Monday, November 10, 2014

Does Walmart still have competitive edge in inventory management?

 It is impossible to talk about best practices of inventory management without mentioning the retail giant Walmart and its success. It established itself as a pioneer in supply chain management.
Over 20 years ago, Walmart adopted the  UPC bar codes and revolutionized the industry; it also pioneered the use of electronic data interchange (EDI) for computerized ordering from vendors. Its hub-and-spoke distribution network ensures goods are brought to distribution centers around the country and then directed outward to thousands of stores, each of which is within a day’s travel. Through the use of cross-docking, one of its best-known innovations, half the goods trucked to a distribution center from supplier’s ship to stores within 24 hours. The other half, called “pull stock,” is stored at the distribution center until needed at stores.[1]

It has become significantly important to monitor the supplies and forecast the demand based on the POS purchase. Every retailer now has an inventory tracking that updates the stock quantities in real time each time a purchase is done at the register. Sometimes reports are sent to the vendors or the direct suppliers of goods for them to do a market and consumer demand analysis of their products.

However Walmart was the first to do this and remains the leader in supply chain, what it did differently was not just rely on technology .The company has a sprawling network of nearly 160 distribution centers covering almost 120 million square feet and all within 130 miles of the stores it supplies, according to MWPVL International, a supply chain and logistics consulting company. About 81% of Walmart merchandise passed through those centers in 2013.[2] Walmart uses its own truck fleets and drivers and accepts a minimum of three years of incident free driving experience etc. These factors also add on to build the robustness of the empire.

Walmart Replenishment Process

In my experience of working with a Manufacturing Client and enabling them to track their products via mobile apps, I have noticed that inventory tracking is one of the prime requirements of this industry. How each organization executes it, how much investment goes into this functionality determines its success.

Today we have custom made vendor solutions available to serve this need, then what will be the competitive edge for these pioneers? Or are inventory management solutions becoming a commodity in today’s era ?

[1] Mike Troy, “Wal-Mart’s Inventory Equation,” Drugstore News, September 11, 2006; “Financial Outlook: Restoring the Productivity Loop,” Retailing Today, June 26, 2006.

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