To become and remain competitive, a company needs to adopt strategic management style in different sectors: supply chain management strategy is an integral part of an organisation management (Brodsky and Newell, 2010). For effective and timely operations, a business requires adequate supply of materials and appropriate equipments at the right time at a competitive cost (Fernie and Leigh, 2009). When a company has an adequate supply of materials, it is able to produce goods in the right time at an affordable and competitive price. Operation/procurements managers have the role of ensuring that their company has quality and quantity supply of materials at any one instance; supply chain management (SCM) focuses on inwards logistics, outwards logistics and reverse logistics (Haag, Cummings, McCubbrey, Pinsonneault and Donovan, 2006). This paper analysis an analysis of supply chain management as operated at Wal-mart stores.
Company background information
Wal-mart stores opened its first branch in 1962, at Rogers, Ark, in United State of America. The growth of the company was fast and it observed the first ten years to have diversified to 11 branches. Currently the company has more than 8747 retail units in 15 countries; it has 55 different banners of operation. It is a leading retail outlet; Fortune 500 report, 2002 to 2010, rated the company as the world number one retail outlet in revenue, the merchandise sold in the stores are over 3000 non-food items like electronic, toys, furniture and kitchenware’s.
Between the year 2002 and 2010, the company income rose from $219.81 billion to $405 billion respectively; number of employees in the same period rose from 1.29 to 2.1 million. The company have 40 Regional Distribution Centres, which each covers an area of over one million square feet’s, inside the distribution centres, there are five conveyer belts that move over 9,000 merchandise, they operate 24 hours, seven days a weeks (Wal-mart Corporate Website, 2011)
One of the strongest management link in the company is the supply chain department, the procurement department is a full department operated at senior management level.
The following are the objectives of supply chain department at wal-mart Company:
- Adequate supply of materials in a company when they are needed (quality objective)
- Supply of quality materials for various purposes in a business at all times (quality objective)
- Supply of materials at a competitive price (price objective)
The system aims at ensuring that forward logistics, reverse logistics, inward logistics and outwards logistics are well operated and they collaborate with each other; this will be the way that a smooth running of business will be affected (Cooper, Lambert and Pagh, 1997)
Wal-mart supply chain management
Head of procurement department have two major departments, the procurement section and traffic/freight. The company’s supply chain takes two forms, from the manufacturer to the company’s stores (inward logistics), and from the stores to the customer (outwards logistics). Inward logistics is concerned about the delivery of stocks and other materials into the company while outward logistics is concerned with supplying goods to buyers. Both functions are operated under one roof. Parties to Wal-mart’s supply chain are:
they are manufactures who make different products that the company stocks. They are supposed to honour an order and deliver products of the right quality and quantity. When the company want to make a certain purchase, it gives suppliers one year renewable contracts to supply the commodity. The contract need the supplier to deliver when required to. Retail industry has a number of suppliers of different commodities so the company accepts requests of supply and those responds to future supplies according to the demands of a certain commodity (Haag, Cummings, McCubbrey, Pinsonneault and Donovan, 2006).
Wal-mart supplies goods to customers who buy certain volume using their trucks and when they are international customers they look for the best means to deliver them, this includes sea and air transport. To certain levels, the company takes the role of supplier to domestic and international customers. When taking orders from the customer, the company operates a computerised stock management system, which advises the company whether what a certain customer has procured is available (Kaushik and Cooper, 2000)
Wal-mart’s procurement department
The department is composed of heads of different sections whom advice the head of procurement on their section’s demand, both for inward and outwards logistics. Through the department is structured with some head, they work for the general of the entire organisation: they operate in sections and each section is entailed to certain functions that contribute to the whole operation. In a single shop, the company operates eleven sections for the purposes of managing supplies. Section managers with a full team of procurement and supplies operate each section. The division ensures that the same manager manages similar goods because their trend in demand is likely to be the same (Ketchen and Hult, 2006)
The company operates and internal transports department; the transport/truck management section has the role of ensuring there is a truck to either deliver to a customer, port or get goods from the suppliers if needed to (Thomas and Donna, 2010). The section is mandated with the task of ensuring right numbers of trucks are maintained in the company, they are operating well and allocates the right number of trucks to a department in need (Wheelen and Hunger, 1999). So far, the company supply management is operating well however some new models and technologies that can be implemented to align the company further with corporate plan/objectives.
These elements that need to be looked to are already in operation however there is need to make their operation better and more efficient (Kontopoulos, 2009).
Creating a Value determination mechanisms
Although Wal-mart is not manufacturing company, there is need to have a value determination mechanisms. To implement this strategy, it will call for the intervention of players is guaranteeing quality to customers. Such players include the government value determination or bureau of standard and an analysis of supplying companies (Kouvelis, Chambers and Wang, 2006). Value in supplies for manufacture of good translates to customer satisfaction and loyalty. For an efficient supply chain management, there should be value determination mechanism set by a company. All goods getting in the company should be vetted for quality. The supply chain management operated by the firm is among the largest in the world; if there is compromise of quality by a supplier, and then the damage that can accrue to the company is massive and large spread (Larson and Halldorsson, 2004).
Computerised suppliers management systems and Just in time supplies systems adoption
Wal-mart should enhance business relationship with its suppliers further; this will assist in making sure that there is reliability in the supply of materials. Suppliers have crucial information that they can give to the company and assist in making strategic decisions to take advantage of market opportunities. For example during the festive seasons, the supply of some goods are minimal and are likely to rise in prices, having such information is crucial for adopting measures to take advantage; suppliers have such information (Mentzer, 2001).
One area that the company need to look into is the data it has on their suppliers; some suppliers have supplied satisfying commodities to the company leading to good customer relation while others have messed up the reputation of the company. The company should maintain a pool of data detailing these times for future decision-making (Simchi-Levi, Kaminsky and Simchi-levi, 2007).
Just in time supply mechanism
Wal-mart has a variety of commodities that need to be managed effectively; computerised management system should assist the company in determining lead-times for various commodities. Space is never enough for the company stores thus there is need to have supplies when they are needed without maintaining bulks of stocks. There are times that the company require more products (this is mostly times of high production) and sometimes pit requires low supplies (Ward and Glass, 2008).
This should be documented and the system made in such a way there is always a just in time supply. A just in time supply means that at any one point in time, the company is has adequate supply. When adopting just in time system, the most important area to look into is the supplier side of the strategy: in some products, there is than one supplier capable of supplying a company with products while other products like branded products can only be supplied by one supplier. Wal-mart should ensure that all suppliers whether quasi monopolies or competitive are vetted to ensure that the best option has been selected (Mentzer, 2001).
Procurement department is mandated with this task, it consider factors like:
- Reliability: how much can the supplier be relied upon, is the supplier able to deliver when called upon whether in short notices or otherwise?
- Capability: can the supplier meet the demands of the company at any one time? In times of peak of a suppliers products are there measures put in place to facilitate increased business (Hines, 2004).
- Price: does the supplier offer good at an appropriate rate, when prices go down do the suppler adjust them accordingly? What technical advice as far as prices is concerned do the supplier offer to its customers?
- Experiences: what was the experience that the company had in the last business with the supplier? Did he fail the company in any way? (this information should be gotten from the suppliers management system)
- Quality assurance and effectiveness: what has been the general response of customers in consideration of the supplier’s commodity? How strong is the supplier’s brand name?
All the above questions has been answered, suppliers will be vetted in an appropriate manner for the benefit of the company (Larson and Halldorsson, 2004).
For an effective business, Wal-mart has adopted an effective inventory chain management however there are some instances of inefficiency noted in the past. Adopting a computerised supply chain system will assist the company take advantage of opportunities as they come along; this means that it ensures its goods are delivered when they are needed; its aims at ensuring that there are no goods lying in the warehouse; goods are either on shelves displayed for sale or in transit (Andraski and Novack, 1996). Operating an effective inventory management, information on market dynamics, supplier’s power and the costs of goods should be undertook, there is also need to have all procurement departments integrated in the system for proper communication among them (Kouvelis, Chambers and Wang, 2006).
The system of cross docking has a similar approach with just in time logistics: the system allows a company to maintain limited number of warehouses; this ensures that between loading and unloading of goods, there is minimal storage. This system will ensure that Wal-Mart suppliers get their goods timely in their best state; it will also facilitate the delivery of supplies to customers. Though the system is seen as a psychological one that supplies should not remain in the business, it assists in deriving of goods to customers when they need them (Haag, Cummings, McCubbrey, Pinsonneault and Donovan, 2006).
Recommendation and conclusion
To ensure that Wal-mart has sufficient inventory; the company has adopted an integrated supply chain system. Procurement department oversees effective coordination of all stakeholders in the supply chain; it manages its over 3000 products by developing good suppliers relations that facilitates a just in time supply chain management. Wal-mart supply chain management is an in-house system developed to fit the structure of the company; it manages trucks that transport goods to customers and from suppliers (Fred, 2008).
Despite the current recommendable supply system, the company need to automate some of its processes; the freight management department has minimal automation a factor that limits its full efficiency. An in-house system that focuses on individual segments in the supply chain systems need to be developed and then linked to the larger procurement department system.
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