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Walmart: Leading the Way With a Important Notice: Any

Successful Supply Chain references to products

Management System or people is for

informational purposes
By Chad Rubin | February 14th, 2018 | eCommerce Best Practices,
only and does not
eCommerce News
re ect an endorsement
by Skubana or the
Walmart is a dominating retail force. author of such
products or people, or
Founded in 1962 by brothers Sam and James “Bud”
an indication that the
Walton, Walmart has since become the largest publicly
product mentioned is
owned retail company in the world.
compatible with
Skubana’s products.
Yes. The largest.
All opinions
In the United States alone, this company operates under
expressed here are
various banners, such as Walmart discount stores,
those of the
Walmart Supercenters, Walmart Neighborhood Markets,
individual author
and Sam’s Club warehouse membership clubs.
and are not the
opinions of Skubana.
Not to mention the 59 other banners it operates under
internationally.

There are nearly 6,300 international Walmarts spanning Popular Recent

the globe, and over 11,700 retail units, all of which
operate in 28 di erent countries. My 1-
Day
And don’t forget the eCommerce space they control as Amazon
well. Suspen
&
What
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Employing 2.3 million associates worldwide, with 1.5 to Do

million of those residing in the United States alone, it is if
not di cult to see that this retailer is a powerhouse. You’re
Next
February 6th, 2017
Adding to that, this retail giant hit $1 billion dollars in
sales, a mere 17 years after opening its doors, which was
the fastest billion dollar milestone to hit in the United The
States at the time. Best
Kept
And let’s not forget that in 2017, Walmart grossed nearly Secrets
$486 billion dollars, netting $13.64 billion dollars in pure of
pro t. Amazon
Private
While all of this may be surprising to those unaware of Labelin
the power Walmart has in the retail world, these startling Initiativ
statistics beg bigger, more comprehensive questions. Amazon
April 20th, 2016

How did Walmart achieve such quick success?

And how does it continue to thrive as one of the number one How to Get
Your Slice of
retails stores in the world, despite the increase in
Amazon’s
competition?
Billion
Dollar Online
How Walmart is Grocery Market
July 9th, 2015

Achieving Such Grand

Recharg
Success Growth
With a
In order to follow what founder Sam Walton wanted all Custom
Retentio
along, which was to “help people save money so they
Strategy
could live better,” Walmart has had to master the art of
September 19th,
supply chain management. 2016

And it has done just that.

The
In fact, it is hard to think of another company that Ultimat
manages inventory and generates sales quite like Guide
Walmart does. to High
Perform
And, by ne-tuning the way it handles inventory, from Amazon
the purchase process all the way to its spot on the shelf, Sponso
Ad PPC
Walmart has enabled itself to not only become a highly
Campai

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pro table business, but one that others strive to December 5th, 2016

emulate.

That’s right, everyone wants to be like Walmart.

In fact, James Crowell, Director of the Supply Chain

Management Research Center at the Walton College of
Business is quoted saying, “I don’t believe there is a
university in the world that doesn’t talk about Walmart
and the supply chain,” for the mere fact that it garners
such respect for what it’s accomplishing.

And it’s true.

Holding rm to its core purpose all these years, Walmart

has continued to streamline its supply chain process so
that customers can come in, nd what they are looking
for at the lowest price possible, and go home.

Nothing more, nothing less.

And despite growing into an internationally known

brand, Walmart has exceeded what other companies
dream to achieve by remaining steadfast in their goal to
always save the customer money rst.

By focusing on how it can save people money, rather

than how it can improve its pro t-and-loss-statements
(P&Ls), the way Walmart does things has an unusual
e ect on the average business person.

Because after all, focusing on pro ts and losses is the key to

success in the business world right?

Not for Walmart it isn’t.

And look how successful they are.

The Supply Chain

Management System
Walmart operates under one of the most technologically
advanced, and e cient, supply chain management
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systems in existence.

It has pioneered ways to master distribution practices

and manage inventory electronically so that it knows at
all times what products are needed, how much products
are needed, and when these products are needed.

This in turn guarantees that Walmart customers always

get what they want every time they step foot in a
Walmart store, while keeping overhead costs to a
minimum.

And, if you run a retail store of any kind, you should take
note of what makes Walmart so great.

The Supply Chain Link

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In the beginning, Walmart founder Sam Walton knew

what it would take to get products on the shelves of his
store at low prices.

In fact, he was known for purchasing bulk merchandise

on his own and having it transported directly to his
stores for resale.

Talk about taking the initiative.

Over time, however, as the company began to grow and

demands for products increased, Walmart had to
develop a better system for stocking products on its
shelves.

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In the 1980s, Walmart e ectively cut out the middleman

and began dealing with manufacturers directly so that it
could cut costs and more e ciently manage the supply
chain.

All while keeping consumer prices low.

In short, Walmart went straight to the source and o ered

guaranteed, consistent business to vendors themselves
in exchange for low, wholesale prices.

And, because of this guarantee, and the fact that

Walmart wanted bulk merchandise, manufacturers were
on board.

But Walmart wanted to do better.

A lot better.

So it went on to implement an electronically backed

vendor managed inventory (VMI) system, so suppliers
could be responsible for managing their own inventory
in Walmart warehouses.

Sending data to centralized databases of stock inventory,

manufacturers were able to tell exactly when goods were
getting low and when to send more to Walmart stores.

This took a load of work o Walmart itself, reduced the

problems that came with managing inventory from
multiple suppliers, and nearly guaranteed items were in
stock at all times.

It also took a sizable link out of the supply chain making

it more e cient, and cost e ective.

And once again, Walmart continued to grow and make

more money, even while passing a lot of the work to
others.

Vendors were able to electronically monitor the

inventory of their goods, determine when stock is low,
and send additional goods to Walmart stores that need
it.

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In the meantime, Walmart monitored the transit of these

goods from their warehouses to the stores.

But that’s all.

In e ect, Walmart delegated the di cult and costly

expense of inventory control onto those responsible for
lling its shelves.

And it worked.

Since suppliers valued the long term relationship they

had formed with the retail giant, and of course wanted to
make a pro t for themselves, they happily managed
their own inventory.

Inventory Types at
Walmart
Walmart utilizes various types of inventory to ful ll roles
within the supply chain.

However, there are 4 main types of inventory adding to

their success that all businesses should take note of.

Finished goods are the main type of inventory used by

Walmart and make the biggest impact on its overall
success.

These goods arrive at Walmart stores directly, are

replenished regularly, and are always on hand in
Walmart stores for consumers to buy.

Next is transit inventory.

Goods that are held in transit for long periods of time

eventually arrive at Walmart stores needing to replenish
the furnished goods mentioned above.

Bu er inventory at Walmart stores is designed for those

unexpected times some goods are suddenly in high
demand and running low.

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In an e ort to maintain stocked shelves, this bu er

inventory is on hand for immediate re-shelving.

And last but not least, Walmart also uses what is coined
anticipation inventory.

Much like bu er inventory, this type of inventory is on

hand, but only for seasonal changes, and is ready to
address increased demand when the time comes.

For example, Black Friday and the following holiday

season is when anticipation inventory is most likely on
hand.

Because of this innovative way of handling inventory, in

addition to the successful VMI system in place, Walmart
was able to secure itself as Retailer of the Decade in
1989, and even pass Kmart as the nation’s most
pro table retailer

At the time, Walmart distribution costs were 1.7% of its

costs of sales, which shattered even Kmart (3.5%) and
Sears (5%), both household retail names at the time..

Walmart was well on its way to making history as the

most successful retailer in the world.

Cross Docking
Central to Walmart’s inventory replenishment and
distribution strategies is a process called cross docking.

Let me explain.

Download The Transcript That Reveals

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One of the biggest obstacles retailers face when dealing

with large amounts of inventory is storage of that
inventory.

When inventory is not sitting on the shelves at a retail

store, it has to be stored somewhere, and at a cost.
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And without an e cient inventory management system

in place, you run the risk of being overstocked and
paying for storage of too much inventory.

In response, Walmart developed a way to minimize these

storage needs (and prevent the bullwhip e ect) by
implementing the concept of cross docking into their
distribution practices.

Suppliers with goods destined for Walmart stores based

on inventory needs simply upload their products to
Walmart delivery trailers.

They are then in turn brought directly to Walmart

warehouses where they are repackaged and
immediately distributed without sitting in inventory.

Sometimes, as is the case with P&G products, at Walmart

distribution centers P&G trucks with products unload
directly onto trucks headed straight for Walmart stores.

There is zero storage of these products – ever.

This eliminates the need for any in between storage (or

having to store the product at the stores themselves),
reduces the damage done to products, especially if
perishable, and of course, drives down overhead costs.

It also ensures that only the inventory that is needed at

stores is delivered, because vendors know what products
are needed (thanks to the VMI system) and restock their
products only when necessary.

This money saved is then turned over to the customer by

way of low, low prices.

Cross docking also manages to reduce transportation

time (since each distribution warehouse is within 130 miles
of any Walmart store) and allows Walmart to negotiate
better pricing margins with vendors.

Why you ask?

Because without the need to store products as inventory

at Walmart stores themselves, you have more shelf
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space to o er.

And, with increased shelf space comes the ability to buy

in higher volumes, at lower prices.

It’s a win-win for both parties – Walmart reduces the cost

of doing business with vendors, and vendors sell more
product.

Use of Advanced
Technology

Since its inception, Walmart has been utilizing the power

of technology to streamline their supply chain process
and give customers the lowest prices possible on
products and services.

And behind it all was the idea that collaboration was the
key to success.

In 1975, Walmart became the rst retail store to utilize

the power of a computer system.

Seems crazy now right?

But at the time, this was revolutionary.

Capturing POS data for inventory means, creating

income statements for stores, and even linking to

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distribution warehouses for management of supplier

inventory was unheard of at the time.

But Walmart did it.

And they didn’t stop there.

In the early 80s, Walmart began using barcodes to scan

POS data.

With these new barcodes, Walmart employees would

scan products and send the data to a large database to
be used for inventory means.

By the late 80s, Walmart had its own satellite system in

place (which was the largest private satellite system in the
U.S.) that allowed for two-way voice and data
communication between all segments of the stores.

It also included one-way video communication.

And, to think that video consumption is at an all-time

high nowadays, and is used in 63% of marketing
campaigns of retailers worldwide rather than just for
communication means.

This technology even connected Walmart to CIO Online,

a website dedicated to CIOs of companies.

Again with the collaboration e orts.

By the 1990s, Walmart wanted to strengthen the

teamwork forged with suppliers and make inventory
control even tighter.

Deploying the Retail Link system, which connected

expert analysts forecasting supplier demands, real-time
POS sales data, and the information at distribution
centers, suppliers were better able to tell which products
they needed to have sent to Walmart stores to satisfy
consumers.

This was Walmart’s ideal way of monitoring the sales of

goods and making sure inventory was replenished
immediately when low.

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Not convinced this works?

Know that within the rst 6 months of deploying this

process, sales grew by $8.5 million dollars.

That’s a lot of dough.

And by the end of the 1990s, nearly 90% of all Walmart

suppliers were doing business using the exclusive Retail
Link system.

And remember the barcode system Walmart enacted in the

early 80s?

It was soon replaced with RFID technology so employees

no longer had to manually scan barcodes of products
coming in to stores or warehouses.

Again, this saved time and money and made Walmart

the retail juggernaut that it is.

Plus, it prevented items from going out of stock by nearly

16%, tracked consumer behavior in real time, and helped
Walmart further develop its already extensive technology
management system.

In fact, Linda Dillman, executive vice president and CIO

for Wal-Mart at the time said it best:

Using RFID technology provides “…evidence that EPCs

[electronic product codes] increase how often we put
products in the hands of customers who want to buy
them.”

And the zinger is, because Walmart spent decades

honing this entire process, using advanced technology as
it came out, no other retail giant has been able to
replicate the system entirely.

Current Inventory
Management Processes

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Despite having an extensive, and successful, supply

management chain system in place for years, Walmart
understands that it is not immune to change.

We live in a digital age and apps are something that most

people understand.

Plus, apps are great for streamlining anything you want

to get done – including inventory management.

That’s why Walmart released an app called My

Productivity in 2016.

In response to the challenges it was facing in the

backroom storage areas of its brick-and-mortar shops,
Walmart put technology directly into the hands of
employees to get things done more e ectively.

With this app, available to Walmart managers, a simple

click on a smartphone set things into motion.

Accessing real-time data and sales trends, restocking

speci c items, answering customer questions, and even
responding to customer surveys was now possible.

Plus, there was no longer a need to leave the oor or

sign in to separate systems to access sales, warehouse,
or replenishment data.

All of this and more was now at the ngertips of every in-
store manager.

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And the best part?

It eliminated the thousands of hours spent in back rooms

organizing and tracking down inventory that Walmart
employees were logging each year.

Yes, thousands.

With this advanced technology, Walmart was e ectively

able to put their employees back on the front line to
provide better service to the customer.

Not to mention, it boosted company productivity, made

inventory management more, well, manageable, and
gave employees the chance to sell more.

It is examples like this, and Walmart’s willingness to

change as the retail space changes, that makes them the
giant that they are.

In fact, it makes Walmart nearly untouchable.

As Sam Walton himself said, “People think we got big by

putting big stores in small towns.  Really, we got big by
replacing inventory with information.”

This, paired with the solidi ed idea that teamwork and

collaboration is the best way to make something as large
as a globally recognized retail store operate at its best is
what makes Walmart the leading example of what all
retailers should be striving to do.

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