7-2 Final Project Supply Chain Evaluation PDF

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Final milestone . Was graded as 100%...

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WALMART SUPPLY CHAIN TRANSPORTATION

7-2 Final Project: Supply Chain Evaluation Southern New Hampshire University Jonathon Wilburn

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3-2 Final Project Milestone One: Demand Forecasting and Sourcing

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Demand Forecasting Walmart is known as one of the world’s largest retailers. As such they try to find new and innovative ways to improve their operations. In 1996, Walmart decided to open a in Shenzhen, Guangdong Province. In 2015, the company’s presence has grown to over 416 retail stores throughout China (“Walmart China”, 2015). Walmart suppliers started out using a ship-direct-tostore model. They found this method to not only to be inefficient but impractical for the suppliers and Walmart. Walmart started having the suppliers ship full truckloads to Walmart’s distribution centers. The shipments were then consolidated and shipped to the stores based on what each store projected needs. Doing this way significantly increased value by reducing the overall supply chain costs. While this helped with non-perishable goods, this did not always work for the perishable items heading to the stores. So, in 2015 Walmart China starting using separate for their perishable and non-perishable goods. Walmart China had eleven perishable distribution centers and nine non-perishable goods distribution centers. The number of items shipped through the non-perishable distribution centers made up 85 percent of the total of item shipped to the distribution centers. Walmart uses a flow-through design that utilizes cross docking to bypass storing products. Cross docking is where the inbound shipments are unloaded directly into outbound trailers at distribution centers and sent to the different stores. Walmart China started reducing the number of regional buying offices and suppliers for perishable and non-perishable products by centralization of the buying organizations. They also significantly improved the amount shipped to each distribution center network by strengthening the capacity and capabilities of the distribution centers network.

3-2 Final Project Milestone One: Demand Forecasting and Sourcing Walmart is constantly attempting to evolve its operations to improve consumer satisfaction. The customers of Walmart China also wish to have low cost products and to have easy access to products at any time. To help with this, Walmart has 416 retail stores in over 166 cities in China. They also created an online-to-offline platform called “Walmart to Go” in Shenzhen. This platform allows consumers to place orders for pick-up or home delivery at the consumers convenience. To continue to be successful, Walmart’s various suppliers must be able to meet the high demand of the consumers. To aid in this, Walmart started using a strategic sourcing strategy to find products at the best possible price from suppliers. While they want to find the best prices, the suppliers must be able to keep up with demand. They must also be able to adhere to Walmart’s strict schedules to be highly adaptable. The supplier must also be willing to adjust their shipping models to meet the demand of Walmart and their customers. Sourcing Walmart China has twenty-nine autonomous buying offices across the country, with a serviceable dry network made up of five distribution centers which service all the stores (“Walmart China”, 2015). Between 2012 and 2015, Walmart changed their sourcing system by switching to twenty distribution centers located throughout different cities. The 20 distribution centers were made up of nine dry centers and eleven perishable centers, with the perishable centers being run by 3PL, which saved Walmart capital but at the same time cost them as capacity was limited (“Walmart China”, 2015). To help optimize Walmart’s sourcing network, Walmart China should upgrade their ordering system. This would help them to increase orders and make it easier to track stock

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3-2 Final Project Milestone One: Demand Forecasting and Sourcing

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delivery. They also need to improve inventory methods to better track in-store stock, preventing the store form having empty shelves at their stores. Transportation Within the Walmart China case study some constraints within the transportation network stood out. The first constraint seen has to do with the lack of a proper transportation infrastructure in China. Inside the cities they have a good infrastructure but once outside the cities the big cities like Shanghai, Beijing, Guangzhou, and Shenzhen infrastructure starts to break down. This makes transporting goods outside of the cities exceedingly difficult. This creates a huge impact because it impacts what goods can and cannot be shipped to the rural Chinese areas. Having a poor infrastructure makes it hard for Walmart to generate the same profits in China that they would normally see in other developed countries. Another constraint seen within the Walmart China transportation network is that they rely heavily on third party logistics companies to handle the eleven perishable items operations. This limits their overall capacity because they have to share warehouse space with other users of that same third-party logistics company. This has a tremendous impact on Walmart’s supply chain it limits the amount of perishable item that Walmart can have at its stores. While Walmart China uses third-party logistics company for the perishable goods, they use their own trucks to deliver the dry and non- perishable goods from their twenty distribution centers to their stores. Using the Walmart distribution centers allows the suppliers the ability to ship full truckloads, full container loads, or ore economic order quantities to the distribution centers. The nine non-perishable goods distribution centers primarily use the cross-docking method, which accounts for 85 percent of the total. The eleven perishable distribution centers use staple stock, which accounts for the remaining 15 percent. With cross docking, the shipments

3-2 Final Project Milestone One: Demand Forecasting and Sourcing

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coming into the distribution centers are unloaded and loaded directly onto outbound trucks for same day delivery to the stores. With staple stock method, the items coming into the distribution centers are stored temporarily and shipped out based on each store’s individual needs. Walmart China uses the correct modes of transportation based on time, cost, and quantity. Using the cross-docking method in the nine dry distribution centers minimizes the waste of time and cost since the shipments are received and shipped out on the same day. This helps to decrease overall distribution costs. The cross-dock flow costs about $7.2 million. With the staple stock flow, the overall distribution costs are higher since the warehouse must store inventory. The staple stock costs about $11.8 million but it allows the capability to hold stock and allows for quick reaction to increases in sales and supports volume buying. To improve the transportation network, Walmart China should consider increasing their investment in china’s transportation infrastructure. This investment should be made in the rural locations to make transporting goods on the ground more efficient. This would cost a tremendous amount of money in the beginning but over time Walmart should begin to see an increase in their revenue from the stores outside of the major Chinese. Also, Walmart China could improve their transportation network is eliminate the use of third part logistics companies to handle their perishable goods. If they create their own system for shipping and storing their perishable goods, Walmart should be able to cut costs by taking full control of their transportation network. Warehousing Walmart China currently uses two different warehousing methods, staple stock and crossdocking. The staple stock system allows storage for the short-term perishable products and items are shipped out based on each store’s individual needs. Scheduling with the staple stock system is easy since it allows the company to pick for stores that are further away and dispatch those

3-2 Final Project Milestone One: Demand Forecasting and Sourcing

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trucks first. With the cross-dock system, a smaller warehouse can be used since the goods are unloaded and then directly loaded onto trucks for same day shipments to the stores. The advantage of crossdocking is the significant cost savings. The cross-dock flow enables the ability to handle an unlimited number of SKUs.

3-2 Final Project Milestone One: Demand Forecasting and Sourcing

Reference Johnson, F. (2015). Walmart China — Supply Chain Transformation, 1-9. Retrieved March 21, 2018, from https://cb.hbsp.harvard.edu/cbmp/content/77242276.

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