Inventory control at Wal-Mart

Contents

 

Wal-Mart Background

Wal-Mart was founded in 1962 when the firm opened its first store in rural Rogers, Arkansas. It was incorporated to Wal-Mart Store Inc. in October 1969. The firm has grown to become the United States and the world’s largest retail outlet. It is the largest single job creator with over two million employees. It is the largest retail outlet in the world. The company is committed to a business model of driving costs out of supply chains to enable consumers save money and live better. This is done anytime anywhere. Wal-Mart use retails stores and online stores as its main distribution channels of its products. As per January 2012 the Wal-Mart had an approximate of 1.4 million associates in the United States. The store has 780 000 international associates. Wal-Mart net sales for the year 2012 were $443.9 billion, an increase of 5.9 percent. The stores consolidated operating income grew by 4% to $26.6 billion. The company’s diluted earnings per share were $4.54. In the same year the company added 52.2 million square feet through 1,160 additional units. This was in a summation of acquisitions in the United Kingdom and South Africa. Wal-Mart fiscal year 2013 sales are approximated to be $466 billion (Wal-Mart Stores, Inc., 2012).

Products and services

Wal-Mart offer a wide range of products that include retails goods like electronic goods, books, home furnishings, music downloads. The store also offer photo lab services inside the store and online. Customers drop their photographs for developing via a store kiosk or they can upload them through the corporate website. The store also offers pharmacy services, financial services and wireless services through partners like T-mobile.

Competition

Wal-Mart competitors are spread all over the world because the store operates in all regions of the world. In North America, Wal-mart’s primary competition includes department stores like Kmart, Shopko and Meijer. It faces competition from Canada’s Zellers, Giant tiger and the Real Canadian Superstore. The store faces competition from Mexico’s Commercial Mexicana and Soriana.

Wal-Mart product mix

Product

Wal-Mart hosts products that range from electronics, music, movies, furniture, books, baby shop, clothing, sports items, health care products, pharmaceutical, toys, photography, grocery and jewelry. The company has also incorporated electronic commerce where it offers online shopping and shipping of products from its stores to any destination in the world. The company has installed a very reliable and warranted system that enables customers to purchase directly through mega stores over the internet. This has helped the store reduce the cost of operation through operation expense reductions. The company has exhibitions where private labeled brands and other brands like Cott beverages are marketed at the store’s various outlets. The companies that supply the stores with food items have been requested to use technologies that are environment friendly will maintaining the nutritional value of these foods. Wal-Mart store is one stop shop where an individual can buy all he or she wants either online on by visiting the various outlets available in the world.

Price

Wal-Mart does not produce any brand. It exhibits various brands. The store has a huge worldwide network that flock with customers due t its discount packages that attract and tempt customers. The store is the largest retailer in the world. This makes it an economic force that enables it to run the pricing policy that provides customers with low rates. These rates are not available anywhere else. The company stands on this basic policy of providing products and services at low rates. The company has a universal bar code that acts as the bench mark for the company. This has helped shift the power form manufactures to retailers. The company has lowered the prices of all its grocery items by 15% of the local market price. Other products that have lower rates than the local market price include electronic goods and technological products. The company has a policy that for any manufacturer retailing items at Wal-Mart stores is that it has to reduce the price of increase the quality of its products. This price policy favors only producers with products selling fast in the market. Thus, Wal-Mart has ensured that its customers get value for their money.

Place

Wal-Mart provides its goods and services through its three main divisions. They include Sam’s Club, Wal-Mart Stores United States and Wal-Mart international. The company’s outlets are marketed in different names in Japan, India, United Kingdom, South America, China, South Africa and Japan. The store is a huge network of stores. They range from small markets, cash and carry stores, membership warehouse clubs, food and drugs. Wal-Mart’s other networks general merchandise stores and soft discount stores. Wal-Mart outlets are mostly large building with an average of 197, 000 square feet.

Promotion

The company has its own in-store promotional activities that include sales promotions. They include product bundling and pricing strategies. The company’s online store earns the firm revenues. This is gotten from customers placing online gifts. The sales turnover of the company increases due to its pricing strategy. The company uses “everyday low prices”, “value of the day” strategy to lure customers to its stores. The electronic commerce site has slogans that tempt customers to buy the products. Examples include “grab it before it is gone”.

Conditions that led to the implementation of inventory control

Company running out of stock

Big stores like Wal-Mart can be hard to carry out an inventory manually. With the inventory control system the staff restocks after taking the inventory off the rack. The system enables them to determine which brand, models and sizes that consumers are buying often. This makes the whole system efficient. This system prevents the store from running out-of stock. The system alerts the employees to replenish the store after a sale. This prevents cases where products go out of stock without the knowledge of the manager. Purchasing on the other hand is notified on the spot. This enables them to place orders throughout the day. The technology is used to improve operations. The tag is disabled at checkout.

Management of suppliers was a problem in the organization. The system was implemented in order to manage suppliers. After the implementation of the system, the number of suppliers was reduced. The suppliers were also made partners with Wal-Mart.

Inventory management was a nightmare at Wal-Mart. This was due to the large number of products, processes and services the firm was dealing with. The system reduced the order-ship-bill cycle. Information could also be easily shared online from one store or department to another.

Wal-Mart is very expansive with branches round the world. To manage all the channels was time consuming and tedious work. The implementation of the system also ensured that channel management was eased. Documents like a bill of landing, purchase order and advanced ship notices can be moved easily over the system.

The system after implementation eliminated the barriers that existed in payment. Wal-Mart was linked to its suppliers and distributors by the system. This ensured that payment could be made electronically.

Wal-Mart operated in various world regions that use different currencies. The system eliminated financial management problems that were facing the company. The management of the company would manage various foreign exchange currencies using the system.

Information between various stores was a problem before the implementation of the system. The system facilitated and improved flow of information among sales and production and customer functions.

Implementation of the operational management tool was done in 2005. This was after various failures of the bar-code system. This system had challenges like inefficiency and slow operations. Inventory was also a problem. Restocking of the store used to be done after a week. However, with the implementation of the new management tool inventory was eased. Other problems faced by the store included supply problems, payments and check-out.

Results of the implementation of the management tool

Information flow was eased at the company. This is because all the associates get the day’s news at once. Any other event is relayed in real-time. This makes operations and management easy, efficient and cheap. Workers were reduced. This is because some of the roles that were being done manually like inventory taking were automated by the new inventory tool. This in the end saved Wal-Mart large sums of money that would otherwise have been used to pay wages.

The figure below shows a reduction in the wages by Wal-Mart store due to implementation of a management tool (Wal-Mart Stores, Inc., 2012).

 

Increased productivity by Wal-Mart due to less time taken to carry out roles like restocking and inventory. Sales increased because the tool ensured that all the products are available for customers at the right time and place. The system alerted the attendants on all products in the store. It could provide information on the expiry date, re-stocking level, price, size, local and quantity. This increased productivity of Wal-Mart thus increasing profits accrued.

Global management tools are of utmost importance to companies like Wal-Mart. This is because these tools eliminate procedural and informational bottlenecks. This increases the efficiency of Wal-Mart’s decision and order timing. The use of the inventory tool by Wal-Mart has helped it improve its business processes both in the United States and Internationally. The risks associated with making errors due to perceived demand changes in the supply chain go done because with the use of the inventory tool, the data becomes relevant and more accurate (Bonacich & Wilson, 2005).

The implementation of the management tool by Wal-Mart improved operations at the store. Customers got quality service and efficiently. This was achieved through the supply chain visibility and more accurate ordering decisions. The system enabled Wal-Mart to lower the costs related with inefficient inventory decisions and handling. This is because ordering and sales are closely aligned than any other process in the operation of the store. The inventory tool is used by Wal-Mart to avoid having excess inventory while attracting price-minded consumers.

The implementation of the inventory tool by Wal-Mart increased the efficiency of its inventory management. The technology has also been implemented by its suppliers because inventory is handled by both Wal-Mart and the suppliers. This tool has enabled Wal-Mart to replenish its products faster than when it was using bar code technology.

The Future of Wal-Mart

The future Wal-Mart will focus its attention on smaller stores as consumers are shifting from out-of-town shopping centers. This has been attributed to high costs of fuel, penetration of technology, consumers do not want to be faced with many things they cannot afford and rise in number of online stores. This has been demonstrated by recent Wal-Mart developments where it is launching small stores in neighborhood markets. These stores can be linked with the rest of the stores using the management tool.

Electronic commerce

Internet has penetrated the world at an alarming rate. Increase in smart phones and cheap computers and the market have increased the demand for electronic commerce. The number of online stores offering electronic commerce has also increased. This has made the number of traditional visit stores shrink in size at a very high rate. Wal-Mart should take advantage of social networking and mobile application that are taking over the lives of many consumers to roll out an efficient electronic commerce system. This will have consumers shop for products over the internet and have them delivered to their proffered destinations. Increase in social networking has influenced shopping habits of many customers.

Going green

Customers’ demands and various campaigns advocating for cost savings have led many retailers, Wal-Mart included to take not of environmental matters. This has been demonstrated by opening of a Wal-Mart, Joplin, Mo. that use energy efficient bulbs. These bulbs use LED lighting and they are complemented by sunlight and concrete flooring made of recycled materials. Wal-Mart has plans to install solar power to its stores in order to reduce the pressure on the environment.

Sci-fi solutions

With the installation of the new management tool, Wal-Mart can install in-store scanning to run its operations. This technology can be used to shift from channel-centric to customer centric. This can enable retailers reach consumers at home, work and during commute time (Bruton & White, 2010).

Acquisitions

Wal-Mart in future can expand and open new store through acquisition. This method cautions an organization against market forces. The company acquires an already existing store in the market with a customer base and premise. All the company does is change management and introduce new products and services. This in the end reduces the starting capital of the firm.

Conclusion

Information technology has been employed by Wal-Mart to improve its business process. The inventory tool has decreased the costs of doing business for Wal-Mart while increasing efficiency and profits. The tool has helped increase the quality of products on display through timely re-stocking while avoiding having excess inventory. Wal-Mart through the use of technology, it can afford to offer consumers goods at low prices because it can control its costs. The costs of its products are also determined by the efficiency or inefficiency of its suppliers. The implementation of a management tool has increased the productivity of the firm, lowered the amount spent to pay its stuff and increased return on investment tremendously. This has been attributed to low cost of doing business.

References

Bonacich, E. & Wilson, J. (2005). Hoisted by its own Petard: Organizing Wal-Mart’s Logistics Workers. New Labor Forum, 14(2), 67-75.

Bruton, G. & White, A. (2010). The Management of Technology and Innovation: 

A Strategic Approach. Connecticut: Cengage Learning.

Wal-Mart Stores, Inc., (2012). To our shareholder, associates and customers. Retrieved from http://www.walmartstores.com/sites/annual-report/2012/CEOletter.aspx.

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