Walmart Supply Chain and Delivery Time Cycle Analysis

Introduction

Walmart's delivery time cycle performance is central to its dominance in the retail sector. There are other large retailers that closely or loosely match what Walmart sells, including Kroger, Kmart/Sears, and Target. However, in its half-century or so of existence, Walmart has become the juggernaut of the world retail sector, and there is little chance of that changing anytime soon, barring a cataclysmic event in the retail or broader business world. While Walmart has taken its share of criticism for wages, benefits, and the volume of goods it sources from China, its position as the retail cost leader — and the degree to which its supply chain management and delivery time cycle contribute to that position — cannot be denied or ignored.

Automated Replenishment and Distribution Center Operations

Walmart is the global leader in retailing and clearly dominates the United States market. Other players are not irrelevant — Kroger and Target are making meaningful inroads — but no single retailer rivals Walmart's combination of hard goods and grocery. One of the primary reasons for this is Walmart's supply chain. The genius of Walmart's system is that the vast majority of goods replenishment is triggered automatically as items are sold at the register. Each item is assigned a "max shelf" figure, which defines how much can fit on the sales floor at any given time. When the quantity on hand falls to a certain threshold relative to that figure, an order is automatically generated.

Complementing this system, Walmart operates distribution centers across the United States and around the world, ensuring that the vast majority of its goods are within a few days' reach of any store at most. These facilities use separate receiving bays for grocery and hard goods, since the handling requirements for each category are quite different. Walmart also makes use of what are known as "break packs" — reusable boxes of varying sizes used to ship goods that are not sold or distributed by the full case. When these boxes are emptied at the store, they are folded flat and returned to the distribution center for reuse. Damaged boxes are recycled along with other cardboard in the store's baler.

Importantly, Walmart is careful not to be too efficient in terms of delivery volume. The company operates on a just-in-time principle, whereby goods are delivered before the shelf is empty but without excess. Overshipping is particularly problematic when a product is perishable or when storage space in a store is limited (Walmart, 2014).

Eco-Friendly Packaging and Green Initiatives

Beyond the replenishment system itself, there is much more to Walmart's supply chain story. One important dimension is packaging efficiency. There is a "sweet spot" at which goods are packaged well enough to arrive at the store intact in the vast majority of cases, without excessive packaging cost. Walmart's suppliers are expected to find this balance, and Walmart itself applies the same standard to its break packs and store-branded goods.

Walmart is relatively unusual among large retailers in that it has the financial resources to pursue green packaging solutions at scale. In addition to calibrating packaging quantity, the company has moved toward biodegradable materials. The vast majority of goods Walmart receives arrive in cardboard boxes that are emptied, broken down, and immediately recycled. Necessary exceptions exist — bags of dog food, for example, are typically wrapped in shrink wrap to prevent shifting and toppling in transit — but most goods move in moderate to small cardboard boxes that are fully recyclable. Emerging alternatives made from ethanol, biomass, and other renewable sources are also beginning to appear, offering recyclable or biodegradable options beyond conventional cardboard.

Not every customer prioritizes environmental concerns, but a significant share of current and potential Walmart shoppers do. In some markets, Walmart has taken its green commitment further by installing full-fledged recycling centers inside its stores. One such store is located in Lawrence, Kansas. These stores demonstrate that Walmart is serious about sustainability and that it wants to help its customers participate in recycling — much of the material collected coming from products purchased at Walmart itself (Dharmadhikari, 2012).

Conclusion

Walmart could certainly do some things better than it currently does. Debates about living wages and Walmart's impact on small-town America are not going to disappear. However, as long as Walmart keeps its prices low and its customers continue to demand value, Walmart will not lose market share unless it proves unable or unwilling to outperform competitors. Given how far ahead of rivals Walmart currently stands, it will likely be a generation or more before any seismic shift in the competitive landscape occurs.

References

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