In the late 1970s, with about 200 stores, Wal-Mart was a relatively small retailer. At that time, Sears and Kmart dominated the retail market. Since then, Wal-Mart gained significant market share from these retailers and became the largest and most profitable retailer in the world. Today, Wal-Mart is admired for its collaboration and technology driven supply chain practices and is leading the retailing industry with its innovative supply chain practices.
“People think we got big by putting big stores in small towns. Really, we got big by replacing inventory with information.” – Sam Walton, Founder of Wal-Mart.
Factors of the success:
- Cross-docking
Cross-docking is an inventory management system. The retailer (XRT) made it popular. Through cross-docking, inbound shipments are unloaded directly into outbound trailers at distribution centers. Cross-docking can lower the time required to transport merchandise. Also, it lowers the inefficiencies in the system. It saves the retailer billions in storage costs.
It gives the retailer leeway to implement its everyday low price, or EDLP, strategy. The EDLP strategy is important to gain trust among customers. This philosophy emphasizes the retailer’s commitment to offer low prices to the customer every day. This ensures that buyers don’t stay away in the hope of frequent promotional activity.
Lowering supply chain costs also helps in the economics of implementing programs—like the Savings Catcher, Save Even More, Ad Match, and rollbacks.
- Economies of scale
In the last 12 months, Walmart earned over $483 billion in revenue. That’s more than the following four companies combined—Costco (COST), Kroger (KR), Tesco (TSCDY) (TSCO.L) in the United Kingdom, and Carrefour SA (CA.PA) (CRRFY) in France.
Walmart spent over $358 billion to purchase merchandise for its stores in fiscal year 2014. That kind of scale gives the company immense bargaining power with its suppliers. At the same time, it’s a huge task to juggle the large number of suppliers from across the world.
- Distribution
Walmart uses a combination of owned and leased facilities and fulfillment centers to distribute its products. In the US, about 80% of Walmart’s products were shipped from these facilities in fiscal year 2014. Suppliers transported the rest of the products directly to the stores.
- Fulfilling the e-commerce promise
Lately, Walmart has also been using its network of supercenters and other retail stores to double as fulfillment centers for e-commerce sales. This is an especially important element of Walmart’s supply chain—if the retailer wants to stay relevant in the fast-paced world of e-commerce.
Amazon (AMZN), Walmart’s nemesis in online sales stakes, is quickly expanding its network of fulfillment centers. Walmart’s existing store network gives it a natural advantage over Amazon. As a result, Amazon is being forced to invest more in distribution.
Walmart’s stores are also being used to offer the click-and-collect facility to customers. Customers can order online and collect their purchases at selected outlets. The service is being tested for groceries. It’s only available at about five locations in the US. However, it’s being used more extensively in countries like the United Kingdom.
Wal-mart is a great example of how logistics should work and which success could bring a good-planned logistics. I suggest also to watch the video as it show more aspects and giving wide explanation of how works the supply chain managment.
The blog of Logistics at MGEPS at UPV 