Walmart is an undoubtedly powerful company that operates both in the US and internationally. In the world of supply chain management, Walmart has been marked as a triumph of logistical and operational activities.
As a result, investors who’ve been interested in Walmart’s strategies often ask, what is Walmart’s supply chain strategy? I was curious about the same thing, so I researched the matter! Here’s what I found out!
What Is Walmart’s Supply Chain Strategy In 2023?
Walmart’s supply chain strategy refers to the activities involved in developing a distribution network with manufacturers and suppliers as of 2023. These activities have resulted in Walmart’s sustainable competitive advantages, like lower inventory costs and highly competitive prices for products and services. As such, Walmart’s supply chain strategy is considered the dominant force behind its success.
If you want more information on Walmart’s supply chain strategy, the innovations, the success of the supply chain strategy, and much more, keep reading!
How Does Walmart Use Its Supply Chain Strategy?
With $32 billion holdings in its inventory, Walmart’s supply chain’s strategy is considered the most significant contributor to its operational success.
Even though Amazon prides itself as the world’s number one retailer, Walmart has been making great competitive efforts as its challenger.
Therefore, it has gained recognition for the best supply chain strategy.
So, with a commitment to helping people save more money and live better, Walmart seeks out more efficient supply chain strategies that benefit the consumers.
For example, some of the most efficient strategies Walmart implements include:
Walmart shares its inventory data with manufacturers and suppliers to achieve better stock levels in the retail stores.
With this data, manufacturers and suppliers can deduce more accurate forecasts and ultimately prepare to meet the retailer’s needs.
For instance, Walmart’s relationship with Proctor and Gamble (P&G) has used data-sharing practices to create efficiencies at the company.
To complete this data-sharing strategy, Walmart has set up an automated re-ordering system that utilizes satellite communication to inform P&Gs companies whenever an item is needed.
Afterward, the item is delivered to a Walmart store in need or the company’s distribution center.
Efficiency In The Warehouse
Walmart warehouses use cross-docking techniques that facilitate freight entering distribution centers to conveyor belts that direct them to trailers delivered to individual stores.
This way, Walmart reduced warehouse space requirements and storage costs.
Furthermore, Walmart uses a consolidation system that facilitates the breakdown of large shipments in one region resulting in the dispersal of products across other distribution centers.
As a result, Walmart ensures that truckloads are fuller to cut down the transportation costs.
Walmart tends to deal directly with the manufacturers to eliminate supply chain intermediaries.
As one of the largest retailers in the world, Walmart has gained itself a high bargaining power and can demand wholesale prices from the manufacturers.
Then, Walmart further supports the bargaining power by ordering items in bulk due to the high sales volumes witnessed at the stores.
Once Walmart purchases items at wholesale prices, it passes the savings to the customers in honor of the “Every Day Low Cost” guarantee.
As a result, Walmart sells items at discounted prices and makes smaller margins that are recovered by the company’s sheer volume of sales.
In addition to the high bargaining power, the company has strict policies that the manufacturers and suppliers deliver in full on time (DIFOT).
So, if deliveries are not made on time, Walmart charges the vendors 3% of the cost of goods.
With a long history of using technology to improve its operations, Walmart uses the following technology to create more efficient supply chains:
- Use of smart tags that help Walmart associates track the inventory better
- The use of Radio Frequency Identification (RFID) to improve the operations of logistics
- Maintenance of a centralized database the keeps all inventory data
- A retail link database that improves communication, stocking requests, and forecasting with suppliers
- Innovative patent filings include smart shopping carts, electronic imaging devices that can detect dropping inventory levels, and an in-store drone for customer assistance
- The creation of My Productivity App for Walmart store managers to minimize backroom tasks
What Innovations Has Walmart Brought To Supply Chain Strategy?
Walmart has brought several innovations through massive investments that aim to increase the efficiency of the supply chain strategy.
For instance, the company has introduced warehouse automation in distribution centers to facilitate the delivery of department-ready pallets.
Also, warehouse automation includes deploying autonomous robots that aid in moving pallets.
Moreover, Walmart is working on digital transformations, including eCommerce and supply chain technologies, to maximize the efficiency of the supply chain strategies.
For example, the company is modernizing its Warehouse Management System (WMS) to help better labor planning and inventory control.
Finally, the company is looking forward to increasing the efficiency of the supply chain by conducting several experiments with over-the-road autonomous tracks.
Why Is Walmart Successful In Its Supply Chain Strategy?
Walmart has bagged most of its success due to the prowess of its supply chain strategy, which creates efficient business operations.
Because of its strong supply chain strategy and management, Walmart has offered competitive prices, owned a consistent inventory, and established a workforce of over 1.3 million employees.
Most importantly, the supply chain strategies have helped the company maintain low costs, which lead to the delivery of the “Every Day Low Prices” promise to the consumers.
As a result, Walmart has achieved customer conversion, customer loyalty, high sales, and increased profits.
Furthermore, Walmart’s excellent practices in its supply chain strategy have gained popularity within the retail industry, with most supply chain managers deriving inspiration for Walmart’s.
Is Walmart’s Supply Chain Strategy Sustainable?
Walmart’s supply chain strategy is considered one of the most sustainable chains globally.
According to sustainability reports, Walmart supports initiatives that lower greenhouse gas (GHG) emissions, reduce the company’s waste stream, and promotes retailing of sustainable products.
To know more, you can also see our related posts on Walmart research & development strategy, Walmart private label strategy, and Walmart’s international strategy.
For several years, Walmart’s task force has been driven by one of the world’s most efficient supply chain strategies.
Thus, the activities involved in the actualization of Walmart’s supply chain strategy have immensely contributed to the success of the giant retail store.