. Walmart as a
multinational retail corporation, has elected for a supply chain of efficiency as
its leading capability which is crucial for their current operation. Walmart achieves
their efficiency through removing a few of the chain’s link, established
strategic partnerships with most of their vendors, technological development and
advancement, and cross docking.

 

Fewer Links  

 

Walmart supply chain management played key role in the
organisations early success when Sam Walton, the founder, bought merchandise in
bulk and shifted it directly to his stores. The company in the 1980’s agreed
that they would dispose of a few links from their supply chain and decided to
work with the manufactures directly (source). This adjustment evidently diminished
costs and eventually managed the supply chain more efficiently in the long run.
VMI (vendor managed inventory) is implemented in the supply chain of Walmart where
the manufacturers themselves are responsible for handling and operating their
own product at the warehouses. This resulted into Walmart expecting near 100
percent order fulfilment on products (source). 
The diminished costs which was achieved due to an effective supply chain,
were Walmart instilled a fewer links approach to enhance efficiency. It has led
them to have a low rate in distribution cost which is estimated at 1.7 %
compared to their rivals such sears and Kmart who both have a higher rate.

 

Vendor Partnerships

 

Another element which is Implemented in the Walmart supply
chain, is a strategic sourcing concept where they look for suppliers who offer
their merchandise for the best price. The supplier should be able to satisfy
the demand which is placed on them by Walmart. Walmart eventually enter into
long-term contracts where they get low prices for high quantity purchases.  As discussed earlier, one of the major factors
for Walmart to be efficient was to have fewer links in the supply chain which plays
a major role on their approach to formulate a strategic vendor partnership. This
occurs because when an organisation removes the middle men and have a few links
implemented in their supply chain, they directly conduct business with the
producers and generate more profit. This evidently builds a trust between the
two and this leads to the parties to enter into a long-term partnership. In 2010,
Walmart bought into the process of developing a relationship with heir supplier
which revolutionized its supply chain and maximized efficiency (source). This relationship
has benefited Walmart by avoiding dealing with fluctuating prices set by
suppliers and the distribution cost to go with it. Another advantage was that there
is no longer uncertainty on whether the suppliers can uphold the high demands
set by Walmart.  

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