Walmart Supply Chain Changes Role - Special Academic Support

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Introduction

Walmart has been a dominant force in the United States for the last 58 years. From the beginning, it has been able to time the market and execute new supply chain changes that have helped put it a step ahead of its competitors. Walmart has only ever had one goal: to provide its consumers with the best products at the lowest cost. It has achieved this goal by implementing a supply chain that helps lower prices and efficiently deliver the product to its stores. US stores have had the advantage of importing products manufactured economically in foreign labor markets and imported to staple stock distribution centers, which are later dispersed across the country via nationwide infrastructure (Rubin, 2020).

Meanwhile, Walmart China did not have these same advantages. When Walmart expanded into China in 1996, it struggled to maintain that same level of cohesion experienced in the US. Inefficient partnerships with suppliers, transportation deterrents, and an underdeveloped warehousing network amplify Chinas poor infrastructure. Nevertheless, the company has significantly improved over the past three years, although numerous challenges and opportunities remain (Johnson, 2015).

Demand Forecasting

Evaluation: Suppliers

Walmart found that Chinas suppliers often lacked proper planning and could not meet the demands necessary to service the stores. As a result, Walmart China adopted and implemented a centralized demand forecasting strategy that sought to enhance efficiencies and decrease spending by collaborating with reliable suppliers capable of adapting to variable consumer demand and adhering to a consistent cross-dock delivery schedule. In addition, by consolidating suppliers and moving forward with goods manufacturers, Walmart is creating new and lasting relationships with its vendors. They are also increasing buying power and streamlining transportation costs and distribution efficiencies by shipping products utilizing full freight loads and at economic order quantities. As a result, changes to Walmart Chinas demand forecasting and supplier network has produced tremendous improvement in delivery reliability, cost savings, and market growth opportunity (Johnson, 2015).

Evaluation: Constraints

Despite the relatively stable demand forecasting system built in China, this algorithm is characterized by some restraints. For instance, according to Ren et al. (2020), customers often lack information from the retailer about what might influence their shopping decisions. In other words, there is no comprehensive possibility to expect specific demand indicators due to the inability to form a clear relationship with the target market, which affects the weak forecasting ability. When evaluating the sustainability of Walmart Chinas supply chain, one might also note that stores are located far from warehouses, which makes it difficult to plan logistics, which, in turn, does not allow for competently assessing sales times. Another deterrent is the compatibility of the supplied products in such criteria as storage, delivery, and some others. Suppliers have to wait a long time to comply with all the necessary conventions to deliver the goods to the points of sale in accordance with all the rules for their transportation. These constraints are critical to consider when analyzing demand forecasting in Walmart China.

Recommendations

To keep cost and waste at a minimum and build adequate strategies for better aligning the demand and supply side of Walmarts product flow, the retailer should optimize individual aspects of its supply chain. Managers should also pay sufficient attention to the logistics and storage of goods to avoid too long delivery times. Introducing innovative tracking equipment and using digital software for supply planning are potentially valuable initiatives to eliminate delays. Another essential factor to address is consumer knowledge about the retailers products. Appropriate updates on the official Walmart website should be made regularly so that customers are aware of available goods and can plan their purchases timely. These initiatives may contribute to optimizing demand forecasting by strengthening the delivery and marketing of products.

Sourcing

Evaluation

Initially, one of the features of Walmarts sourcing in China was the imposition of appropriate warehousing fees by the logistics department on both business suppliers and customers. This practice inevitably led to a decrease in market interest in the activities of the retailer. According to Johnson (2015), a number of distribution centers of the network existed in the Chinese Walmart, which created difficulties for the transportation of the required share of products. The number of suppliers and the quality of their work did not form an optimal mix for the operation. Along with the increased cost of operation, value loss was one of the negative implications of the current system. However, the centralization of the supply chain helps meet steady-state and peer demand. Distribution centers work closely with points of sale, thereby meeting Walmarts quality standards. Having a clear idea of the volume of production and the needs of specific stores, suppliers distribute goods from warehouses, thereby optimizing sourcing.

Recommendations: Strategize to Optimize

As a potentially valuable solution to optimize the current sourcing system, one can suggest a review of the associated cost system for suppliers and buyers. Logistics and warehousing principles should be improved to keep the target market interested in the retailers products. Demand indicators are important to meet based on available capacities but not on the desire to extract the maximum benefit by imposing additional costs on partners and consumers. As alternative sources of materials, farmers and other private individuals may be involved. These participants can become a valuable link in building a reliable supply chain and ensuring that quality products are sold to the population.

Recommendations: Vetting Suppliers

The practices of vetting suppliers need to be revised, which is justified by the need to ensure hassle-free deliveries. To improve efficiency, Walmart China should reduce the number of partners because, based on supplier evaluations, the key criteria should be the timeliness and reliability of transportation, which cannot be achieved under the current conditions. All participants in the network need to be aware of the principles that the retailer intends to follow to avoid delivery delays. Walmarts corporate social responsibility guidelines imply providing fresh products to buyers, and this is a priority task to achieve.

Recommendations: Quantitative Methods

As a recommendation regarding sourcing optimization, Walmart China management should implement the notification system as an important initiative. For instance, in the case of a critical decrease in products in warehouses, when goods reach a certain mark, all interested participants in the supply chain must be immediately notified. Deliveries should be made before the production volume reaches a specific level, for instance, one-third of the available goods, to prevent a decline in sales or the sale of low-quality products. In this case, the risks of shortage of supply are minimized, and stable sales can be realized due to the timely replenishment of stocks in warehouses.

Transportation

Evaluation: Constraints

Walmart Chinas primary transport constraint is its need to sustain a fleet of trucks that can meet its needs at all times. By utilizing a cross-docking model responsible for over 85% of the stock sold in stores, Walmart has outbound trucks at all distribution centers loaded with suppliers products. However, this model presents a scheduling challenge because the pick path is substantial and intricate. For example, stores must start and finish picking simultaneously, which may result in delays and potential problems down the line (Johnson, 2015).

Additionally, this model depends on suppliers reliability to deliver goods at the right time and the correct fill rate. Unfortunately, meeting these requirements is challenging for most suppliers since they are still inexperienced in the process and work on their schedules. Therefore, during peak sales, such as seasonal events and festivals, Walmart struggles to keep its shelves stocked with the items consumers want (Johnson, 2015).

Evaluation: Modes of Transportation

Walmart China employs a fleet of trucks to transport products to its retail locations throughout the country. Utilizing the cross-docking warehousing method, suppliers trucks unload goods at the distribution centers (DCs), which are later loaded into the outbound trucks for delivery to the stores. The second method of warehousing utilized by Walmart is the staple stock-flow model in which trucks are packed with products stored at DCs for delivery to retail locations based on demand. Due to the low number of distribution centers, this may lead to time constraints. For instance, the DC in Dongguan replaced two DCS unable to maintain capacity and took over 128 locations in two different provinces, estimated to be 170km between stores. The trucks supply all the outlets by transporting around 3500 stock-keeping units (SKUs) daily (Johnson, 2015).

Recommendations

Walmart China should look at options that will benefit its enterprise in the short and long term. In the interim, it should focus on creating relationships with local warehouses in areas currently experiencing higher delays in receiving products. The next is preserving relationships with its current suppliers that have proven effective and reliable in delivering products per the timetables. Finally, increasing its DC footprint could help to increase the staple stock to avoid deficiencies. By improving stock, Walmart will be able to accommodate the demand for the product that often sells quickly and can be supplied on request with little to no delay. These short-term changes can help Walmart China to work towards the long-term goal of constructing a warehouse based on localized locations serviced by individual DCs.

Warehousing

Evaluation: Infrastructure

Walmart China operated 20 distribution centers, 11 perishable and nine dry or ambient. The dry DCs stored the dry grocery items and general merchandise such as electronics, toys, and apparel. At the same time, the perishable DCs manage products that require a temperature-controlled environment. Walmart China operates within leased and owned storage warehouses. To ensure productivity and cost savings, Walmart has implemented two models of warehousing staple stock-flow and cross-dock flow. The staple stock flow requires suppliers to transport product to DC, where it is stored until it is loaded and delivered to the store on demand. This model helps ensure that Walmart can respond to increased sales of a specified product by aiding the on-demand supply of goods to stores. In the cross-docking flow model, suppliers bring truckloads of goods directly into outbound trucks for delivery to different stores. One of the key benefits of this model is the reduced handling cost due to the smaller footprint versus the stock-flow model. Utilizing this model guarantees Walmart can manage an unlimited quantity of SKUs. Therefore, by implementing both models, Walmart can ensure that it can meet the present storage needs. Nevertheless, if Walmart intends to expand its enterprise, it will require constructing additional DCs to increase the stock-flow capacity (Johnson, 2015).

Evaluation: Hazardous Materials

Like many companies, Walmart China handles hazardous materials based on environmental compliance programs set forth by local and government authorities. Walmart utilizes a third-party vendor to audit suppliers and departments to ensure they meet all environment and safety regulations (LabelMaster, 2013). The Environmental Health and Safety office also works with compliance managers globally to safeguard hazardous wares handled under specified protocols. All employees must undergo training to ensure they are certified in handling dangerous materials and follow all guidelines. When a product is returned, it is tracked and monitored to establish if it is hazardous, disposed of per specified guidelines, and distributed pertinent information to employees utilizing the online data management system (Walmart, 2022a).

Walmart carries a variety of items that fall under the parameters of hazardous materials, including electronics, batteries, and perishables such as meat, dairy, and produce products (Johnson, 2015). Most of these products undergo the staple stock-flow model to ensure their quality when delivered to outlets through the pick to zero policy, whereby goods are stored for one day before being forced out to different locations. Therefore, handling hazardous items negatively impacts the companys warehousing as it increases the need for a large building footprint to create space for staple stock flow.

Recommendations: Requirements

Walmart Chinas warehouse system needs to be revised to meet the retailers current needs and address relevant issues related to storing products. One of the key initiatives to promote is creating conditions for the safe storage of goods, which can be both perishable and non-perishable. In addition, to expedite delivery from warehouses, these facilities must be located in close proximity to points of sale, which can help increase productivity and reduce transportation costs. Moreover, warehouses must have sufficient capacity and hold the required amount of products, which indicates the potential need to expand their size. During the period of active sales of perishable products, warehouse managers must ensure the accelerated sale of such goods. Accordingly, during a decrease in customer activity and a decline in the sale of fresh products, storage systems should be adapted to the available storage capacity.

Recommendations: Warehouse Design

The warehouse design is a crucial criterion for the branch to address to maintain sustainable sales and eliminate unnecessary expenses. To minimize movements between functions and reduce costs, Walmart China needs to automate all warehouse operations as much as possible by introducing innovative control technologies. Facility costs can be reduced if storage premises have two entry points, where products from suppliers enter and leave the points of sale separately. Inventory carrying costs can also be reduced through the use of innovative technologies, for instance, through the utilization of an electronic product labeling system to prevent write-offs due to spoilage. Accordingly, personnel costs can be reduced if robotic mechanical systems are applied. Labor costs for workers will decrease as more complex operations will be performed automatically, without the participation of people. Finally, equipment costs will be reduced due to the greater reliability of electronic monitoring systems and the robust operation of digital control and alert programs.

Conclusions

Prioritize

A deep assessment shows that Walmart China is a large and sought-after branch of the global retailer. At the same time, when analyzing the individual aspects of the supply chain, sourcing, warehousing, and transportation of the business, one can note that initially, the company had difficulties in establishing all these systems. With the introduction of centralized management, changes were made in the strategies for controlling the aforementioned activities, and particular attention was paid to demand forecasting as a procedure that largely determined planning success. Nevertheless, by evaluating market activities and their effectiveness, some priority areas of development can be identified. While paying close attention to demand forecasting, Walmart China should establish a stable and reliable system for controlling the flow of products to warehouses and distribution points. With regard to sourcing, attracting reliable partners is a priority. It is not worth entrusting transportation to third parties, and internal work to ensure this activity should be conducted. The automation of warehousing procedures should be promoted, and trade in perishable and non-perishable goods increases the relevance of this initiative and proves the importance of a sound supply chain management system.

Feasibility

It is essential to evaluate the feasibility of the proposed initiatives based on the analysis of the technical and economic possibilities of changes in the way Walmart China operates. Given the aforementioned constraints, namely demand forecasting and product compatibility, system automation and increased work on supply chain optimization can be realized through relevant steps. These are the reallocation of the resource base and investment in internal development rather than external relations. The branch has many contacts with partners, but, as practice shows, poor control centralization and the inability to oversee internal storage and maintenance processes entail losses. Thus, if Walmart China conducts the necessary analysis of the resource base and draws up a project for the implementation of the necessary improvements, the feasibility of all the proposed initiatives is obvious.

References

Johnson, F. (2015). Walmart China Supply chain transformation. Harvard Business Publishing. Web.

LabelMaster. (2013). Supply chain issues related to hazardous materials cost Wal-Mart more than $82 million.

Ren, S., Chan, H. L., & Siqin, T. (2020). Demand forecasting in retail operations for fashionable products: Methods, practices, and real case study. Annals of Operations Research, 291(1), 761-777.

Rubin, C. (2021). Walmart supply chain [2021]: Why it continues to dominate. Skubana.

Walmart. (2022a). Environmental, social & governance reporting. Walmart.

Walmart. (2022b). Supplier expectations compliance areas. Walmart.

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