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The Recipe to Walmart’s Supply Chain Success

Walmart supply chain: Walmart store exterior. Walmart is an American multinational corporation that runs large discount stores and is the world's largest public corporation.
Featured image credit: Wolterk/iStockphoto.com

Walmart’s supply chain management is the most sought-after case study across the world.

Why shouldn’t it be?

The retail behemoth operates more than 11,443 stores and clubs under 48 banners in 24 countries and eCommerce websites. [Source: Walmart official website]

Managing so much can give any organization a run for its money.

So, how does Walmart ensure seamless supply chain management and what can we learn from Walmart’s supply chain management system?

We discuss everything below.

The Beginning of Walmart’s Supply Chain

The present Walmart supply chain management system is the result of years of innovation and ideas coming together.

The company was originally founded to provide customers with products at the lowest price and Walmart still sticks to that mission.

It started with Walmart founder, Sam Walton, purchasing merchandise in bulk and getting them delivered to the store to be sold to customers. He himself took the initiative to visit distributors to purchase the items at a low cost.

However, this simple Walmart supply chain strategy was no longer effective when the company began to grow, and products’ demand increased.

So, in the 1980s, Walmart went a step forward into the supply chain.

Walton cut out the middlemen and approached the manufacturers directly. By doing so, Walmart further cut down its costs of securing products.

Clearly, there’s a reason why Walmart is the market leader that it is today. The company further streamlined Walmart operations and supply chain management by including technology into the concoction.

For example, Walmart introduced a vendor-managed inventory system (VMI) and delegated the responsibility of Walmart inventory management directly to the suppliers.

The base of this system is a centralized database that the suppliers can access.

The manufacturers can look at the stock inventory levels on the database and supply goods whenever the stocks run low. Walmart just has to handle the transit of the products from their warehouses to their stores.

Such a simple idea eliminated a huge load of work from Walmart and cut costs of managing inventory. And, the manufacturers have nothing to complain about either because it was a win-win situation.

By managing the inventory themselves, the suppliers can ensure that their products never go out of stock at Walmart.

Types of Inventory at Walmart

Walmart’s supply chain management strategy uses four different types of inventory throughout its supply chain. These are:

Finished Goods Inventory

This is the main type of inventory that comes directly to the store for customers to buy.

The stock for finished goods is replenished regularly and is one of the biggest contributors to the success of Walmart as a retail giant.

 Transit Goods Inventory

This is the second most significant type of stock in the Walmart distribution process.

Walmart’s worldwide retail supply chain means it sometimes takes days or weeks for stock to reach a store and such inventory is known as transit goods. Transit goods inventory’s function is to support the replenishment of finished goods in stores.

Buffer Goods Inventory

As the name suggests, such stock is maintained just in case.

There can be scenarios where demand suddenly fluctuates or replenishment of stock arrives late, in which case the buffer inventory holds the fort. The role of buffer goods inventory is to maintain stock at the stores until replenishment arrives.

Anticipation Goods Inventory

This is another integral part of the Walmart distribution model.

In essence, anticipation inventory works much like buffer stock, but anticipation goods inventory is maintained for seasonal demand fluctuations. For example, during the holiday seasons, such as Thanksgiving and Christmas.

Cross Docking – The Key Contributor to Walmart’s Success

One of the most integral parts of Walmart’s supply chain is the Walmart cross-docking system.

We look at how it is bound to the retail giant’s success and what exactly this innovative method is.

What Is Cross Docking?

Cross-docking is a logistics procedure that diminishes warehouse waste by taking out the storage link in the supply chain.

Simply put, the items arriving in an inbound vehicle from a supplier are unloaded and directly loaded onto a vehicle bound for Walmart stores or warehouses.

The goods are not stored anywhere during transit.

How Is Cross-Docking Effective?

Managing a large storage inventory is not only expensive but overstocking can also lead to waste.

So, cross-docking is central to Walmart’s supply chain because it eliminates one of the biggest headaches of retailers worldwide, namely dealing with a large amount of stock in storage.

Below is a quick rundown of some other benefits of cross-docking:

  • Cuts down labor costs.
  • Ensures just-in-time manufacturing.
  • Ensures an organized supply chain.

You can also incorporate cross-docking in your organization with an advanced route planner like Route4Me.

The software will help you plan optimized routes to transport goods from multiple warehouses or vendors to a single distribution center as efficiently and quickly as possible.

You can use Route4Me’s route planner for all type of cross-docking, such as:

  • Manufacturing cross-docking
  • Distributor cross-docking
  • Transportation cross-docking

To learn more about how cross-docking works, its advantages and disadvantages, and how to implement it in your organization, read our guide on cross-docking.

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How Walmart Uses Technology to Improve Their Supply Chain

Walmart’s supply chain management analysis by experts shows that the basis of Walmart’s success through the years has been its ability to update according to the changing times.

Walmart has never shied away from using advanced technology to its advantage and the present Walmart supply chain system is proof of that.

For example, Walmart was the first retail store in the US to use a computer system; it even did so in 1975.

Walmart also implemented barcodes for scanning point-of-sale (POS) data in the 80s, even though it was unheard of at that time.

Another innovation implemented by Walmart was Retail Link, a reporting software that connects analysts who can forecast demands to the network of Walmart suppliers.

The system collects real-time sales data from cash registers as well as information from Walmart distribution centers. This gives suppliers the much-needed insight as to which products they should replenish at the stores immediately.

The system has been instrumental in connecting all the supply chain links through a satellite network, a central database, and a POS system at the store level.

And, the system was so successful that reports show a whopping $8.5 million growth in sales within just six months of implementing it.

In addition, Walmart currently employs a radio frequency identification tags (RFID) system to free the store employees from having to scan the barcodes of every product coming into the warehouses or the stores.

According to reports, the replacement of barcodes with RFIDs into the Walmart supply chain technology immediately improved the on-shelf availability of products by 63%.

Some other innovations used by Walmart are:

  • MyProductivity app which gives store managers and associates easy access to important data, such as stock replenishment, sales, and warehouse. This helps in increased productivity since the in-store team doesn’t have to log in to different systems or disappear behind a screen for hours to get the data.
  • TopStock is not a technology, but a simple idea that proved revolutionary. The concept is keeping extra stock at the top shelves in the store, instead of keeping them in the inventory.

How Walmart Is Trying to Stay Ahead of Amazon

Walmart is colliding head-on with Amazon when it comes to online delivery; not only for food and grocery but also for delivering general items.

Being aware of the implications of the online dominance of Amazon, especially during the pandemic when online shopping has taken precedence, Walmart is bulldozing into the market pretty quickly.

Reports say that part of the strategy for effective delivery of online orders to customers includes Walmart turning some of its physical stores into fulfillment centers for online deliveries.

Another report provides insight into Walmart’s technological innovation, Alphabot, which are robots operating inside the warehouses.

The Alphabots wheel around the warehouses, picking ordered items and delivering them for packaging at the assembly workstations, making the process much more streamlined and quicker.

Walmart is also foraying into faster delivery of products, challenging Amazon’s Prime. As part of the initiative, Walmart introduced Express Delivery which promises to deliver orders to customers in two hours or quicker.

This is possible, once again, with the help of technology, specifically artificial intelligence (AI) and machine learning (ML).

ALSO READ: What Makes the Amazon’s Supply Chain the World’s Best

The process flow for the Express Delivery is as follows:

  • The backend AI system starts working as soon as a user adds items to the cart and chooses their delivery time and date.
  • The AI-powered resource utilization system determines whether the user is eligible for Express Delivery based on numerous factors, including the time slot selected by the user, the number of orders assigned during the same time slot, the availability of vehicles, and the distance between the nearest fulfillment center and the delivery address.
  • The estimated delivery time is calculated from all the above factors and is fed into a second AI system.
  • The second AI system checks the availability of labor in the fulfillment center, vehicles for delivery, and the time slots.
  • The conclusions reached by these two AI systems determine whether a user will at all see the Express Delivery option at the checkout. This means that all the above steps are completed within milliseconds and the decision reached is based on real-time and historical data, which is saved on the system thanks to ML.
  • Once an Express Delivery is confirmed, another AI system takes over the fulfillment of the orders, i.e., picking and packing.
  • The final step is the last AI system taking over to direct a delivery driver to pick up the order from the designated area.

Finally, to get the orders delivered, Walmart partners with last-mile delivery businesses, such as DoorDash and Postmate.

You too can optimize your routes easily with a route planner.

A delivery route planner will help you plan well-optimized routes with accurate driving directions for your delivery drivers in less than a minute.

ALSO READ: How to Plan a Route with Multiple Stops in 30 Seconds

You don’t need to worry about any hindrances that could stop your drivers from making on-time deliveries.

The delivery scheduling software factors in weather conditions, traffic congestion, left turns and U-turns, one ways, avoidance zones, and more.

A route optimizer can also help with picking and packing by optimizing pick-and-pack routes inside your warehouses and yards for robotic and human operators.

Learn how Route4Me’s route planner can help you with pick-and-pack optimization.

Walmart Supply Chain System – Worth Emulating

Walmart’s customer-centric approach has always focused on customer demands. By tracking customer demands, Walmart’s supply chain has effectively created an inbound merchandising strategy.

The concept is to pull goods into the store instead of suppliers pushing their items onto the shelves.

Walmart’s continuous upgrades to its systems, embracing the latest technology to stay on top of the market, and its customer-centric approach have ensured that it stays the market leader that it is.

There’s indeed a lot to learn from how this retail market leader has stayed at the Number one spot in the industry for so long.

Want To See For Yourself How Route4Me Can Boost Your Profits?

Whether you want to slash the time it takes you to plan routes for your drivers, increase the number of stops they can make, or keep your customers satisfied knowing that your drivers show up on time… Route4Me helps you achieve that!

Start Free 7 Day Trial

About Route4Me

Route4Me has over 34,000 customers globally. Route4Me's Android and iPhone mobile apps have been downloaded over 2 million times since 2009. Extremely easy-to-use, Route4Me's apps create optimized routes, synchronize routes to mobile devices, enable communication with drivers and customers, offer turn-by-turn directions, delivery confirmation, and more. Behind the scenes, Route4Me's operational optimization platform combines high-performance algorithms with data science, machine learning, and big data to plan, optimize, and analyze routes of almost any size in real-time.