Inventory Problem Case Study of Wal-Mart

Question: Discuss about theInventory Problemfor Case Study of Wal-Mart. Answer: Introduction Wal-Mart has continuously experienced an inventory management problem leading to massive losses. For example, in 2013, the company reported a loss of $3 billion in sales because out of stock merchandise, yet its inventory was growing at the fastest rate than the expected sales rate (Rosenblum, 2014). Although the company has identified high expected tax rates, economically challenged customer base, and poor weather, the inventory problem is the primary that continues to reduce the earnings for the company. In fact, the company has failed to undertake swift restocking of its shelves. For example, the inventory in the backroom no longer moves as expected because the process is slow thus causing undue shrinkages and out-of-stocks (Peterson, 2015). The problem forms the basis of this study based on the operations management concepts. Significance of the Problem The problem is costing the company significantly because customers can fail to find their desired products on the shelves. Given the current competitive pressure in the market, Wal-Mart might lose its market share to the rivals. In fact, the companys revenues will fall beyond control thus leading to an unexpected bullwhip effect. Solutions The company has never sat back but has initiated various strategies to overcome the inventory management challenges. Wal-Marts supply innovation program was to ensure that the company removes some chain links. By 1980s, it began working with its manufacturers directly so as to minimize costs and manage the supply chain efficiently. Through the Vendor Managed Inventory initiative, the company ensured its manufacturers were responsible for the product management in the Wal-Marts warehouses. To this effect, Wal-Mart anticipated a close to 100 percent order fulfillment (Chao, 2015). Strategic Vendor Partnerships The company initiated a strategic sourcing so as to find products offered at best process from its suppliers thus allowed Wal-Mart to meet the market demand. Wal-Mart further established strategic partnerships with various vendors and offered them the potential for high and long-term volume purchases at the lowest possible prices (Peterson, 2015). The firm opted to streamline its supply chain management by establishing a relationship and communication networks with its suppliers thus improved the material flow with the least inventories. Shin and Tucci (2015) affirmed that the network of warehouses, global suppliers, and retail stores behave like a single firm. Therefore, the company became successful because of the active collaboration. Cross Docking Wal-Mart has also used cross docking as an inventory strategy to replenish its inventory efficiently. The logistics practice ensured there is a direct transfer of materials from outbound or inbound truck trailers without using any extra storage. With this inventory tactics, it is possible for the firm to unload products from any incoming trailer truck and load the materials into the outbound rail cars, trailers, and trucks without using any storage space. The global suppliers have delivered materials to the companys distribution centers, where these items got cross-docked and delivered to the Wal-Marts stores (Chao, 2015). The cross-docking strategy has kept the transportation and inventory costs down, eliminated inefficiencies, and reduced shipping time. Wal-Mart has the truck fleet, in particular, the non-unionized drivers to help in delivering products to the firms distribution centers continuously as reported by Wulfraat (2014). At these centers, the goods get stored, repackaged and distributed to the destination points without sitting in the warehouses. Materials cross from a loading dock to the other in less than 24 hours (Shin Tucci, 2015). The firms trucks would return empty backhaul with the unsold merchandise. Through the cross docking, goods get routed from the suppliers to the companys warehouses. From this point, the products get shipped to the stores without spending extra time in the stores. The strategy has helped the organization to reduce the costs thus pass the savings on the customers by offering a highly competitive pricing. Technology Wal-Mart has remained faithful to its clients by pursuing low consumer prices by embracing technology thus become an innovator regarding the stores tracking of inventory and restocking the shelves. Technology is critical in the management of supply chain (Stevenson Sum, 2014). The company has established the largest IT infrastructure in the modern world. With its network design and state-of-the-art technology, Wal-Mart has managed to forecast its demand, create highly efficient transportation routes, track and predict inventory needs, and manage customer response logistics accurately (Shin Tucci, 2015). For instance, the organization introduced the Universal Product Code bar that transmitted the store level information immediately. The bar codes enhanced the collection and analysis of the information through the Retail Link database. The global satellite system helped the Retail Link to connect to the firms analysts who forecasted Wal-Marts supplier demands to the network. The Reta il Links displaced the real-time sales data to the distribution centers thus enhancing the management of the inventory based on the cash registers data (Wulfraat, 2014). The manufacturers and suppliers managed to synchronize the demand projections through their collaborative planning, forecast, and replenishment policy as every Retail Link is connected using technology and captures the information from the central database, satellite network, and store-level point-of-sale systems (Wal-Mart, 2013). Wal-Mart has become an innovative company because it can share information with its partners. Based on the Wal-Marts approach, the company can receive information through friendly cooperation. The company managed to track customer demand and purchases thus allowing them to effectively pull merchandise to stores than push for the items onto shelves. Wal-Mart has incessantly used radio frequency identification tags (RFID) that rely on the numerical codes thus track pallets from a distance within the supply chain. Wal-Mart and its suppliers have to handle the inventory by encouraging providers in adopting the RFID technology (Kosasi, Kom, Saragih, 2014). The company further introduced smart tags that were read by the handheld scanners, thus allowing the employees to learn about the need to replace the items onto the shelves and stock the inventory frequently. Since the introduction of the RFID into its supply chain, the company reported a 16 percent reduction in the out-of-stocks (Rosenblum, 2014). With the electronic product codes enhanced the replenishment of the outputs. By networking with its suppliers, the business maintained its stores and created automated reordering systems and linked them to the PG factory using the satellite communication system. It remained the responsibility of PG to deliver the items to the firms distribution center or the retail store directly. Application of the Techniques to Handle the Problem The scope of operations management entails scheduling forecasting, capacity planning, managing inventories, and locating facilities. It also considers assuring quality, supply chain management, and motivating and training workers. These strategies are relevant in addressing the inventory problem Wal-Mart is experiencing (Banjo, 2013). Given the current trends experienced in business, it would be prudent for the organization to value outsourcing, agility, and ethical behavior, management of supply chains, management technology, and globalization. The emergence of e-commerce, e-business, and the Internet provide value to Wal-Mart (Wal-Mart, 2013). RFID Technologies Many retail stores experience inventory problems due to bullwhip effects and lacking real-time data and product for retail stores. The issue affects the product receiving labor costs, incorrect inventory, and replenishment, and return frauds (Chao, 2015). The RFID is a new technology that offers answers to the inventory problems as it offers companies an opportunity to become efficient and fast in their supply chain management. With this technology, it has become possible to increase responsiveness to market dynamics and allow partners to collaborate efficiently. Wal-Mart has invested in the technology to improve its efficiency and manage the supply chain through visibility and accurately. The company has further reduced the costs of inefficient inventory decisions by employing just-in-time technology. RFID technologies automate the supply chain because its tags identify any product and capture all relevant information regarding the item. With the help of an electronic reader, the RFID tags are read automatically (Shin Eksioglu, 2014). The aspects of vendor-managed inventory are also relevant in addressing the problem. RFID enhances the vendor-managed inventory but affects the CPFR (Collaborative Planning, Forecasting, and Replenishment). Kosasi et al. (2014) argued that the suppliers use the CPFR data to design, predict, and coordinate with the supply chain partners. As such, the members of the chain would get accurate information and materials as needed. Application of Human Governance Wal-Marts social corporate management is critical to its success because it promises a low pricing strategy to the consumers. It understands that they only way to offer a competitive pricing is by achieving an operational efficiency to bring the savings for clients. Apart from employing RFID technologies, the company defined the RFID standards. Recently, the executives acknowledged the significance of the technology in reducing the excess inventory and slashing out-of-stock practices. The technology can rarely operate like a robot. It requires the input of the employees and managers. Wal-Mart (2013) reported that it has continuously trained the workforce on how to handle the new technology in improving the efficiency. Conclusion Wal-Mart is the leading retail store company in the modern world. It has introduced the RFID technologies to improve its supply chain management. Based on this article, it is evident that the companys chain seems to hold more inventories at the distribution centers than the shelves or in store back rooms. Despite the firms resource base, it has remained skeptical regarding its strategy to fix out-of-stock issues. Nonetheless, the company has initiated various strategies to restore its supply chain management by introducing technologies. The aspects of operations management concepts have been applied in addressing the problem including the incorporation of the executives and employees in the new initiative. References Banjo, S. (2013, June 19). Wal-Marts E-stumble with Amazon. The Wall Street Journal. Retrieved from https://online.wsj.com/news/articles/SB10001424127887323566804578553301017702818. Chao, L. (2015, Aug 18). Wal-Mart reins back inventory in a revamped supply chain. The Wall Street Journal. 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Wal-Marts dilemma in the 21st century: Sales growth vs. inventory growth. The Journal of Applied Business Research, 31(1), 37-46. Stevenson, W. J., Sum, C. C. (2014). Operations management. New York, NY: McGraw-Hill/Irwin. Wal-Mart. (2013). 2013 Annual report: Wal-Mart. Retrieved from https://c46b2bcc0db5865f5a76-91c2ff8eba65983a1c33d367b8503d02.r78.cf2.rackcdn.com/88/2d/4fdf67184a359fdef07b1c3f4732/2013-annual-report-for-walmart-stores-inc_130221024708579502.pdf. Wulfraat, M. (2014). The Wal-Mart Distribution Center Network in the United States. Retrieved from https://www.mwpvl.com/html/walmart.html.