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Section A:
Learner Number: 215105052 Centre: Namibian Germany center for Logistics
Level: 5 Unit Title: Inventory
Assignment No: 1 Reference: AO/QUA/0250
Date submitted: 10/06/2021 Word 2525
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1st Submission √ 2nd Submission 3rd Submission

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Table of Contents
Introduction.................................................................................................................... 3

a) Order optimization: With this strategy, the company was able to align its
shipping and transportation points with company’s Distribution Centers...........3

b) Improved truck miles per gallon (MPG):...............................................................4

b) Consolidation of work towards more efficient system.....................................4

Pareto analysis – an overview......................................................................................4

ABC/XYZ Analysis...................................................................................................... 5

Analysis of results and their implications on Wal-Mart inventory planning policy. 7

Two more sophisticated and modern tools/techniques for the inventory

management...................................................................................................................9

a)Enterprise Resource Planning Software(ERP)......................................................9

b) Customer Relationship Management Software method(ERP)...........................9

Conclusion....................................................................................................................11

References....................................................................................................................12

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Introduction
Wal-Mart Stores, Inc. (commonly known as Wal-Mart) is a multi-national, low-cost retail
firm based in the United States. Wal-Mart has a massive supply chain that allows them
to get items and inventory from suppliers to its stores quickly. There are 242 distribution
centers (DCs) and 8,423 retail outlets in the company's global network. All supply
chains bringing products and other merchandise into the United States have passed via
Norfolk, Virginia's ports.

Wal-Mart overhauled various elements of its business in 2005, earning a competitive

edge by focusing on environmental issues.

a) Order optimization: With this strategy, the company was able to align its
shipping and transportation points with company’s Distribution Centers.

The primary goals are to reduce travel distance and fuel consumption, as well as
pollution and carbon footprint. For example, the placement of containers and boxes on
delivery vehicles can be improved. As a result, more boxes can be loaded into the
vehicle, resulting in lighter overall truck weights and lower fuel costs. This strategy tries
to improve item and load packing and stacking in the vehicle.

b) Improved truck miles per gallon (MPG):

This strategy included improved truck aerodynamics, more fuel-efficient turbine engines,
fuel-efficient road transportation tires, and long-lasting and efficient synthetic lubricants
and engine oils.

b) Consolidation of work towards more efficient system:

The corporation has established a network of center-point facilities, sometimes known

as consolidation centers that collect and transfer smaller shipments and loads from a
range of vendors to Wal-Mart shops. Before leaving for Wal-Mart locations, these truck
loads are wrapped while they are half-filled.

Pareto analysis – an overview

Pareto analysis is a strategy for inventory management that estimates the value of stock
items based on their importance to the company. In Pareto, demand, cost, and risk

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data, as well as inventories, are used to rank things. Managers are in charge of
classifying these goods based on the criteria established. This can help business
leaders, marketers, and management determine which products or services are most
important to the company's financial performance.

Vilfredo Pareto, an Italian economist, invented the Pareto Analysis. He discovered that
just about 20% of the world's wealth is concentrated in the hands of the top 20% of the
population. As a result, this viewpoint violates the ideal statement that the world should
be divided and balanced equitably. The Pareto Analysis underpins the 80/20 rule, also
known as the law of the vital few. According to Joseph Juran, approximately 80% of bad
product management quality may be traced back to 20% of quality management factors.

The Pareto Principle and its application in supply chains, inventory management, and
logistics are referred to as ABC/XYZ analysis in logistics management. To put it another
way, this rule is based on the following assumptions:

 •80% of total profit (or revenue) is earned by 20% of product or service offerings,
 And 80% of profits are generated by 20% of consumers.

The next section covers how Pareto analysis can be used in warehouse design and
operations planning to help with inventory planning. The succeeding parts provide you
with an overview of Wal-inventory Mart's management:

• Over 7000 distinct locations (approximately 7357)

• Over 2 million employees globally

According to the aforementioned facts, inventories are vital for many types of
businesses based on their business execution. As a result, in order to meet client
expectations, inventories must be managed, purchased or procured, and efficiently
used in operations.

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ABC/XYZ Analysis
The simplest unit of analysis is the Stock Keeping Unit (SKU) (SKU). A SKU is a
product code that is used in lists, invoices, and order forms to search for and identify
stock on hand. Using the Pareto principle or ABC analysis, Wal-Mart splits its inventory
SKUs into three groups or classes based on their dollar value. The corporation conducts
an ABC assessment for each area of the warehouse based on how it is used if demand
patterns vary drastically. Organizations must then identify the categories or classes of
goods (also known as SKUs) that give strategic direction and allow inventory levels to
be controlled.

The figure below depicts how Wal-Mart, for example, plots the percentage of SKUs
based on the dollar value:

Step 1:

Information on stationery, as well as its SKU value

SKU Number Description Quantity Used per Year (in thousands) Unit Value

1 Boxes 500 3

2 Cardboard (square feet) 18,000 0.02

3 Cover stock 10,000 0.75

4 Glue (gallons) 75 40

5 Inside covers 20,000 0.75

6 Reinforcing tape (meters) 3000 0.15

7 Signatures 150,000 0.45

Step 2:

Calculate each stationary item's annual dollar consumption value:

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SKU Number Description Quantity Used per Year (in thousands) Unit Value
Annual dollar usage value

1 Boxes 500 3 1,500.00

2 Cardboard (square feet) 18000 0.02 360.00

3 Cover stock 10000 0.75 7,500.00

4 Glue (gallons) 75 40 3,000.00

5 Inside covers 20000 0.05 1,000.00

6 Reinforcing tape (meters) 3000 0.15 450.00

7 Signatures 150000 0.45 67,500.00

TOTAL 81,310.00

Step: 2

Classification of SKUs in terms of Classes A, B, and C:

SKU

Number Description Quantity Used

per Year (in thousands) Unit Value Annual dollar

usage value Percentage of total value Cumulative

percentage

of total value% of SKU's Cumulative %

of SKU units Class

(A/B/C)

7 Signatures 150000 0.45 67,500.00 83.02% 83.02%

74.41% 74.41% A

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3 Cover stock 10000 0.75 7,500.00 9.22% 92.24% 4.96%
79.37% B

4 Glue (gallons) 75 40 3,000.00 3.69% 95.93% 0.04%

79.41% B

1 Boxes 500 3 1,500.00 1.84% 97.77% 0.25% 79.66%

C

5 Inside covers 20000 0.05 1,000.00 1.23% 99.00% 9.92%

8.93% 100.00% C

TOTAL 201575 81,310.00 100.00%

Step 3: Calculate the annual dollar usage for Classes A, B, and C, and classify SKUs
accordingly.

Analysis of results and their implications on Wal-Mart inventory planning policy

According to studies, 20% of Wal-Mart stationery inventory is responsible for 80% of the
whole dollar utilization value. These inventory products must be efficiently managed and
made available to customers when they are needed. The decision-making skill for
storing ABC-categorize things is summarized in the following section:

a) Because they are in high demand and have the highest monetary value, Class A
products must be stored in an automated manner.

b) Semi-automated Class B is present; somewhat dollar-generating items continue to be

in a very productive and favorable picking mode, and are in high demand among
consumers.

c) Class C products must be classified in such a way that they can be picked manually
using the least productive picking mode, resulting in a high stock level and storage
density.

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The fundamental idea behind the Pareto Analysis is to assign and/or categorize the
most popular, high-demand, high-value, and high-revenue-generating product items to a
readily accessible area inside the boundaries of the warehouse or product storage and
distribution facility. As a result, when carried out correctly, the Pareto Analysis can
assist a company in reducing journey time, transportation expenses, and improving pick
efficiency and delivery speed.

As a result, not all products and merchandise are valued similarly in terms of financial
worth in the case of Wal-Mart, and thus not all inventory levels require the same level of
inventory management attention. After applying the various categories of products, the
findings of the Pareto analysis provide beneficial information that instructs Wal-Mart to
monitor and assess how inventory and stock levels should be checked and maintained.
Since A-class products are valuable and in great demand, they necessitate increased
security monitoring and inventory control measures, as well as integration and
alignment with standardized and customized efficient warehouse management allowing
for optimal revenue value generation. However, keep in mind that these product levels
frequently account for only a small portion of the total inventory count (20 percent).

• Products and inventory in the B-class category have a lower level of criticality
inventory. For such products, standard inventory management procedures and frequent
usage checks are normally required.

• The C-class inventory category has the fewest controls, is referred to as free stock,
and necessitates forward holding.

Two more sophisticated and modern tools/techniques for the inventory

management
Modern inventory management instruments include ERP and CRM systems, which
incorporate accounting tools for management. Warehouse management is best served
by both Enterprise Resource Management and inventory technologies. To provide
predictive analysis capabilities, e-commerce can be coupled with an ERP system.

Streamlining operations and obtaining data in real-time can help companies like
Walmart maintain their competitive advantage. Furthermore, multi-national retailers can

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foresee future occurrences and plan accordingly thanks to contemporary data analysis
technology. These solutions, which include ERP and CRM software, will help these
companies manage their success in today's market.

Enterprise Resource Planning Software method (ERP)

ERP software has the ability to improve the effectiveness and efficiency of a company's
procedures. ERP software allows organizations to focus on data management by better
managing the important activities of enterprises such as Wal-Mart, warehouse,
inventory, and supply chain. Employees can use linked ERP software to update the
platform with critical information that is available in real time to all departments inside
the company. When problems develop, this integrated technology alerts firms such as
Walmart. If an issue occurs in the supply chain, ERP software may identify it and alert
all relevant sectors, including the warehouse. ERP not only keeps all departments up to
date, but it also provides them with a clear and accurate picture of their current
situation.

Customer Relationship Management Software Method (CRM)

The customer side of the system is completed with CRM software. As a result, client
loyalty management software can help businesses enhance their relationships. As a
result, a company's ability to communicate with customers, optimize procedures, and
generate profitability would be enhanced. Anyone, from salespeople to managers to
accountants, can benefit from CRM. Every encounter a company has with a customer
should be recorded by a good CRM system. Businesses may improve client interactions
and increase customer loyalty and income by effectively managing customer
information.

Despite the fact that not all CRMs are created equal, all CRM software includes
modules like marketing, sales, and service that are used by various departments inside
a company. The CRM for SYSPRO replaces the patchwork method with a single
module that has all of the necessary functionality. SYSPRO CRM allows users to share
the same data by putting people at the center and integrating company operations and

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data, providing the impression of one application rather than a large collection of pieces.
It is simple to design and integrate thanks to its architecture and convenience of use.

Both Wal-Marts ERP and CRM systems keep track of vital information. Despite the fact
that the two software systems deal with different sorts of data, they must work together
for operational efficiency. ERP and CRM provide a high return on investment, which is
one of its benefits. Both platforms collect information that assists employees in making
better decisions. A sales associate, for example, will struggle to make a good deal
without CRM and ERP. Without CRM, salespeople are more likely to overlook critical
information, perhaps resulting in the loss of a deal. Without ERP, the sale may be
missed by accounting, manufacturing, and/or warehouse divisions, creating roadblocks
and unmet customer expectations.

Customer and corporate goals can be realized with the help of ERP and CRM solutions.
Such technological systems can ensure that multiple departments that are supposed to
work together effectively do so. Within Prior to a transaction, sales professionals can
communicate with the accounting, supply, and warehouse departments. This allows
sales representatives and other relevant individuals to be alerted as soon as problems
arise. As a result of these strategic technological procedures, sales associates are
better able to close agreements and preserve brand visibility and reputation.

The above article goes into great detail on inventory management strategies that are
extensively employed by well-known global businesses. By guiding the strategic
development of operations, this technology assists businesses in projecting accurate
and timely information about existing inventory levels.

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Conclusion
Regardless of their sector, industries and organizations acknowledge the need to
promptly recognize and measure retail products and commodities as a beneficial supply
chain process for establishing long-term supply value chain operations.

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References

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Chi, Y., and Quan, Y. (2016). Service Quality Perspective and Customer
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Gong, C., Steel, R. J., Wang, Y., Sweet, M. L., Xian, B., Xu, Q., and Zhang, B. (2019).
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