Walmart$$s Supply Chain: A Detailed Look at How They Manage It

Sam Walton said, $$People think we got big by putting big stores in small towns. Really we got big by

replacing inventory with information.$$ It is information, and especially information sharing, that lets

Walmart constantly increase efficiency at every step, from replenishment planning and production to

shipping, distribution, delivery, and stocking.

Studying the nuts and bolts of how Walmart uses information$$data$$to make that happen can help

shippers and other retailers optimize their supply chains with digital data sharing.

Walmart is big, racking up $$555$ billion in sales in fiscal $2021,$ so it can seem like a behemoth with no

lessons for the rest of us$.$ But we can learn valuable lessons from Walmart$$s focus on efficiency and

automation, its nuanced approach to supply chain sustainability and social responsibility, and how

digital data sharing underlies it all.

Size Matters

Walmart has $5,300-$plus stores in the United States employing nearly $1\mathrm{.}6$ million people, and $5,100-$

odd stores in $23$ other countries employing another $550,000.$

These, together with Walmart$$s family of e$-$commerce websites, are served by $210$ distribution centers.

Every one of them unloads and ships at least $200$ trailers a day. They encompass at least $1$ million

square feet each$$and $42$ of them are U$.$S$.$ regional distribution centers that dwarf the others.

Their shipping fleet musters $9,000$ tractors and $80,000$ trailers and drives more than $1$ billion miles per

year. Walmart even dealt with the Covid supply chain crunch of $2021$ by chartering its own ships to

unload at less$-$busy ports. Who can say the same?

Data Matters More

But Walmart succeeds and grows because of a relentless focus on efficiency and transparency in its

supply chain, even in packing pallets and stocking shelves, as we shall see.

They continuously find ways to optimize their supply chain to control or reduce costs, and they never

let up$.$ Walmart believes that it$$s that focus that underlies all their success and guarantees that, even

as inflation and wages and other costs of doing business rise, Walmart continues to be the low$-$price

leader.

Walmart$$s policy is to offer Everyday Low Prices$$lower than everyone else$$s$$year$-$round, instead of

competing on price only during seasonal sales. Walmart can do that and still hit its margin targets

because it is so successful in building visibility and transparency into every scrap of data in their supply

chain.

Visibility, Transparency and Collaboration

At Walmart, demand forecasting and inventory$-$level prediction are obsessions. Walmart was the first

company in the world to use barcodes on $100\%$ of its products, way back in $1983.$

In $2015$ alone it spent $$10\mathrm{.}5$ billion on IT$,$ a lot even for a company that booked $$486$ billion of revenue

that year. And nothing has changed. In $2021,$ Walmart CFO Brett M$.$ Biggs said, $$From a position of

great strength, we$$re now going to accelerate investments in supply chain, technology, automation,

and our associates....we remain laser$-$focused on operating efficiency.$$

Though not yet a $100\%$ mandate, radio frequency identification $($RFID$)$ tags are encouraged for

suppliers. These tags can be scanned from a distance with radio waves, so that pallets and boxes

don$$t have to be approached with a handheld laser scanner for their data to be captured and shared.

In fact, pallets and boxes don$$t even need to stop moving to be scanned; RFID tags can be read as

they$$re moving through a gate on a loading dock.

Making data sharing that easy provides a great benefit: Walmart products with RFID are replenished

three times as fast as those that only carry barcodes, and out$-$of$-$stocks are down $16\%$ since the

company started using them.

But make no mistake: It isn$$t gadgets, but rather Walmart$$s transparency and visibility at every step of

its supply chain that is the real secret of its success. The first step is perhaps the most radical: All of

Walmart$$s suppliers are responsible for their own replenishment planning, and the company gives

each of them the tools and data to successfully manage the inventory levels of their own products in

Walmart$$s stores and warehouses.

True Collaboration With Vendors and Suppliers

Walmart began dealing directly with the firms that produce its assortment in the $1980$s$,$ and found it

profitable to cut out distributors in the middle. Over time, advances in IT made it possible to share so

much timely data with vendors that the company could relieve itself of the cost of managing its own

inventory.

The result is a digital vendor$-$managed inventory system called Retail Link$$ that gives suppliers

access to real$-$time store$-$by$-$store point of sale data, whether they are making furniture in China or

frozen food in California.

Analysts working for suppliers don$$t just react to falling inventory levels, they forecast demand

patterns$$which are ultra$-$stable due to Walmart$$s Everyday Low Prices polic