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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
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.
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;
Table of Contents
1
INTRODUCTION...................................................................................6
1.1
Overview........................................................................................6
1.2
History..........................................................................................6
1.3
1.4
1.5
Importance of Inventory.......................................................................8
DISTRIBUTION SYSTEM........................................................................................ 9
2.1
Walmart Stores................................................................................................. 9
2.2
Distribution Centers......................................................................................... 10
2.3
2.3.1
2.3.2
2.3.3
2.3.4
2.3.5
2.3.6
GRS System:............................................................................................. 14
3.1.2
3.2
4
Replenishment................................................................................................ 13
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
5.2
Cross Docking................................................................................................. 19
5.3
ABC Analysis.................................................................................................. 20
5.4
Technological Advancement............................................................................... 20
6.2
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.
YEARS
WALMART LOGO
1962 - 1964
1964 - 1981
1981 - 1992
1992 - 2008
2008 - Present
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)
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
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.
Import/Redistribution Centers
Specialty Distribution Centers (export, optical labs, Pharmacy, returns Processing, Tires,
Print and mail, e-commerce)
2.3.1
2.3.2
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
2.3.3
2.3.4
2.3.5
1 print and mail distribution center and 1 star North IT distribution center.
2.3.6
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
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.
4.1.1
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.
4.1.4
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.
answer
is
Walmarts
way
of
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.
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.
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.
Linked computer networks with intranet connection to all stores and corporate offices.
Scanners
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
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.
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.