Walmarts 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 informationdatato 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 Walmarts 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 1.6 million people, and 5,100- odd stores in 23 other countries employing another 550,000. These, together with Walmarts 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 eachand 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 its 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. Walmarts policy is to offer Everyday Low Priceslower than everyone elsesyear-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 $10.5 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, were 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 dont have to be approached with a handheld laser scanner for their data to be captured and shared. In fact, pallets and boxes dont even need to stop moving to be scanned; RFID tags can be read as theyre 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 isnt gadgets, but rather Walmarts 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 Walmarts 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 Walmarts stores and warehouses. True Collaboration With Vendors and Suppliers Walmart began dealing directly with the firms that produce its assortment in the 1980s, 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 dont just react to falling inventory levels, they forecast demand patternswhich are ultra-stable due to Walmarts Everyday Low Prices policy of avoiding seasonal salesand collaborate with other suppliers and with Walmart to decide when to ship products to Walmart distribution centers. And benefits beyond avoiding out-of-stocks are made possible by the systems openness and collaboration with suppliers. Walmart doesnt drip-feed information to its suppliers, it opens its books to them. A tool within Retail Link called Market Basket allows suppliers visibility into what products are routinely combined with their own in the same purchase. This gives vendors the opportunity to produce their own versions of those frequent companion products, or to ask Walmart to place their products where theyll be seen by buyers of those companions. No Wasted Timeor Space Once a product is shipped, the vendors responsibility ends and Walmart takes charge. But the same data sharing and visibility, aided by satellite tracking, allows Walmart to precisely schedule just-in-time handling of goods as they are received. Walmart coordinates each unloading of a suppliers truck with the loading of an outbound Walmart truck at the same distribution center within about a day. This practice, known as cross-docking, minimizes both inventory carrying costs and the duration of the Walmart assortments journey from factory to customer. Goods are only warehoused at the big box stores, which further minimizes the duration of a products journey to the customer. The stores are sized for the purpose both in area and in height; the towering upper shelves hold as much as or more inventory than the shelves that customers shop from. In-store warehousing also allows for fewer and larger deliveries from distribution centers to stores, an efficiency that saves more than money. Filling trucks and minimizing miles traveled also reduces Walmarts carbon footprint. This contributes to the companys impressive gains in sustainability, as well see below. Data Enables Precision Walmarts mastery of real-time information allows it to mingle the very different assortments of products that are sold through its various channels. If you walk inside a Walmart store, you can lay your hands on fewer than 200,000 items immediately. But Walmarts online storefronts offer millions of items, and Walmart wants to get those to you as quickly as possible. Theyre able to do so because 90% of Americans live within 10 miles of their stores, which are also their warehouses. Demand Forecasting and Predictive Distribution With the new system, suppliers fill only one order, instead of 42. This allows them to save money on order management and to dispatch fewer less-than-truckload shipments. More important to Walmarts bottom line, all the container loads are scanned and counted as soon as they arrive at consolidation centers, upstream from the RDCs. The scanning and counting are done automatically on arrival. This allows the entire system to adjust to the unexpected that much sooner. With complete visibility, the system can even respond to sudden shifts in regional demand, for example, due to a heat wave driving air-conditioner sales in certain states, and rebalance shipments to the various RDCs. As Geno Bell, Walmarts senior director of its consolidation centers, put it, With this new technology, we can be surgical and responsive in getting merchandise into stores. After the products have been received, counted and assigned to destinations, the automated warehouse management system is used to sort and separate the arrivals and load the products into new truckloads according to how they are stocked downstream, speeding and simplifying unloading at the destination. Things get even more high-tech at the new automated RDCs, where high-speed palletizing robots unload and sort product. These tireless workers can use every inch of available warehouse space because they never lose track of where a product is stored, no matter how deep it is buried or how high it is stacked. When its time to load it out, the robots retrieve the product and make up individual pallets designed for easy unloading at the other end. The new pallets are packed by how products are stocked in the destination stores, down to specific aisles, in a tour de force of precision and integration. Work on the first of these automated marvels began in 2017 in Brooksville, Florida. Now Walmart is rolling out the automated system to 25 of its 42 RDCs.

QUESTION 3 [25] Remaining competitive in the field of logistics and supply chain remain a challenge. Using the concepts of the Red Ocean strategy, how could an organisation like Walmart be more competitive? Substantiate your discussions with relevant examples.