BAHIR DAR UNIVERSITY

BAHIR DAR INSTITUTE OF TECHNOLOGY

FACULTY OF MECHANICAL AND INDUSTRIAL
ENGINEERING

Production Engineering and Management

Production and Operations Management
WAL-MART COST LEADERSHIP FOR INVENTORY MANAGMENT

By -Seydu worku- ID BDU1302147

-Nahom Tesfa –ID BDU1302259
-Yinebeb tamiru-ID BDU1200076
Submitted to Betsha Tizazu (Ph.D)
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 Introduction
Competitiveness strategy
It is long-term action of a company which is directed
to gain competitive advantage over its rival after
evaluating their strength ,weaknesses ,opportunities
and heart in the industry and compare it with your
own.
competitiveness strategies includes:
1. Differentiation
2. Cost Leadership
3. Response

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 Cont.
Cost leadership Example
Low overhead……..Franz corrupts warehouse
type store
Effective capacity use……south west airline high
air craft utilization
Inventory management…wal-marts sophisticated
distribution system

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 Con.
Cost Leadership
It means to become low cost producer or provider in
the industry
Provide and manufacture products at low cost by
attaining economies of scale.
Cost leadership factor such efficient operation, large
distribution channel, techinological advancement and
bargaining power.

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 Cont.
Walmart is an American retail corporation established in
1962 by Sam Walton
It operates large chains of department stores and
warehouses where they sell products at discounted
prices .
It operates in several countries including the United
States, Brazil, Argentina, and Canada.
Walmarthas an overall positive effect on the economy
and lives of people despite criticisms .
It employs over 2 million workers and is the largest
private employer in the world.
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 CONT…
Developed e- commerce website in 11 conters and service
more than 260 million a week
It reaches 44 consecutive years of increasing annually
dividends

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 Wal-Mart’s problems identification
The company lost $3million in 2013 sales.
In fact Wal-Mart is suffering a double issue of
unproductive inventory and out of stock.
which leads to reduction in earnings for the quarter ending
April 30 of that year.
The first step in resolving a problem is acknowledging it,
which Wal-Mart did. But it reminds a very difficult
situation to solve mainly firm with a huge diversity in its
product

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 CONT.
 A big part of the problem was that too much to be done
by employee is since there number in the store is not
sufficient to keep the back room organized and products
stored
stores that turns quickly always lack new products and
there is absence of more frequent and smaller delivered.
Finally Wal-Mart inventory system was declared
“workable” when it was characterized by the excessive
human interventions.

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 Types of inventory at Wal-Mart
 Finished good inventory-is a number of manufactured
product in stock that are available for the customer to
purchase.
 Transit inventory is inventory that has been shipped by the
seller but has not reached the buyer destinations.
 Buffer inventory- is surplus of inventory that is stored in
warehouse in case of emergency, supply chain failure
,transportation delay, or unexpected surge in demand
 Anticipation inventory-the stock a company keeps
expecting a change in customer demand in the near future.
this stock would provide benefit to company by satisfying
their customer if there is surge in demand

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 Wal-Mart vendor-managed inventory
model
 The implementations of VMI, suppliers have access to
data related to inventory.
 Suppliers decide when to send in additional goods to
Wal-Mart while the company supervises and controls the
transit of products from warehouse to the store.
The distributor decides the timing and size of the order to
send, thus, he manages the inventory plan.

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 Wal-Mart vendor-managed inventory
model..

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 Use of this modal
 In this model, suppliers access data from the company’s
information systems, 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 controls the
actual transit of goods from warehouses to the stores..
 Walmart’s vendor-managed inventory has the benefit of
minimizing delays in the movement of inventory across the
supply chain
 suppliers can directly access current data about the
inventory of their goods at Walmart stores

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 Just in time crossing- docking in Wal-Mart
inventory management
 Walmart uses different methods to manage its inventory. Just-in-time
inventory is the application of the just-in-time (JIT) method to inventory
management. This method involves measures and activities for the operational
objective of minimizing storage and related costs.
 Is an inventory strategy aiming to increase efficiency and decrease storage by
ordering goods only when it is needed, there by jit helps reduce inventory
costs in Wal-Mart the jit inventory method is applied in the form of cross-
docking.

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 The main benefit of cross-docking at Wal-Mart's
warehouses is the minimization of inventory size
cross-docking enables Wal-Mart to quickly deliver
goods to the stores
Low inventory cost.

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 Wal-Mart uses ABC analysis
 Wal-Mart classified its item as following according to
their important
Class A. include the finished goods sold at its stores and
operations equipment, such as information systems for
supply chain management and inventory management
Class B includes maintenance equipment and office
furniture.
Class C, involves the least monitored and recorded
inventory items. This category has the least impact on
the company’s daily retail operations.

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 Uses of inventory technology in Wal-Mart
1.company develop retail link mammoth Bentonville
database it is an online hub containing information and
reports used by suppliers to control their business with
Wal-Mart
2. Wal-Mart's stared using (radio frequency identification.)
it is a technology that uses electronic tags placed on
items. Through the mean of radio wave, this numerical
cods scanned to track the movement of each inventory in
the supply

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 Cont.
3. wal-mart started in implementing smart tags scan by a
hand held scanner that provides employee with
immediate information about the inventory level,
4.wal-Mart art launched collaboration with P and G form
the inventory in its stores and creates automated re
ordering system relating all computers between p and g
factory through a satellite communication system.
5.wal marts is also using drowns to efficiently manage in
its massive war house having a size of 21 football field
operation
6. An innovative high efficiency label scanner is also Bing
implemented at the distribution center. It scans up to 700
units per hour, more than twice the 200 to 300 units a
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worker scan the same time.
 wal-Mart arts measures of inventory
performance
Inventory turn over -the rate at which Walmart’s inventory is
sold out and replenished.It is a measure of the cost of
keeping each item in stock.
Store out rate- the frequency at which Walmart’s inventory
becomes inadequate in satisfying demand.
Inventory size -measures reflect the cost minimization
objectives linked to Wal-Mart's cost leadership generic
competitive strategy, which requires low costs to maintain
attractive low selling prices.

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 Reference
 F.Robert jacobs
 Jesse H.Jones 10th edithion
 Rechard B.Chase 11th edithion
 Youtube
 Abernathy, F. H., Dunlop, J. T., Hammond, J. H., & Weil, D.
(2001). Control Your Inventory in a World of Lean Retailing. Harvard
Business School.
 Agrawal, N., & Smith, S. A. (2013). Optimal inventory management for a retail chain
with diverse store demands. European Journal of Operational Research, 225(3), 393-
403.
 Brea-Solis, H., Casadesus-Masanell, R., & Grifell-Tatje, E. (2012). Business Model
Evaluation: Quantifying Walmart’s Sources of Advantage. Harvard Business School.
 Bromiley, P., & Rau, D. (2016). Operations management and the resource based
view: Another view. Journal of Operations Management, 41, 95-106.

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 THANK YOU

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