Question

Describe how Walmart's warehousing system works?

Answer 1

Walmart streamlined supply chain management by constructing communication and relationship networks with suppliers to improve material flow with lower inventories. The network of global suppliers, warehouses, and retail stores has been described as behaving almost like a single firm.

Cross-docking is a logistics practice that is the centrepiece of Walmart’s strategy to replenish inventory efficiently. It means the direct transfer of products from inbound or outbound truck trailers without the need for 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 have been delivering products to Walmart’s distribution centers where the product is cross-docked and then delivered to Walmart stores. Cross-docking keeps inventory and transportation costs down, reduces transportation time, and eliminates inefficiencies.

Walmart’s truck fleet of drivers continuously deliver goods to distribution centers (located an average 130 miles from the store), where they are stored, repackaged and distributed without sitting in storage. Goods will cross from one loading dock to another, usually in 24 hours or less, and company trucks that would otherwise return empty “backhaul” unsold merchandise.

This strategy has reduced Walmart’s costs significantly, allowing the company to pass those savings on to their customers with highly competitive pricing

Walmart embraced and invested in technology to become an innovator in the way stores track inventory and restock their shelves, thus allowing them to cut costs. In 2015, the company spent a reported $10.5 billion on information technology and has also invested significantly in improving their eCommerce capability.

Technology plays a key role in Walmart’s supply chain, serving as the foundation of their supply chain strategy. Walmart has the largest information technology infrastructure of any private company in the world, and it is this state-of-the-art technology and network design that allows Walmart to accurately forecast demand, track and predict inventory levels, create highly efficient transportation routes, manage customer relationships, and service response logistics.

For example, Walmart implemented the first company-wide use of Universal Product Code (barcodes) in 1983, through which store level information was immediately collected and analyzed. Later, Walmart leveraged this now-everyday technology into a further innovation: Savings Catcher, which allows consumers to scan product barcodes on their smartphones to compare best prices.

The company then devised Retail Link, a mammoth database. Through a global satellite system, Retail Link is connected to analysts who forecast supplier demands to the supplier network, which displays real-time sales data from cash registers and to Walmart’s distribution centers.

Suppliers and manufacturers within the supply chain synchronize their demand projections under a collaborative planning, forecasting and replenishment scheme, and every link in the chain is connected through technology that includes a central database, store-level point-of-sale systems, and a satellite network.

What made Walmart so innovative was that it had been sharing all this information with their partners. Back in the day, a lot of companies weren’t doing that, but rather using third-party services where they had to pay for the information.

Walmart’s approach allows for frequent, informal cooperation among stores, distribution centers and suppliers, and less centralized control. Furthermore, the company’s supply chain, by tracking customer purchases and demand, allows consumers to effectively pull merchandise to stores through demand, rather than having the company push goods onto shelves.

In recent years, Walmart has used radio frequency identification tags (RFID), which use numerical codes that can be scanned from a distance to track pallets of merchandise moving along the supply chain. As inventory must be handled by both Walmart and its suppliers, Walmart has encouraged its suppliers to use RFID technology as wel

Walmart’s cross-docking as a form of the just-in-time inventory method also helps reduce inventory costs by minimizing inventory size. This combined approach supports the company’s profitability and financial soundness.