Walmart_Distribution

Network Distribution Assignment. Question 1 In addition to the case study that sets the stage for this chapter, I don’t think a company exists that has leveraged their supply chain in general and distribution in particular as Wal-Mart. I also know that their story has been chronicled over the years in more magazines, journals and newspapers than you can imagine. I want you to write a short report (2-3 pages – whatever it takes to do a good job) that details the different distribution strategies that Wal-Mart employs and the impact that these have had on their success. Please use the on-line library resource and fine a couple of relevant articles about Wal-Mart and distribution to supplement the information in your text. Include citations for these papers in your report. Wal-Mart has one of the largest private distribution operations in the world with more than 40 Regional Distribution Centers with each one over 1 million square feet in size. They operate 24 hours a day 7 days a week keeping their own fleet of trucks and trailers moving. Each Distribution Centre supports between 75 and 100 stores within a 250-mile radius A key to Wal-Mart’s success has been its reliable and effective supply chain. From purchasing to transporting to selling, Wal-Mart has been able to adopt an efficient distribution and logistics management system where they have been able to ensure a constant flow of goods by using highly advantageous innovative strategies. For instance: • A world class Cross Docking strategy • State-of-the-art technology systems • In-house transport fleet.    Wal-Mart developed the hub-and-spoke distribution strategy which has been one of its key operational competitive advantages. While Wal-Mart needs only 10% of its stores square footage for inventory, competitors on average require 25%. This is because each of its stores is within a day's drive from one of their distribution centers thus allowing Wal-Mart's to bring a product from the dock to the customer in as less than 72 hours. Wal-Mart has invested heavily in its unique Cross Docking inventory system which is the process of unloading and loading materials with little or any storage thus avoiding potential inefficiencies in the distribution system. Products are received on one side of the warehouse and leave out of the other side, virtually eliminating the requirement for the storage of goods. With this system, goods are continuously delivered to stores within 48 hours and often without storing them as inventory. Materials are picked-up directly from the manufacturing plant or from the supplier of the finished goods, sorted and directly supplied to the customers.  By focusing on the supply to demand chain Wal-Mart has been able to dispense with the requirement for a centralized distribution system and through there sophisticated IT inventory systems allow customers to pull products the moment they are needed.  The benefits of Cross Docking have resulted in a reduction in material handling and storage of finished goods. It has also provided Wal-Mart a competitive edge by having an efficient supply chain management system that includes the reduction in lead time, quicker inventory turnover, accurate forecasting of inventory levels, Economic Order Point and reduction in safety stock. Overall, the Cross Docking helped in the reduction of storage, labour and handling costs. Wal-Mart has also adopted a strategy of managing its own In House Transportation Fleet and hiring there own dedicated drivers who to ensure they are ready and responsible to be able to adopt procedures such as the Private Fleet Driver Handbook. This handbook contains check-lists to ensure the safe distribution of goods and the driver’s roles and responsibilities. By monitoring the drivers Wal-Mart is assured that they are able to perform their roles and not cause unnecessary delays which could hamper the efficiency of its supply chain. This has allowed Wal-Mart to replenish their shelves 4 times faster than any of its competition Wal-Mart’s scheduling process is a well-organised and efficient process for the loading and unloading time of materials providing a constant and smooth flow of its distribution process. Thus Wal-Mart is assured that everything has been unloaded and distributed on time accordingly. The advantage of having an in-house fleet provides Wal-Mart with the benefits of low cost transportation for the delivering of goods to the different stores and distribution centers.  It has been said that Wal-Mart’s capabilities of replenishing the shelves, is four times faster than the other competitors.  One disadvantage is that Wal-Mart is responsible for the repairs and maintenance of their fleet which could be expensive. However the effectiveness of its in-house fleet transportation system far outweighs this disadvantage. Wal-Mart owns the largest and most sophisticated computer system in the private sector. It uses a MPP (massively parallel processor) computer system to track stock and movement which keeps it abreast of fast changes in the market (Daugherty, 1993). Information related to sales and inventory is disseminated via its advanced satellite communications system Wal-Mart’s state- of- the- art information technology minimises human errors and makes inventories instantly available when required. With the use of hand held devices. RFID tagging, automated inventory and direct communication with their suppliers this technology has provided a huge assistance to employees tracking down inventory, deliveries and back-up merchandise in stores at the distribution centers.  A form of just-in-time distribution, system is also used at the distribution centers to the customer. Using company owned fleet and tractors Wal-Mart replenishes its own stores 24 hours per day from its own distribution centers. The adoption of technology has certainly helped their suppliers however Wal-Mart still forces them to hold on to the majority of inventory, resulting in higher inventory levels. One example of this technology is the automated reordering system linking computers between Procter & Gamble ('P&G') and its stores and distribution centers. The computer system sends a signal from a store to P&G identifying an item low in stock. It then sends a resupply order, via satellite, to the nearest P&G factory, which then ships the item to a Wal-Mart distribution center or directly to the store. This interaction between Wal-Mart and P&G provides coordination; P&G can lower its costs and pass some of the savings on to Wal-Mart. The benefits of an efficient supply chain provides reduction in lead times , faster inventory turn over , more accurate forecasting of inventory levels, increased warehouse space, and a reduction in safety stock. Wal-Mart’s supply chain management of Cross Docking, In House Fleet and the use of state of the art technology has resulted in a highly efficient supply chain management process. They have eliminated the issue of holding old stock and maintain a high quality of goods. Bar Coding, RFID technology has enabled an accurate distribution process and Cross Docking has helped Wal-Mart to reduce inventory costs in the loading and unloading of goods. References • Daugherty, R. (1993). New approach to retail signals strong future for point of purchase displays. Paperboard Packaging, pp. 24-27. • Thompson, A. A., Jr. & Strickland, A.J. III. (1995). Strategic management concepts and cases (8th ed.). Chicago: Irwin. • Vance, S., & Scott, S. (1994). Wal-Mart: a history of Sam Walton's retail phenomenon. New York: Twayne. • (Lacefield October 2005 Logistics Management Vol. 44, No. 10). • Wal-Mart: Staying on Top of the Fortune 500 A Case Studies on Wal-Mart Stores Inc. This case study was produced for the Corporate Strategy and Public Affairs Lecture, The Graduate School of Political Management, George Washington University. April 2002, Washington DC Contributors to this Report: Patrick Hayden, Seung Lee, Kate McMahon, Mike Pereira • A Case Study of Wal-Mart’s “Green” Supply Chain Management Adam Heying Whitney Sanzero Professor Jim Constand May 4, 2009 • Supply-Chain Integration through Information Sharing:Channel Partnership between Wal-Mart and Procter & Gamble Michael Grean Michael J. Shaw Question 2 Consider a large discount Store. Discuss some products and suppliers for which the discount store should use: • A Cross Docking Strategy • Traditional Warehouse Strategy • A Direct Shipment Strategy Cross Docking and direct ship operations are best suited when there is a consistent demand for goods making the demand more predictable, either to a retail manager, or to a central ordering facility. Cross Docking is usually linked with the retail sector, manufacturing and distribution companies where on average shipments typically spend less than 24 hours in the distribution center and in some cases less than an hour. For Cross Docking to be successful it is important to have automated material handling systems, state-of-the art warehouse management systems, order processing systems, quality controls systems, and strong relationships between supply chain partners. These are essential when dealing with products whose demands are high and predictable such as perishable goods like fruit, vegetables, and flowers. An example of a Cross Docking supply chain partners is UK supermarket chain ASDA who partnered with Kimberly-Clark, the paper manufactured to supplier low-value products such as toilet tissue and paper towels. It is also common in the clothing industry to use this strategy where it is important to know the demand characteristics such as size colour etc. plus these products have a limited shelf life due to the constant changes in fashion and the highly competitive industry. There are various factors that can influence the use of Cross Docking. Some of these include geographical details of the customer and the supplier, freight charges on the material being shipped, details and complexity of the loads, handling charges, logistics software, tracking the inventory and the cost of inventory in transit. If the product demand is erratic then perhaps a warehousing strategy is more suitable as there would be less forecasting errors which could result in stock shortages. A Central Managed Inventory strategy therefore is better suited to hold inventory at a location rather than deployed and stored in retail stores. This then allows the bulk of inventory to be sold in a region as well as being made available to be sold through all the sales outlets. . The Central Managed Inventory therefore acts as a hub and is accessible by the entire retail outlet that can pull from that inventory. The benefits of a Centralised Managed Inventory are that it is easily to deploy inventory to the best region which is selling most of the products and not having to distribute them to lots of different regions. Costs are reduced by reducing the size of the retail store by not having to store goods at the retail outlets and instead using warehouse space which is cheaper. Products shipped through a wholesaler are handled more efficiently and can be combined with other products from many different suppliers. Other examples of produce using a Central Warehousing Strategy are Electronic goods, furniture and goods which are not perishable. Another alternative is Direct Shipping where inventory is pushed to the customer. If products can be shipped direct to the consumer from the warehouse then retailers can simply place orders which can then be “drop shipped” to the customers. Aircraft manufacturers for instance supply products which are custom made and shipped directly to the airline. Automobiles are another example as they are difficult to move so is shipped directly to a dealer. Drop shipping has many advantages for the retailer as it eliminates the need for storage and inventory management.          Question 3 Consider an oil and gas division of a large, international EPC company that has customers worldwide. Discuss some products and suppliers to use: To keep things simple, focus on refineries (new and upgrades) that range from $250M to $2B with half of that in materials • A Cross Docking Strategy • Traditional Warehouse Strategy • A Direct Shipment Strategy Question 2 provides background into the different types of distribution strategies and how they operate. Although these strategies are used in some fashion on individual Oil and Gas construction projects in my experience there has been little if any thought for developing a supply chain which will serve these projects. Unless the EPC has many projects being executed with the same client using the same materials, specifications and is driving also standardisation could this be possible. Walsh et Al (2003) investigated the use of a warehousing strategy to manage critical products during the execution and construction of a project. However this was client driven and so was some what easier to implement and manage. Therefore Cross Docking and direct shipment were strategies which were deployed by those suppliers executing the project and providing equipment to the jobsite. However there are opportunities to adopt these strategies on individual and projects and on location construction projects where a modularisation strategy is being adopted. Cross Docking and warehousing strategies would adapt well to the management and distribution of bulk and cable materials which notoriously cause problems on projects similar to those identified by Walsh et Al (2003) Common problems are either under stocked to meet variable demand or surplus at the end of the project. These strategies would need to be developed with a supplier partner who has the necessary state of the art technology, logistical and warehouse management skills etc…to manage inventory and be able to identify the Economic Order point, lead times, and safety stock to support construction. Equipment supplied to construction sites such as Compressors, Vessels, Columns, Mechanical Skids, Electrical and Control system package buildings tend to be direct shipped to the jobsite. In fact the majority of equipment today is shipped to site with warehousing being provided at the jobsite. The strategy being as long as material has been delivered to site then Construction can be supported. However locating the material is and investigating whether it has been delivered to site is a common occurrence. Unfortunately the best practices from warehouse management used in the manufacturing industry are rarely used in EPC Oil and Gas projects, resulting in either excess inventory or a shortage of materials. With good planning and working with qualified suppliers there is no good reason why successful strategies such as Cross Docking, warehouse management either centralised or local could not be investigated and the most suitable implemented Question 4 Consider a nuclear power division of a large EPC company in the United States with an eye on building multiple power plants at multiple sites over the next 20 years. Discuss some products and suppliers for to use. Assume all construction will be only in the US and that these projects will cost about $10B over 7 years, again with half of this cost associated with materials. • A Cross Docking Strategy • Traditional Warehouse Strategy • A Direct Shipment Strategy The introduction of nuclear projects and a projected lifespan of 20 years provide an opportunity to introduce long term game changing strategies. The supply of materials on nuclear projects means that there are stringent requirements particularly in the amount of documentation a supplier needs to provide to receive accreditation and approval. For those suppliers this is a very costly exercise which has led to a reduced number of qualified suppliers in certain product categories. This provides the opportunities to standardise on equipment allowing for supply chain strategy development which could mirror the strategies used in the retail industries such as Cross Docking, Centralised warehousing and direct shipment. Although there will be sensitive material and particular pieces of equipment which are project specific and follow the traditional Oil and Gas methodologies e.g. direct shipment of large equipment, there will also be commodity type equipment which could be managed when working with strategic partners with warehouse and logistic skills as discussed in Question 3. Thus providing opportunities for these suppliers to further hone their skills and perhaps learn from the retail industry if the promise of long term investment in these 20 nuclear projects is realised. Such products again include bulk material and cable which fit well into these strategies and by working with the client there are opportunities to use some of the findings from Walsh et Al (2003) to develop similar supply chain strategies The important difference between the Oil and Gas EPC projects and the nuclear projects is that the nuclear industry would provide a 20 vision of projects which would encourage and support the long term investment in technology, work processes, warehousing and transportation network to support the Cross Docking, warehouse strategies as well as developing new strategies in direct JIT shipment.