Question

Walmart’s continuous replenishment system senses the level of stocks in Walmart stores and make orders to the suppliers to replenish the items that will be depleted soon.

1. What are the benefits of implementing the continuous replenishment system from the perspective of stores, customer, and the suppliers?

2. What strategies to deal with the Porter’s Competitive Forces are working by the replenishment system and why?

Answer 1

Benefits of implementation of continuous replenishment system are -

1. Makes the whole supply chain more effective

2. People required to maintain inventory level and place orders will no longer be required which in turn will reduce costs.

3. This system reduces the number of obstacles or middlemen which in turn provides better quality of delivery to the customers.

4. The relationship between suppliers and customers becomes stronger in the long term.

5. Costs involved in logistics are also lowered as the supplier - customer relationship works to create a logistics process beneficial to both.

In response to the Porter's competitive forces, Walmart is using its cost leadership strategy. The main focus of this strategy is to achieve low costs. As a low cost retail service provider and it's other related low cost business outputs, Walmart is able to compete on the basis of low selling prices.

A lower operational cost strategy also gives Walmart competitive advantage. Information technology plays a vital role in achieving this. The continuous replenishment system keeps the prices low. As soon as customers pay for the purchased item, this system automatically sends orders for new stock directly to suppliers. Point of sales terminals record each sold item and correspondingly send a purchase order to the central servers. These central computers then collate the orders from all the Walmart stores and sends it to suppliers. This system also enables Walmart to adjust purchase of stocks in it's stores as per customer demand.