Wal-Mart has earned itself the enviable position of being the largest retailing company in the whole world. The company’s unprecedented success can be traced back to the founder of Wal-Mart. Sam Walton opened the first Wal-Mart store on September 1, 1945. Those were hard times. It was the period of the Second World War. Sam Walton knew that the biggest challenge for people was money. So he came into business with one major goal, help people to “save money” so that they could “live better” (Walton, 2009).
He had four major guidelines that still dictate day to day operations at Wal-Mart. He wanted to cut down on expenditure, to increase the sale volume, to embrace technology and to apply the most efficient logistics management. It is this culture that has been the biggest hinge on which Wal-Mart operates. The company is always looking for ways of saving money by cutting down on expenditure so as to give consumers the best prices. Again, this was modeled by the founder. Even after the company had begun bringing in billions, He still drove a pickup. This legacy has remained in the company to date. The managers for instance always stay at economy hotels when on business trips.
But perhaps the most important contributor to the success of Wal-Mart is the supply chain management. Wal-Mart has successfully established one of the most efficient systems of logistics movement that has made it to be a reliable and efficient company. The most significant part of the supply chain is the distribution centers that the store has at different vantage points. The goal of these distribution centers is to feed the supply chain to make sure the demand and supply curve is maintained at normal. Close to 85% of the goods supplied to Wal-Mart went through these centers. Some manufacturers even delivered goods to these centers directly (Chandran, 2003).
A most notable feature of Wal-Mart’s logistics was the fast responsive fleet team. A good logistics management is key in the success of any organization (Waters, 2007). The distribution centers of Wal-Mart are usually serviced by 3500 company trucks. These trucks are responsible transporting cargo from the centers into the stores. This team ensures that the shelves of Wal-Mart are replenished at last twice a week to make sure customers get all they need when they come shopping. To make sure the system is efficient the company only employs drivers who have enough experience and who have a clean driving license record. These drivers usually report to a co-coordinator who will dispatch them to the store that needs supplies.
The distributing process was simplified further by employing a transportation system referred to as cross docking. This is a system where the company picks the finished goods direct from the manufacturers. The goods are then sorted out and then they are delivered to the customers. The idea is to reduce on the need of warehousing and avoid middle men hence cutting down greatly on costs. Let’s take a hypothetical case of a customer that sends Wal-Mart a requisition. On receiving it, Wal-Mart immediately converted it into a purchase order. This is then sent out to different manufacturers to find out which one is able and willing to deliver the goods. Once a supplier had been established, the goods were packed on site as per the customers needs and directly sent to the different customers
Cross-docking is the most efficient way of transportation in the logistics management of the company. It means that the goods don’t have to go to the distribution centers before they are taken to the stores and finally sold. This ensures that Wal-Mart will end up selling the goods at a much cheaper price than it would have. This system of transportation is a blatant shift from the traditional structured way of logistics management. Cross docking removes the power of controlling of the transportation from the board room and makes it a practical and more efficient exercise
While this system works well for the company, Wal-Mart could actual use a mix of the different modes of cross docking that are available. For starters, there is the Opportunistic cross docking method which is used when the destination and the source of the goods is predetermined. The company will then ship the goods directly to the customer. Another type of cross docking is the flow through approach. This is a good method to use for perishables like groceries. The goods enter the distribution centers and leave almost on a predetermined schedule. There is also the Distributor cross docking method. This is where the manufacturer delivers the goods directly to the customer without involving Wal-Mart. It is a win- win situation as both organizations will avoid the need of warehousing.
Pre-allocated cross docking can also be used. This is a form of cross docking which works just like the normal cross docking except that goods to be delivered are usually packed and branded in advance. These goods will then be taken to the distribution centers and later to the stores. Since they were already packaged by the manufacturer, Wal-Mart will not incur the packaging cost again
Chandran, M. (2003). Wal-Mart Supply Chain Management Practices . New York: Routledge.
Walton, R. (2009). Wal-Mart Annual Report 2009. Arkansas: Wal-Mart Stores Inc.
Waters, D. (2007). Global Logistics: New Directions in Supply Chain Management. UK: Kogan Page.