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WALMART CASE STUDY

INVENTORY MANAGEMENT SYSTEM

DATED: APRIL 24, 2016

TRANSMITTAL LETTER

Sir Asif Murtaza _______________


Course Coordinator (Inventory Management)
Karachi University Business School,
University of Karachi,

Respected Sir,
We are pleased to present our final project report on Walmart Inventory Management System. It is a
project on describing the current inventory management system used by Walmart, their distribution
system, processes of replenishment being used by Walmart and most importantly ways of improving
inventory management system so that they go for optimizing their revenue.
It was a pleasure learning and working on this project as it immensely broadened our perspective.

We look forward for your response about our piece of work. Your comments and suggestions
will be highly appreciated.

Sincerely Yours,
Name
Batool Iqbal
Hira Sultan
Ifrah Qais
Mahreen
Wardah

Signature

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ACKNOWLEDGEMENT

First of all we would like to thank Almighty Allah for giving us the strength and courage to
accomplish all tasks, and the will power and patience in making this report possible. We went
through certain hardships during making of this report. In spite of all of this we remained
unshaken and confident by the difficulties that hindered our efforts. We would like to thank our
course coordinator SIR ASIF, as without his support we couldnt have accomplished this task.
He guided us throughout this report.
We cannot oversee the extended help of our acquaintances who gave us all the guidance, advices
and examples in making this report possible. In the end we hope and pray that this report meets
the criteria, which we were asked to adhere to and you have a worthy time going through it.

THANK YOU.

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EXECUTIVE SUMMARY

This report is based on inventory management system of Walmart. It provides a thorough study
on Walmarts strategies of inventory management and their continuous improvement to become
the giant retail in competitive market.
The objective of this study was to analyze the main aspects that are;

Importance of Inventory management at Walmart


To research on current inventory management system of Walmart
To study Batch Replenishment Cycle of Walmart
To analyze the increase of revenue by optimizing inventory system

Walmart is an American multinational retail corporation that operates a chain of hypermarkets,


discount department stores and grocery stores. Headquartered in Bentonville, Arkansas, the
company was founded by Sam Walton in 1962 and incorporated on October 31, 1969.
Wal-Mart invested heavily in IT and communication systems to effectively track sales and
merchandise inventories in stores across the country. Walmart has 150+ distribution centers as
hubs of activity for their business. They have organized Wal-Marts distribution centers by
facility, type, state and city based on main facility types.
The key of improved sales and better customer retention in Wal-Mart is replenishment. This also
makes its relationship smoother and stronger with its suppliers. Walmart operates on GRS
System (Global replenishment system) and Continuous Replenishment Process (CRP). Walmart
carries many types of inventories to meet the customers demand. Walmart uses VMI, Cross
docking, ABC analysis to manage its inventory system. While continuous improvement is being
made through technological involvement such as RFID and Bar Coding.

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Table of Contents
1

INTRODUCTION...................................................................................6
1.1

Overview........................................................................................6

1.2

History..........................................................................................6

1.3

Evolution of Walmart logo.....................................................................7

1.4

Managing The Supply Chain The Walmart Way...........................................7

1.5

Importance of Inventory.......................................................................8

DISTRIBUTION SYSTEM........................................................................................ 9
2.1

Walmart Stores................................................................................................. 9

2.2

Distribution Centers......................................................................................... 10

2.3

Distribution Centre Layout................................................................................10

2.3.1

Regional General Merchandise Distribution Centers:.........................................11

2.3.2

Walmart Grocery and Perishables Distribution Center:.......................................11

2.3.3

Walmart Fashion Distribution Center Network:.................................................11

2.3.4

Sams Club Distribution Center Network:........................................................12

2.3.5

Wal-Mart specialty distribution center network:.................................................12

2.3.6

Walmart Center Point Distribution Centers:......................................................13

BATCH REPLENISHMENT CYCLE........................................................................13


3.1
3.1.1

GRS System:............................................................................................. 14

3.1.2

Continuous Replenishment Process (CRP):......................................................15

3.2
4

Replenishment................................................................................................ 13

How inventory can enhance performance.............................................................15

TYPES AND ROLES OF INVENTORY.....................................................................16


4.1
4.1.1

Types of inventory:........................................................................................... 16
Finished goods inventory............................................................................. 17

4.1.2
Transit inventory........................................................................................ 17
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4.1.3

Buffer inventory......................................................................................... 17

4.1.4

Anticipation inventory/Seasonal Inventory.......................................................17

INVENTORY MANAGEMENT SYSTEM AT WALMART............................................18


5.1

Vendor Management Inventory (VMI) Model........................................................18

5.2

Cross Docking................................................................................................. 19

5.3

ABC Analysis.................................................................................................. 20

5.4

Technological Advancement............................................................................... 20

PROBLEMS AND IMPROVEMENT OF INVENTORY MANAGEMENT SYSTEM.........21


6.1

Problems at Wal-Mart of Inventory Management System........................................21

6.2

Ways of Improving Inventory Management System and Optimizing the Revenue at

Walmart.................................................................................................................. 22
7

CONCLUSION..................................................................................................... 23

REFERENCES...................................................................................................... 24

1 INTRODUCTION
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1.1 Overview
Walmart is an American multinational retail corporation that operates a chain of hypermarkets,
discount department stores and grocery stores. Headquartered in Bentonville, Arkansas, the
company was founded by Sam Walton in 1962 and incorporated on October 31, 1969.
The company operates under the Walmart name in the United States and Canada. It operates as
Walmart de Mxico y Centroamrica in Mexico, as ASDA in the United Kingdom, as Seiyu in
Japan, and as Best Price in India. It has wholly owned operations in Argentina, Brazil, and
Canada. It also owns and operates the Sam's Club retail warehouses. Walmart is a family-owned
business, as the company is controlled by the Walton family. Sam Walton's heirs own over 50
percent of Walmart through their holding company, Walton Enterprises, and through their
individual holdings. It is also one of the world's most valuable companies by market value, and is
also the largest grocery retailer in the U.S. In 2015, it generated 59.8 percent of its US$288
billion sales in the U.S. from its grocery business.
The company was listed on the New York Stock Exchange in 1972. In the late 1980s and early
1990s, the company rose from a regional to a national giant. By 1988, Walmart was the most
profitable retailer in the U.S. and by October 1989, it had become the largest in terms of revenue.

1.2 History
In 1945, a businessman and former J. C. Penney employee, Sam Walton, purchased a branch of
the Ben Franklin Stores from the Butler Brothers. His primary focus was on selling products at
low prices to get higher-volume sales at a lower profit margin, portraying it as a crusade for the
consumer. He experienced setbacks, because the lease price and branch purchase were unusually
high, but he was able to find lower-cost suppliers than those used by other stores.
Some major events in the history that contributed towards the rise of Walmart are as follows:

In 1945, Sam Walton opens his first retail store in Newport, Ark.

In 1970, Wal-Mart becomes a publicly-traded company.


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1.3 Evolution of Walmart logo

YEARS

WALMART LOGO

1962 - 1964
1964 - 1981

1981 - 1992

1992 - 2008

2008 - Present

1.4 Managing The Supply Chain The Walmart Way


Walmart (WMT) has one of the largest supply chains in the world. According to Supply Chain
Digest, this retail giant stocks products made in more than 70 countries and at any given time,
operates more than 11,000 stores in 27 countries around the world, and manages an average of
$32 billion in inventory.
Walmart increasingly embraces e-commerce by making the inventory across all their warehouses
and stores available to all customers, both online and offline. By keeping smaller amounts of a
wider variety of goods at distribution centers, Wal-Mart can make products available to
customers without having to stock the items in every store. And if customers want an item in a
distribution center, it can be shipped quickly and more efficiently.
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Walmart began with the goal to provide customers with the goods they wanted whenever and
wherever they wanted them. The company then focused on developing cost structures that
allowed it to offer low everyday pricing. Walmart then concentrated on developing a more highly
structured and advanced supply chain management strategy to exploit and enhance this
competitive advantage and assume market leadership position.

1.5 Importance of Inventory

1)

Inventory in huge quantity helps Wal-Mart to become a mammoth buyer thus get stronger

negotiating power due to which it shapes the behavior of suppliers and enjoys higher price
discounts over the products.
2)

Inventory helps Wal-Mart to continue its operations smoothly while the demand

fluctuates unknowingly.
3)

Keeping inventory helps Wal-Mart to better serve customer by ensuring the availability of

the product so customer dont have to rush to another place. This is how the customer at WalMart is also retained.
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4)

Inventory increases the capacity of the store to serve more customers than usual and stay

in the business to increase their profit margins.


5)

Wal-Mart stores massive inventory in the peak seasons like Black Friday, Christmas and

holiday season to support the boost in sales and earn full profits through maintaining higher
inventory levels.
6)

Inventory helps Wal-Mart to offer timely price cuts and promotional offers. Which will

not just boost the sales of that particular product it will increase the traffic in the retail stores thus
other items will also be sold.

2 DISTRIBUTION SYSTEM
2.1 Walmart Stores
Wal-Mart has stores in 50 states and Puerto Rico offering low prices on the broadest assortment
of products through a variety of formats including the Supercenter, Discount Store and
Neighborhood Market.

Wal-Mart Supercenter
Wal-Mart began building Supercenters in 1988 and are around 182,000 square feet
employing about 300 associates. Wal-Mart Supercenters offer a one-stop shopping
experience by combining a grocery store with fresh produce, bakery, deli and dairy
products with electronics, apparel, toys and home furnishings. Most Supercenters are
open 24 hours, and may also include specialty shops such as banks, hair and nail salons,
restaurants, or vision centers.

Wal-Mart Discount Store


Since Sam Walton opened his first discount store in Rogers, Ark., in 1962, they have built
hundreds across the U.S. Smaller than a Supercenter, discount stores employ about 200
associates and offer electronics, apparel, toys, home furnishings, health and beauty aids,
hardware and more in about 106,000 square feet of open, brightly lit space.
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Wal-Mart Neighborhood Market


Walmart Neighborhood Markets were designed in 1998 as a smaller-footprint option for
communities in need of a pharmacy, affordable groceries and merchandise. Each one is
approximately 38,000 square feet and employs up to 95 associates. Walmart
Neighborhood Markets offer fresh produce, meat and dairy products, bakery and deli
items, household supplies, health and beauty aids and a pharmacy.

2.2 Distribution Centers


Walmart's 150+ distribution centers are hubs of activity for their business. Their distribution
operation is one of the largest in the world servicing stores, clubs and direct delivery to
customers. Walmart transportation has a fleet of 6,100 tractors, 61,000 trailers and more than
7,800 drivers. The distribution center network ships general merchandise, dry groceries,
perishable groceries, along with other specialty categories to our consumers daily.
There are 6 massive distribution centers, strategically located across the country and stocked to
provide rapid response to struggling communities in the event of a natural disaster.
Each distribution center is more than 1 million square feet in size and employs 600+ personnel
unloading and shipping over 200 trailers daily. Every distribution center supports 90 to 100
stores in a 150+ mile radius.

2.3 Distribution Centre Layout


Walmart has organized distribution centers by facility, type, state and city based on the following
main facility types.

Regional General Merchandise Distribution Centers.

Full-Line Grocery, Grocery And Perishables Food Distribution Centers

Import/Redistribution Centers

Fashion Distribution Centers

Sams Club Distribution Centers


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Specialty Distribution Centers (export, optical labs, Pharmacy, returns Processing, Tires,
Print and mail, e-commerce)

2.3.1

Center Point Distribution Centers

Regional General Merchandise Distribution Centers:


Walmart GMDC serves as the strategic backbone. Walmart currently operates 42 regional
general merchandise distribution centers in the US totaling 50.1 million square feet.
These massive facilities are typically within the range of 1.0-1.6 million square feet 35
clear stacking height. The average distribution center employs over 1,000 warehouse
associates. The average one-way travel distance to the stores is approximately 124 miles.
The narrower rectangular portion of the facility is typically designed for a mechanized
conveyor system that can be anywhere from 10-20miles in total length.
o Larger rectangular portion have section of the warehouse.
o Pallets are received on one side of the building and then put away into storage
racks
o GMDC complex is also used for full pallet cross docking operations.

2.3.2

Walmart Grocery and Perishables Distribution Center:


Walmart

currently

operates

43

grocery

distribution

centers

(36 full line grocery, 6 perishables and 1 dry grocery) with 35.1 million square feet. They
have 750 warehouses. The average one-way travel distance to the stores is approximately
134 miles.
This distribution center is generally L-shaped. One side of L shape is dry grocery
building forming and other side with long rectangular perishables building. Items include
dry grocery, dairy, deli meats, fresh meat, produce and frozen food. Walmart has early
adopter of vocollects voice picking technology to improve the speed and accuracy of full
case picking operations within their grocery distribution operations

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2.3.3

Walmart Fashion Distribution Center Network:


Walmart currently operates 7 fashion distribution centers and 1 smaller footwear
distribution center of approximately 7.6million square feet. The massive distribution
centers within the range of 640,000-106 million square feet and employ around 700
warehouse associates. Allocated to ticketing and distributing wearable. This was actually
Walmarts first warehouse which handled both soft lines and hard lines merchandise. This
distribution centers are generally large rectangular shaped.
Wal-Mart import distribution center network
Walmart currently operates 8 import distribution centers building in 5 locations around
the US totaling 15.5 million square feet. Facilities position to close major US ports in
Long beach, Houston, Savannah, Norfolk and Chicago. Each import center receive
containers of merchandise from Asia Pacific and the rest of the world and then
redistributes this merchandise to the companys regional general merchandise and
grocery distribution centers within its region.

2.3.4

Sams Club Distribution Center Network:


Sams club currently operates 26 distribution centers within the US totaling 2.5 million
square feet. These facilities are basically long rectangular shed-like buildings with many
dock doors. Full pallets are received on one side of the building and then a forklift driver
cross docks the pallet directly to a staged trailer assigned to a store/shipping door on the
other side of the building.

2.3.5

Wal-Mart specialty distribution center network:


Walmart also operates a number of other specialty distribution centers that service
different commodities.
Export distribution center; Walmart actually considers this to be part of their international
distribution center network.

3 optical laboratory plants.

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5pharmacy distribution centers.

1 print and mail distribution center and 1 star North IT distribution center.

6 returns centers; 6 return consolidation centers; 7 used asset centers; 1 material


consolidation center and 2 electronics refurbishment centers.

2.3.6

2 tire distribution centers

7 ecommerce fulfillment centers.

Walmart Center Point Distribution Centers:


Walmart has developed a dedicated distribution network to consolidate inbound
merchandise from suppliers for shipment to their distribution centers. The company refers
to these facilities as center point distribution centers and they are utilized to consolidate
inbound loads of merchandise with the goal to minimize the net landed cost of goods into
their distribution network.
Suppliers sending small shipments directly to Walmart many distribution center around
the country, Walmart reduces inbound freight cost by having suppliers transport their LTL
loads into nearest CP. The CP consolidates all merchandise going to the same distribution
center with the goal to achieve a full truck load inbound to every DC.
Walmart center point distribution network consists of 19 facilities. Mainly cross dock
terminal building most of which are operated by third party logistics firms.

3 BATCH REPLENISHMENT CYCLE


3.1 Replenishment
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The key of improved sales and better customer retention in Wal-Mart is replenishment. This also
makes its relationship smoother and stronger with its suppliers. And thus is the reason why WalMart has made huge investments on the implementation of new replenishment system.
3.1.1

GRS System:
This retail giant was working on (GRS) Global Replenishment System which was in test
mode so the bugs could be removed. GRS has replaced a system developed by IBM
known as Inforem.
It was said about the GRS when it was at the testing stage that it will be a better
forecasting engine and thus will allow the company to better serve their customers by
having better real time inventory in our stores. The on-shelf availability of the products as
well as number of stock outs can be reduced will be made possible due to the usage of
technology as performance driver at Wal-Mart.
Even after approaching half trillion dollars revenue Wal-Mart is concerned for its
inventory replenishment system to be more prompt and coordinated with its suppliers.
Since Wal-Mart is retail giant thus its replenishment system is of concern for every
supplier.
One of the biggest differences which suppliers will have to face is that GRS uses item
specific historical sales data to create forecast which has a big emphasis on promotional
marketing event.
GRS is a technological change which is difficult to implement thus will cause some loss
of efficiency during the transition period because some employees will be reluctant
towards this new phase.
Wal-Mart is working with the suppliers to work on GRS system because it has a forecast
accuracy of 90%. Because it works on improving JIT system as well as the suppliers
inventory
Reviews of GRS:
At the initial stage of this new replenishment system the suppliers lost their shipments
leading to high out-of-stocks at the distribution center and store because the initial
cutover process was not managed correctly.
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Since there were very few experts of GRS in the beginning working through this
transition with the replenishment manager and making sure all the different cut-over steps
are uploaded and established correctly on the front end will be the deciding factor of a
suppliers conversion success. But to face this situation suppliers complete a lead time
audit, and make sure an accurate order increment and minimum order quantity is in place
of each item distribution center. The lead time audit is a validation of processing and
transit time from supplier ship point to each Wal-Mart distribution center. The suppliers
who wanted to make an easy transition to GRS made sure they had an open line of
communication with their replenishment manager and a firm grasp of the new tighter
forecast variance expectations.
3.1.2

Continuous Replenishment Process (CRP):


Wal-Mart is also working on sharing the data with the suppliers and manufacturers of
their inventory levels on their retail outlets by using CRP system which enables the
supplier get hand on the inventory information of the retailer even before retailer places
the order for replenishment. This helps the supplier and manufacturer to plan their
replenishment shipment schedules more efficiently so their stock out reduces.
By sharing POS data with Wal-Marts suppliers it helps to improve the performance and
cost efficiency of the supplier on the other hand it also helps the highly fluctuating
inventory situation become more stable and predictable. Ultimately it makes great
contribution towards the reduction of uncertainty of demand in replenishment cycles.
The process of CRP requires three things:
(1) Actual warehouse on-hand quantity,
(2) Actual warehouse on-order quantity, and
(3) Projected sales demand from the stores.
Due to the implementation of CRP the product at the Wal-Mart inventory spends less than
4 hours and on shelf it spends less than 24 hours. This time based efficiency leads
towards the ability of Wal-Mart to receive payment from the customer even before they
have to pay their supplier and this ability takes this retail giants name into the list of
most effective supply chain like Amazon.com and Dell.
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There is one more tool which is used by Wal-Mart known as Retail Link is use to link
Wal-Marts sales data with their key vendors and helps its customers in quick
replenishment.

3.2 How inventory can enhance performance


1) Use Information Technology Resources: IT plays a vital role it helps find better ways to
connect the supplier with the retailers to meet the customer demands. It can provide latest
software solutions to reduce cost.
2) Train the Staff: Invest some time and other resources on training your staff who handles the
inventory so that they do not waste time while replenishing the inventory and handling the
product.
3) Focus on the consumer: Collect the data using technology and use that data to find customer
preferences so that restocking would become much easier for the retailer. It can also keep a track
of fast moving items as well as slow moving items and calculate the products shelf time to
increase overall supply chains productivity.
4) Employ Industry standards: Standardizing all the methods used in the inventory calculations
as well as the modes of transportation and batch sizes will help the Wal-Mart achieve its goal to
be more cost efficient.
6) Commitment to Information Sharing: Trust is an element which should be present among all
the supply chain partners thus they can share their critical POS data to help each other achieve
strategic goals.

4 TYPES AND ROLES OF INVENTORY


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4.1 Types of inventory:


There are many types of inventory that Walmart uses. Each type fulfills a certain role in the
firms inventory and supply chain. However, the following are the most common in Walmarts
practices:
1. Finished Goods Inventory
2. Transit Inventory
3. Buffer Inventory
4. Anticipation Inventory/Seasonal Inventory

4.1.1

Finished goods inventory

The finished goods inventory type is the most important in Walmarts business. Finished goods
arrive at the companys stores. These goods are stored and the inventory is replenished regularly.
Thus, the role of this type of inventory is to support Walmart store operations, where the finished
goods are sold from the inventory to the customers.

4.1.2

Transit inventory

Walmart also uses the transit inventory. This type of inventory refers to the goods that are held
while in transit i.e. goods that are being procured globally because Walmart stocks products
made in more than 70 countries. It simply means that some goods are in transit for days or months.
The role of this inventory type is to support the replenishment of the finished goods inventory in Walmart stores.

4.1.3

Buffer inventory

Walmart uses the buffer inventory type in its stores by keeping a small margin of extra goods in
case demand suddenly fluctuates. There will always be an extra stock of goods at Walmart stores.
The role of this type of inventory is to ensure the capacity of the firm to satisfy sudden increases
in demand or to meet the uncertainty.

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4.1.4

Anticipation inventory/Seasonal Inventory

Walmart also uses the anticipation inventory type. This is similar to the buffer inventory because
the company maintains extra stocks of goods to address an increase in demand. However, the
anticipation inventory type is based on seasonal changes. For example, Walmart dramatically
increases its inventory size right before and during Black Friday to satisfy the massive increase
in demand during this special shopping day. The company also uses anticipation inventory for
the Christmas season and some long holiday weekends. Walmart does not use the anticipation
inventory type during regular shopping days, which are basically the rest of the year. The role of
this inventory type is to enable the company to satisfy expected seasonal increases in demand.

5 INVENTORY MANAGEMENT SYSTEM AT WALMART


Walmart has one of the largest supply
chains in the world. The company owned
inventories worth over $51 billion as of
3Q15. So, how does the company juggle
millions of products in over 11,100 stores
in 27 countries with intense competition
in market?
The

answer

is

Walmarts

way

of

managing its inventories.


Walmarts inventory management is a key
success factor in the firms ability to grow to its current position as the leading retailer in the
world. The Giant retailer perfected the art of innovating its inventory management methods and
strategies. Considering the massive size of the firm, effective and efficient inventory
management is of critical importance. Walmart is known for cutting-edge technological
applications for its inventory management aspect.

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Walmart uses innovative and advanced technology in optimizing its inventory management
performance. There are various models or systems that Walmart uses to manage and control its
inventory system.

5.1 Vendor Management Inventory (VMI) Model


VMI is technique in which vendor is responsible for managing the inventory located at
customers facility. The vendor stocks the inventory, places replenishment orders, and arranges
its display. The vendor typically owns the inventory until it is being purchased by the customer.
Walmarts success in managing its inventory is partly due to the effective implementation of the
vendor-managed inventory model. In this model, suppliers access data from Walmarts
information system, such as data on current inventory levels and the rate at which certain goods
are sold. Suppliers decide when to send additional goods to Walmart, while the company
monitors and control the actual transit of goods from warehouses to the stores.
This system minimizes the delay in movement of inventory because supplier can directly access
data about inventory of their goods at Walmarts stores. Another benefit is the cost efficiency,
Walmart does not need to spend for extra personnel to manage each suppliers goods. Instead,
this financial and human resource expense is directly passed on to the suppliers.
As a result of this model, Walmart was able to expect close to 100% order fulfilment on
merchandise. In 1989, Wal-Mart was named Retailer of the Decade, with distribution costs
estimated at a mere 1.7% of its cost of sales far superior to competitors like Kmart (3.5%) and
Sears (5%).

5.2 Cross Docking


Walmart also uses Cross Docking technique to manage its inventory. This is also called Just-intime inventory method, it involves minimizing storage. In Walmart, the just-in-time inventory
method is applied in the form of cross-docking. In cross-docking, suppliers trucks and
Walmarts trucks meet at the companys warehouses. Goods are transferred from the suppliers
trucks directly to Walmarts trucks, which deliver the goods to the stores.
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Cross docking is a logistics practice that is the focus of Walmarts strategy to replenish inventory
efficiently. Suppliers have been delivering products to Walmarts distribution centers where the
product is cross docked and then delivered to Walmart stores. Cross docking keeps inventory and
transportation costs down, reduces transportation time, and eliminates inefficiencies.
The main benefit is the reduced inventory size. A smaller inventory is less costly to maintain.
Also, cross-docking enables Walmart to quickly deliver goods to the stores.

5.3 ABC Analysis


ABC analysis is the inventory control technique that builds up on the Paretos principle. It
involves dividing the products in to 3 categories A, B and C, where category A contains
most popular or profitable 20% of the products and category B and C contain the rest (can be
divided as per the companys preferences). While using ABC analysis, the company should focus
more on managing inventory for category-A products to ensure they fulfill the demand.

The Category A items in Walmarts inventory include the goods sold at its stores and

operations equipment, such as information systems for supply chain management and inventory
management. Items in this category are regularly monitored and recorded.

The Category B items in Walmarts inventory are the other supplies or materials used for

operations, such as maintenance equipment and office furniture. These items have moderate
monitoring, and recording accuracy is moderate.

The Category C involves the least monitored and recorded inventory items, such as

janitorial supplies and office supplies like paper. This category has the least impact on Walmarts
daily operations.

5.4 Technological Advancement


Retail link, Database system, developed by Walmart that allows the company to track sales,
manage inventory, review trends, and communicate with suppliers.

Linked computer networks with intranet connection to all stores and corporate offices.

Server and software capable of processing massive amount of data.


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Scanners

Barcodes and Radio Frequency Identification technology (RFID)

(Transmits data about a product to a scanner or data collection device)


In the case of barcodes or RFID tags (radio frequency identification technology),
Walmart was a pioneer in getting detailed product information electronically attached to
products so that such information could be relayed to its database and could inform its
inventory management system. Walmart information system or technology plays a
significant role in managing their inventory. The Giant retailer is heavily relied on linked
inventory management system and PO system to maintain their business performance.

5.4.1.1 Benefits of technological advancement:

Drastic decrease in stock out situation: From $400 million to 1.2 billion for P&G
Less labor requirement: Almost $6.34 billion yearly
Decrease in merchandise theft: Almost $2billion

6 PROBLEMS
AND
IMPROVEMENT
MANAGEMENT SYSTEM

OF

INVENTORY

6.1 Problems at Wal-Mart of Inventory Management System


In early 2013 Wal-Mart was suffering in the major two problems of inventory management
which is out-of-stock and unproductive inventory. At Walmart inventory got increased at a
greater pace than the rate of sales even as shelves remain empty. Management recognized that a
big part of the problems was too much work for employees, and it was taking steps to put some
payroll back in the stores .Several things came through loud and clear. Most of them were retail
basics, and surprisingly Wal-Mart had fallen into some of these traps.

The major problem for the stock out in Wal-Mart was that, there was not enough

employees to handle and organized the back room inventory properly. Most of the product were
not in their locater system in back room who locate the product on the right time, and if the
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product were not located on that right time it could not have come on the selling floor for the
sell.

There was also a communication gap between the store employees and home office

employees. New item information was not communicated to store employees and sent the new
product to the stores and due to the lack of knowledge their employees brought it back to the
back room from the shelves and there is point where they suffered.

Most of the suppliers complaint to Wal-Mart for not selling their product and their

product was somewhere in the store but no one has time to go through on their complaints and of
course it was very difficult to find the product in the back room.
Based above, Walmart did not accept the quickly change of new product at the right time, hence
stores faced the down fall as they could not generate enough sale with missing product and at
that time when the customer needed the product they couldnt fulfill the demand on the shorter
period of time. So at that time Wal-Mart was lying in the D category for their poor performances
and they lost their 3 billion dollar due to these problems.

6.2 Ways of Improving Inventory Management System and Optimizing the


Revenue at Walmart
After the loss of 3 billion dollar Wal-Mart executives planned to find the solution to resolve these
issue. They took the help of technology for managing the companys back room and they
adopted the earlier technology which is RFID (Radio Frequency Identification).
RFID were available in a different form of chips, these chips fixed at the different places to find
the product quickly even they also fixed the chip on the neck of dog and cats so if they need to
find the lost product they can. They also read all types of submissive tags those who require
closeness to read.
Wal-Mart takes eighteen month to implement this on their top 100 suppliers in their all pallet and
shelves and they also expected the remaining supplier also accept this technology by the end of
2006. In the starting of 2009 the picture was very clear and obvious in front of the retail observer.
They also adopt the other simple technology which is Bar Code. The bar code was also used for
the same purpose more or less. During the adoption RFID they also faced some problem that is
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RFID was not an efficient reader through liquid and metal due to some radio frequencies
distortion.
So for this reason they contacted relevant company of RFID chip maker Impinge Incorporation
to resolve the hurdles and after the discussion and working on it Wal-Mart got the effective
RFID. They almost eliminated the physical inventories management but also relied totally cut off
the payroll this was also create a problem so for the managing with their technology and along
with the payroll to manage companys back room. Along with this they made the practices to
spend each year on store physical inventories, tiding up the back room and cost was actually
counting of merchandise.
This is how Wal-Mart actually performed well for improving their inventory system and they
optimized their revenues through this robust and efficient inventory management.

7 CONCLUSION
Wal-Mart was established in 1969. Soon it became a retail giant and a worlds largest company
by revenue in America because of its success of cost leadership strategy. Wal-Mart made its
supply chain more responsive and efficient by the time to become more cost efficient for its
customers as well. Wal-Marts enormous buying power helped it shape the behavior of its
suppliers thus the suppliers synchronized their technological advancements and inventory
software with Wal-Marts system.
Wal-Mart keeps inventory stocked in its warehouses and uses cross docking technique which
helps Wal-Mart to support and absorb all the uncertainty in demand from its consumers thus all
the operations run smoothly without any glitches. To attract more customers Wal-Mart offers
price discounts on various products even according to the season so keeping inventory for WalMart is really important it also helps to retain the customer by ensuring the availability of the
product. Wal-Mart has maintained its name and reputation globally by not compromising over
quality of service they give to their customers.
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Thus Wal-Mart is a perfect example of how to use technology to maintain inventory in most
effective way possible. It focuses on renewable energy and less carbon emission so more people
are attracted to buy from Wal-Mart after knowing its a socially responsible company which is
making all the efforts to keep the environment healthy.

People think we got big by putting big stores in small towns. Really, we got big by
replacing inventory with information
Sam Walton, Founder of Walmart

8 REFERENCES
http://warlmart.blogspot.com/2009/02/introduction.html
https://www.scribd.com/doc/41970993/Introduction-to-Walmart
http://corporate.walmart.com/our-story/our-history
http://www.usanfranonline.com/resources/supply-chain-management/walmart-keys-tosuccessful-supply-chain-management
http://careers.walmart.com/career-areas/transportation-logistics-group/distribution-center/
http://www.mwpvl.com/html/walmart.html
http://www.supplychaindigital.com/logistics/3401/Part-2:-Supply-chain-alignment-the-WalMart-story
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http://panmore.com/walmart-inventory-management.

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