The supplier standards were created in 1992 for the companies that wanted to conduct business with Wal-Mart. Suppliers, their contractors, and their subcontractors must conform to the ethical standards and business practices stated in the standards. By the end of January 2003, Wal-Mart took direct control of its factory audits for direct import merchandise. This has given Wal-Mart greater visibility to factories where merchandise is being produced. The connection that Wal-Mart has established with their suppliers helps them to get the products that their customers want efficiently. Wal-Mart changed their inventory management by developing standards and empowering their suppliers.
To answer the question we posed earlier, how can Wal-Mart effectively keep all of its stores supplied when their stores are spread all over the country? Wal-Mart operates its own private fleet which is the largest of its kind in America. They have more than 5,600 tractor-trailers in 48 states and employ more than 6,900 driver associates. They provide essential transportation that forms the foundation for Wal-Mart logistics. Along with their logistics partners they provide safe transportation services to regional, grocery and specialty distribution centers throughout the United States. On a daily basis the Wal-Mart private fleet provides on-time, responsive, and efficient transportation solutions and dedicated service to Wal-Mart stores, SAM'S Clubs and their customers across the United States. Currently, the Wal-Mart private fleet transportation network spans the continental United States and operates 36 Transportation Office Terminals in 28 states.
The logistics arm of the company is the 30,000-associate Division 7 in Bentonville, Arkansas. Division 7 manages the warehousing and transporting of everything the company sells in over 4,750 Wal-Mart and Sam's Club stores located in the United States, Canada, Mexico, and Hong Kong. In 1995 that was nearly 2 billion cases of freight worth over $85 billion. Wal-Mart distributes the freight through a network of 20 regional distribution centers across the country such as Shelbyville, Tennessee; Carrollton, Georgia; Johnstown, New York and MacClenny, Florida. Each distribution center accomplishes an incredible amount of work every day. A single distribution center can load and unload over 200 tractor-trailers daily. A sophisticated transportation control system in Bentonville, Arkansas routes tractor-trailers loaded with merchandise from vendors to the regional distribution centers. A dispatch office connected with each distribution center controls Wal-Mart's fleet of trucks that transport the merchandise from the distribution centers to the retail stores. On a big day in the fall season the distribution center network may process up to 8 million cases of freight.
The Wal-Mart truck drivers primarily move trailers loaded with merchandise from Wal-Mart distribution centers to Wal-Mart retail stores in the geographic area serviced by each particular distribution center. Wal-Mart distribution centers and their drivers treat the retail stores as the customer. Drivers report their hours of service to Wal-Mart daily. A coordinator plans the drivers' dispatches based upon available driving time and estimated travel time between the distribution center and the stores. Wal-Mart usually informs a driver of his daily dispatches upon his arrival or return to the distribution center. Usually, a driver is dispatched to take a shipment to a store and return to the distribution center with an empty trailer. The next dispatch would be from the distribution center to a store where he would spend the night. Wal-Mart stores have receiving docks for trailers loaded with merchandise. The process of unloading trailers by store personnel usually occurs at night when customer traffic is light and freight can be staged in the store aisles without inconveniencing customers. The unloading of trailers is generally scheduled two hours apart. For example, if a store receives three trailers the first trailer may be scheduled to begin unloading at midnight. The second trailer would be scheduled for unloading at 2:00 a.m., and the third trailer would be scheduled to begin unloading at 4:00 a.m. A driver must have the trailer at the dock no later than the scheduled unloading time irrespective of when he arrives at the store.
However, the main reason for Wal-mart’s success is their incorporation of new technology into their supply chain. Not only did Wal-mart pioneer the use of new technology, as they grew they demanded the implementation of technology throughout their supply chain. This technology’s specific purpose is to eliminate the need for Wal-Mart to manage its inventory. The way it works is as follows: As soon as a UPC is scanned at the register of a Wal-mart anywhere in the world, the technology driving the supply chain is started. At the point-of-sale Wal-mart’s computer databases are updated immediately to reflect a change in inventory on Wal-mart’s shelves. At the same time electronic data interchange (EDI) sends the sales data over the internet to the respective suppliers of the goods sold. These suppliers are able to keep track of their goods in Wal-mart’s stores simultaneously. The technology links between Wal-mart and its suppliers have created many advantages that Wal-Mart’s competitors do not have.
Wal-mart has agreements with their main suppliers, such as Procter and Gamble, to send goods as soon as they are needed on the shelves. The incorporation of high end technology eliminated the need to place sales orders. Not only does Wal-Mart eliminate the need to fill out and send procurement orders every week, Wal-mart does not have to monitor their own inventory levels. The suppliers have all of this information and are required to fill the orders as needed. If there is a sudden surge in sales of a particular product at a certain Wal-mart, the suppliers can reroute their trucks and goods in mid-transportation in order to satisfy demand. Also, this setup has reduced the bullwhip effect on the supply chain because the suppliers are able to monitor their manufacturing process directly with Wal-Mart’s inventory levels. Each separate company no longer has to wait to receive sales orders and build up inventory in anticipation. Technology and e-procurement have allowed just-in-time production to work better than ever.
Wal-mart’s competitive edge has come from the incorporation of new technology, and they continue to implement newer technology as it becomes available. The future of Wal-Mart’s supply chain management is Radio Frequency Identification tags (RFID). RFID tags are minuscule tags that would be imbedded in each product, emitting a radio frequency corresponding to what the product is. Essentially, it will replace the UPC. This tag adds value over the UPC because Wal-mart will no longer have to scan every product received from suppliers. A crate of products will emit its contents inside without the crate ever being opened. This will further reduce the cost of the supply chain. As soon as a product is removed from the shelves in Wal-mart, shelf mounted scanners will alert the warehouse that the shelf needs restocking. RFID tags will keep the product on the floor where consumers can easily find them. Wal-mart has the best chance of implementing RFID tags because of their strict supplier guidelines. As they integrate new technology they will keep their competitive edge. Wal-Mart is currently battling through the United States legislation system to ensure the legality of RFID tags and is simultaneously demanding that certain suppliers implement them within the coming year. In fact, Wal-Mart has begun a pilot program for the use of RFID tags in Texas. They have selected several stores in which they will test the new technology. Several of their suppliers including Procter and Gamble, the Kraft Foods Company, and the Gillette Company have agreed to put RFID tags on their products in order to facilitate this experiment.
However, Wal-Mart’s proprietary supply chain does not always receive such praise. Many critics feel that Wal-Mart has many bad effects on the economy, its suppliers, and the towns in which it operates. According to BusinessWeek writers Anthony Bianco and Wendy Zellner,
“Wal-Mart has relentlessly wrung tens of billions of dollars in cost efficiencies out of the retail supply chain. In a breakdown of savings, New England Consulting estimates that Wal-Mart saved its U.S. customers $20 billion last year alone. Factor in the price cuts other retailers must make to compete, and the total annual savings approach $100 billion. It's no wonder that economists refer to a broad "Wal-Mart effect" that has suppressed inflation and rippled productivity gains through the economy year after year.”
The “Wal-Mart Effect” is defined by www.wordspy.com as the economic effects attributable to the Wal-Mart retail chain, including local effects such as forcing smaller competitors out of business and driving down wages, and broader effects such as helping to keep inflation low and productivity high.
Clearly there are aspects of Wal-Mart that hurt society as a whole. One of the biggest groups that can be damaged or driven out of business by Wal-Mart is the suppliers in their supply chain. What most people do not know about Wal-Mart is that the price that Wal-Mart pays for its supplies is required to drop annually. The company has so much power that its pricing demands have forced suppliers to lay off employees and move operations overseas. While the customer enjoys low prices and Wal-Mart enjoys staggering profits, suppliers are sometimes forced to downsize in order to fulfill Wal-Mart’s demands.
For a supplier to sign a contract with Wal-Mart is a great accomplishment at first. Wal-Mart has become legendary for streamlining and improving their supplier’s processes. There are times when Wal-Mart even forces suppliers to revamp everything from their packaging to their computer systems. Then, once all is said and done, Wal-Mart will often tell the supplier what it will pay for its goods. This can be dangerous for the supplier if Wal-Mart’s demands for price are too low.
Despite the negative accusations of some critics, there is no doubt that Wal-Mart is doing something right. In becoming the world leader in retail stores they have managed to become the benchmark for supply chain efficiency. They have pioneered new technology and new ideas. Use of their astounding amount of capital has allowed them to turn their cutting edge supply chain ideas into functional technology that is a part of everyday transactions at Wal-Mart stores across the nation. Their tenacity at creating an efficient supply chain in order to beat the competition on price and selection has certainly paid off.
Works Cited
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