walmart inventory management
With all the Just-In-Time talk and knowledge regarding better management and understanding of inventory, you'd think that average levels would be decreasing. Well, I still think that at a well-managed company, they should be, but Susan K. Lacefield, accociate editor of Logistics Management, wrote a pretty interesting article that found otherwise.
In a poll of her magazine's internet readers, she found that over 60% of companies expect to see inventory levels rising over the next year. The specifics regarding why are some pretty interesting reasons.
Most notably, Wal-Mart's JIT efforts are leaving their suppliers with more inventory. If you think about this, it makes a lot of sense. Wal-Mart does not want to hold inventory. At the same time, they do not want backorders. The only way to do this is to be able to replenish their stock at a moment's notice. So what does this do to their suppliers? According to Logistics Management, it shoots supplier's inventories straight up.
The demands that Wal-Mart places on its suppliers are incredible because of the power Wal-Mart places on its suppliers. Personally, I'm waiting for the day when Wal-Mart's suppliers form a massive supplier's union (sounds like collusion to me), but until then, good for Wal-Mart for leveraging what it can out of its suppliers. Also in the mean time, suppliers are forced to hold incredible safety stocks to make sure they can satisfy Wal- Mart's demands.
Basically, the suppliers don't have a choice in the matter. Wal-Mart's business, even with the demands on service, is too good to pass up. But, Wal-Mart is not about to have a stockout due to some supplier's inability to provide a 99% service level. Wal-Mart, like many huge companies, will not wait. Many companies are:
Wal-Mart is ordering fewer cases more frequently
For a company, this means that they can either produce smaller batches, or hold onto more inventory. Because if a company cannot produce less and faster, than they have to produce a large amount and then, instead of producing a large amount and getting rid of it all at once, they have to get rid of it slowly over time, which increases average inventory.
While Wal-Mart may be getting the good end of the deal, one thing is for sure, there's a reason suppiers put up with these demands, and it's not because the business with Wal-Mart is bad.
If you would like more informatin regarding this article, Shippers are seeing inventory rising, it can found in the October 2005 Logistics Management Vol. 44, No. 10 issue. Additionally, feel free to leave comments with a question and your email address.[1]
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Benefits of walmart inventory management
it is able to offer consumers an every-day-low-price largely in part because it is able to control its costs. The cost of its products, however, is not only a function of its efficiency or lack of it but also the efficiency/inefficiency of its suppliers. Because of the volume of products sold by Wal-Mart, it has a great influence over its suppliers and often pressures its suppliers to find ways to lower costs. Though it has a large influence over these suppliers, it is impossible for Wal-Mart to operate without their assistance, and thus it is important for Wal-Mart to maintain mutually beneficial relationships with those suppliers. Sharing benefits and costs in, instead of mandating the use of, technology implementations is an effective way for Wal-Mart to cultivate a mutually beneficial relationship with its suppliers. The novelty and frailty of certain technologies like RFID, however, sometimes preclude a timely and effective implementation of them. A technology’s benefits are felt the more its use is standardized throughout the marketplace. Once unit cost has decreased and privacy issues have been resolved, many more companies will be able to implement RFID as an effective means to improve supply chain management efficiency.[2]
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Summary :-
Wal-Mart is multifaceted: Its retail stores can
replenish tagged out-of-stock items up to three times faster
than non-tagged items, according to independent research
on Wal-Mart’s EPC initiative. Tagging also helps ensure
promotional products are delivered and correctly tagged and displayed for sales on an advertised date. And better inventory management systems help store managers avoid stockpiling excess inventory at the store.
For the manufacturer, product tagging shortens the amount of time it takes for new items to make it through the distribution channel and onto store shelves. More specifically, RFID tagging aids in proof of delivery and purchase order reconciliation, as products—even ones packed deep inside boxed pallets—can be tracked and counted at every critical point in the manufacturer’s distribution process.