This article provides information on Walmart’s distribution strategy while also highlighting the supply chain problems and challenges it faces.
Walmart is a multinational retail corporation operating a chain of grocery stores, hypermarkets, and discount department stores. This major retail player with American origins has built a major and successful brand but not without its challenges.
The Numbers Say a Lot
Walmart is a global retail giant with extensive operations which results in extensive and enormous logistical planning. To have an idea of the sheer size of its operations, Walmart operates over 11,700 stores. These stores being operated function over 59 company names.
What more? It has a huge workforce of about 2.3 million employees scattered over 28 countries across the world. These employees help in the management of the company’s $32 billion inventory.
These numbers are enormous! To have a better idea of how all of these are coordinated, it will be necessary to consider its distribution strategy as well as its supply chain problems if any. This is what this article is about.
Stick with us as we discuss these areas of Walmart’s operations.
Walmart Distribution Strategy
Walmart’s distribution strategy is extensive and spans a wide range of areas. It follows a business model of lowering or cutting down the costs out of supply chains. The ultimate goal here is to help its consumers or customers to save money.
The sheer size of its operations has drawn the interest of individuals and institutions to gain an insight into how things (especially its distribution strategy) are organized. It all started with the goal of meeting the needs of clients by providing them with the products they wanted.
Such goods reached the customers whenever and wherever they wanted them. Walmart moved further to add cost structures which were meant to create lower pricing for all of its services. Walmart’s next line of action was to create an enhanced supply chain management structure.
The result of these strategies has helped a great deal in positioning the company as a market leader.
Fewer Supply Chain Links
One of Walmart’s distribution strategies has to do with the creation of fewer supply chain links. This has been effective in enhancing efficiency while significantly lowering its distribution costs.
So, what exactly does fewer supply chain links mean?
Right from its early days as a growing company, Walmart removed some of its supply chain links. This meant that Walmart began working directly with product manufacturers which in turn helped cut costs significantly. This drastically improved the efficiency of supply chain management.
Part of its distribution strategy was the unveiling of its Vendor Managed Inventory (VMI) program. Under this program, rather than Walmart managing its inventory, this responsibility is transferred to product manufacturers. This is done in Walmart’s warehouse.
This distribution strategy has seen Walmart continuously achieve close to 100% order fulfillment on merchandise delivery. What more? It has also resulted in lower distribution costs.
Another Walmart strategy that has ensured it continues to meet and fulfill client expectations is its streamlined operations. This is seen in its partnerships with strategic partners (including product suppliers and vendors).
Some of the benefits obtained from these partnerships are strategic sourcing (from suppliers) as well as improved material flow with lower inventories using its network of global retail stores, warehouses, and suppliers.
That way, goods are easily distributed with minimal difficulties.
Walmart’s Supply Chain Problems
Despite its many successes, certain areas in its supply chain present challenges to this multinational company.
In 2013, Bloomberg featured a story about how Walmart’s supply chain problems were slowly mounting and how some improvements needed to be made.
One of the main supply chain problems resulted from certain merchandise being returned to the shelves after attempts to de-clutter its stores. This was a restocking problem that had to be fixed. Being unable to adequately replenish supplies to keep up with customer demands hampered its operations significantly.
Another problem resulting from the inability to replace supplies after the last ones have been shipped out is gaps where merchandise is missing. A major supply chain problem confronting Walmart is delay restocking.
According to reliable accounts coming from Walmart personnel, restocking can take several weeks or months in some cases.
When items are purchased from Walmart and are shipped out, there needs to be a replacement or replenishment. Anything less than this leads to a problem as customers are unable to find what they seek. This is a major supply chain problem confronting Walmart that needs to be resolved.
It is also an eye-opener for businesses dealing with or relying on supply chains to fully address the disconnect within their operations. There are factors responsible for this trend. One of them includes being able to figure out what exactly is needed by the customer.
Customer shopping habits have changed over the years. Their preferences continue to change frequently. As such, keeping up can be quite challenging for major retailers such as Walmart. One of the pressing questions that need answers is how do retailers know what customers want.
This is necessary as it plays a role in helping Walmart restock or replenish supplies. Such a conundrum will require much more than a study of customer behavior. It also requires constantly keeping up with industry trends and finding the right products to fit demands.
Volatility in the supply chain is one of Walmart’s supply chain problems. The decision of Walmart to balance its in-store logistics with its e-commerce business, although a great move results in lots of uncertainties for the success of its future operations.
Walmart is a global giant when it comes to retail and e-commerce among other things. This company has continued to expand its operations into new territories.
However, we’ve also seen that such successes come with their own challenges.
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For growing businesses, this insight is crucial to ensuring that operational structures are well laid and frequently modified to meet up with emerging trends and demands. It is also important to identify areas that need improvement and halt unproductive distribution or supply chain strategies.