The Importance And Role Of Supply Chain Management In Big Industries And Companies

Over the recent years, it has become increasingly essential to understand and evaluate the importance and role of Supply Chain Management in big industries and companies. In the 90th century, many companies and industries were analyzed in order to understand how they improved their current models to update their supply chain strategies to increase and build customer loyalty and also increase internal efficiency. Supply chain encompasses the supply of products to the manufacturer, work in process, inventory and finished product distribution to the final customer, and to manage the supply chain companies are looking for how to adapt choices across for example continues planning, inventory network functions, time, integration, efficient information flow and more. For that an efficient SCM is pivotal.

Walmart, in the olden days, was one of the most affordable stores founded in the year 1962 in the US by Sam Watson. Their main strategy was to sell more products at a better cost. Over the last 50 years, Walmart has grown considerably and has become one of the largest retailers in the world functioning in 28 countries and also has a strong e-commerce presence in 11 countries, and it receives around 260 million customers per week. It also has a strong reputation as one of the most powerful and smartest operational and logistics models.The products are produced by Walmart in 7 countries throughout the world and are also handling 32 US Billion dollars in inventory alone.

Looking at the numbers and statistics, it is sure that Walmart has brilliantly implemented supply chain management within its strategies and decisions.Supply Chain Digest states that Walmart has an inventory made in more than seventy countries and at any point in time, it functions and runs more than 11,000 stores in 27 countries globally.When a company like Walmart has this kind of results in terms of numbers, it is very essential for it to function smoothly with the help of a well-planned and management and supply chain strategy. Walmart sticks to its main motive of encouraging the customers to save more and also live a quality life.Walmart first started functioning with its main target in mind – provide the consumers with anything and almost everything they required, and after they were able to achieve this form of accessibility they started to focus on integrating and growing a well-structured cost model that made it easier to allow the products to people at a low price. Later, it went on to evolve into a better and more uniformly structured supply chain of management to use its competitive advantage to its best ability and become a leader.

Less connecting points in the supply chain.

When Walmart started off, its different and well-structured supply chain management model contributed to its success. Sam Walton, who owned a variety of Ben Franklin franchise stores before opening the 1st Walmart in Rogers, Ark in 1962, specifically purchased wholesale/bulk products and shipped or sent it directly to his stores.Walmart started its supply chain model by disconnecting a number of the links. Later in the 80s it started functioning directly with manufacturers to save more and also run the model smoothly.Walmart started its supply chain model known as the Vendor Managed Inventory (VMI), in this venture the main manufacturers were responsible to take care of their products in Walmart’s warehouses.Due to this new advancement in their supply chain model, Walmart was able to expect close to 100% order fulfilment on merchandise.In 1989, Wal-Mart was named Retailer of the Decade, with distribution costs estimated at a mere 1.7% of its cost of sales – far superior to competitors like Kmart (3.5%) and Sears (5%).

Partnering with vendors based on a strategy method.

Walmart started looking for a strategic way to source its products to ensure the best price from the suppliers who were able to cope up with the demand. Walmart, then went ahead to set up strategic partnerships a number of their vendors, offering them a strong growth potential for long-term and high-volume purchases in return for the lowest possible prices.It also built a very effective communication network with suppliers to advance material flow even when there would be a lower inventor.The map/ collaboration of global suppliers, warehouses, and retail stores connected to Walmart functioned altogether like a single store.

Implementing cross-docking in the supply chain model.

In Logistics, Cross-docking is a practice that is the diamond of Walmart’s strategy to replace and supply inventory efficiently. It means the direct transfer of products from inbound or outbound truck trailers without extra storage, by unloading items from an incoming semi-trailer truck or railroad car and loading these materials directly into outbound trucks, trailers, or rail cars (and vice versa), with no storage in between.

Suppliers usually deliver products to Walmart’s distribution centres where the product is cross docked and then delivered to their stores. Cross docking helps to save and cut down on inventory and transportation, saves transportation time, and also cuts any point of inefficiencies. Using cross docking, products are taken directly from suppliers to Walmart’s warehouses, where they are then shipped to stores without being kept for long in the inventory.

This cross docking model reduced Walmart’s expenses greatly and they passed those savings on to their customers with really competitive pricing.

Advanced and Best Quality of Technology

Walmart welcomed the best form of technology to cut down and offer its consumers the best cost and this also helped stores to keep an account of their inventory and restock their shelves.Technology has been a pillar in Walmart’s supply chain model, becoming a strong foundation of their supply chain. Walmart has the best and largest IT infrastructure in the world. Its state-of-the-art technology and network design allow Walmart to precisely predict demand, track their inventory levels. It also helps to create precise transportation routes, and also take care of customer relationships and service response logistics.

A big example of Walmart's use of Technology: Universal Product Code (UPSC) barcodes: It helps to collect important information which is crucial to analyze inventory and pricing tactics. Later came the devised Retail Link, (Bentonville database), utilizing a global satellite system, Retail Link is connected to analysts who could predict and analyze supplier demands to the network of suppliers, it also portrayed real-time sales data from cash registers and to Walmart’s distribution centers.Suppliers and manufacturers within the supply chain harmonize their demand projections under a network of planning, forecasting, and renewal scheme, and every point of connection in the chain is linked through technology that includes a main- middle database, point-of-sale systems at the store level, and a satellite network.

Walmart kept sharing their data and information with all their partners and in the olden days, a lot of companies weren’t doing that. In fact, they were using third parties which again incurred extra costs.

Walmart’s approach reflects a truly regular, informal cooperation among stores, distribution centers, and suppliers and a more spread out form of control. Also, tracking customer activity, paved the way for consumers to efficiently pull merchandise to stores rather than having the company push goods onto shelves.

Radio Frequency Identification Tags: Recently, Wal-Mart has started utilizing codes that could be scanned from a distance to track merchandise moving along the supply chain.Since inventory is taken care of by both Wal-Mart and its suppliers, Wal-Mart has encouraged its suppliers to use radio frequency identification tags as well.Smart tags: Walmart utilises these tags to help employees to efficiently analyze which items need to be replaced to ensure a constant supply.

Cross-functional teams: It would be essential for Walmart to implement and establish cross-functional teams in order to reduce the levels of inventory, in order to save time and extra cost.

Financial information which is very crucial to forecast and promote growth should be analyzed regularly in comparison to that of the competitors.

It needs to cut down on inventory, it would make things more efficient and also cut down on the surplus of products which would otherwise go to waste due to expiry dates.

It needs to do a supply chain analysis to understand the level of customer satisfaction, loyalty, and purchase behavior.

The HR Department of Walmart could collaborate all the strategies and at the same time keep the employees involved in their present and future tasks by encouraging them by using incentives or other tactics. Keeping the employees informed about the in-depth details and data about the potential/regular customer’s trend and demands would also help them to function better.

11 February 2020
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