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Supply chain disruption

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In recent years, supply chains have become longer and more complex, while the severity and frequency of supply chain disruptions seems to be increasing. When faced with a supply chain disruption, proactive and reactive supply chain risk management can in fact make or break a company’s existence. One of the most famous cases is the fire at the Walmart.

Walmart’s Supply Chain Management (SCM)

A competitive business environment has made Walmart focus on innovative processes and systems to overhaul its supply chains and make them more efficient. Increasingly, Walmart is integrating its supply chains with major customers. Wal-Mart is an innovator in SCM, which has helped it to provide low-cost merchandise to its customers and undercut its competitors.

Wal-Mart supply chain risk

In January 2008, the world’s largest retailer Wal-Mart introduced Supply Risk Monitoring service as a requirement to Wal-Mart’s supplier community. This after Wal-Mart made an agreement with Strategic Forecasting, Inc. (Stratfor) to assess and rank security risk for countries in its global supply chain. Stratfor is a leading private intelligence company and its services will enable Wal-Mart to identify risks with supply chain infrastructure in (ranked as high, medium or low) within its supply chain using a unique analytical methodology. The countries will be assessed on risks associated with terrorism, insurrection, crime, the political and regulatory environment, natural disasters, including other factors related to supply chain infrastructure. This will help Wal-Mart to produce a quantifiable measure of the actual risk to a nation’s supply chain and thereby determine appropriate supply chain security counter-measures. It can thus quickly warn of emerging threats and prevent disruption of deliveries of goods to major markets around the world.

The key to Wal-Mart’s supply chain successful

Wal-Mart is committed to improving operations, lowering costs and improving customer service. But the key to retailer Wal-Mart’s success is its ability to drive costs out of its supply chain and manage it efficiently. Many supply chain experts refer to Wal-Mart as a supply chain-driven company that also has retail stores. Wal-Mart’s company philosophy (“The Wal-Mart Way”) is to be at the leading edge of logistics, distribution, transportation, and technology. The Wal-Mart business model would fail instantly without its advanced technology (Wal-Mart has the largest IT systems of any private company in the world) and supply chain (Wal-Mart has made significant investments in supply chain management).

Wal-Mart’s business model and competition

Wal-Mart’s business model is based on a low price strategy and low transportation costs allow it to sell its products at the lowest possible prices. In return for its strategy (Everyday Low Price Strategy), Wal-Mart’s suppliers – both large and small – either break even or make profit supplying at Wal-Mart’s stores. But the real winners are Wal-Mart’s customers (approximately 175 million every week) who save thousands of dollars buying at low prices. Since Wal-Mart stores began selling groceries almost three dozen regional grocery suppliers have struggled to match or simply run out of business. Last year, Wal-Mart’s annual sales were $350 billion and it had more than 7,000 stores, 120 distribution centres and operations spanning 15 countries. Nearly two million employees at Wal-Mart focus on cost, customers and continuous improvement on a daily basis. Other major retailers like Target and Home Depot have emulated Wal-Mart’s logistics strategies and actics.

Wal-Mart’s one-store-at-a-time, RFID and just-in-time distribution approach

Every Wal-Mart store operates like a small company. Store managers are trained to manage one store at a time, one department at a time, and one customer at a time. Decisions are made by store teams to make the individual stores operate at its best with superior in-store execution. With established vendor partnerships with top manufacturers, Wal-Mart has implemented advanced logistics solutions like radio frequency identification. RFID solutions help maintain lower costs, identify out-of-stocks and increase sales. Distribution centres instead of warehouses, automated replenishment and cross-docking technology also reduce inventory carrying costs.

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