Wal-Mart Used Technology to Become Supply Chain Leader

by Todd Traub  on Monday, Jul. 2, 2012 12:00 am  

“Two IBM 370-148 computers record performance of each store daily,” Wal-Mart bragged in its 1979 annual report.

It is hard to talk about supply chain management without mentioning Wal-Mart.

In its relentless pursuit of low consumer prices, Wal-Mart embraced technology to become an innovator in the way stores track inventory and restock their shelves, cutting costs and passing the savings along to customers. In the process the company became synonymous with the concept of successful supply chain management.

“I don’t believe there is a university in the world that doesn’t talk about Wal-Mart and the supply chain,” said James Crowell, director of the Supply Chain Management Research Center at the Walton College of Business. “They are just so well respected because they do it so well, and certainly I know a lot of peer institutions around our country … will bring a Wal-Mart guest to speak.”

From ancient times through two world wars to today’s global market, the logistics of supply chain management have challenged any enterprise that tries to move goods and materials a long way in a timely manner. A break in the supply chain leading to a dearth of food or ammunition could spell disaster for an army on the move. For consumers and businesses, a supply chain breakdown means empty shelves and a loss of revenue.

Through a combination of distribution practices, truck fleet management and technological innovations, Wal-Mart not only became the model of supply chain efficiency and used it to become the largest retailer and private sector employer in the world.

Even the U.S. military noticed. Army Col. Vernon L. Beatty, who commanded the Defense Distribution Depot in Kuwait, spent a year with Wal-Mart as part of the military’s Training With Industry program.

“Supply chain management is moving the right items to the right customer at the right time by the most efficient means,” Beatty said in article about his experience. “No one does that better than Wal-Mart.”

Fewer Links

Wal-Mart’s supply chain innovation began with the company removing a few of the chain’s links.

In the 1980s Wal-Mart began working directly with manufacturers to cut costs and more efficiently manage the supply chain. From 1993 to 2001, Wal-Mart grew from doing $1 billion in business a week to $1 billion every 36 hours, growth that was attributed as much to supply chain management as to customer service.

Last year, Wal-Mart sold $1.22 billion worth of merchandise every day.

Under a Wal-Mart’s supply chain initiative called VMI — vendor managed inventory — manufacturers became responsible for managing their products in Wal-Mart’s warehouses. As a result, Wal-Mart could expect close to 100 percent order fulfillment on merchandise.

 

 

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