Walmart is the leading retail store in the US producing mass merchandisers of consumer products under the Walmart brand name. Its operation has surpassed some of the Europe large retail stores such as Metro AG, Tesco, and Carrefour and this has made it world’s number one retailer with over 2.2 million employees. Within the United States, Walmart operates in all 50 states with more than 5,160 stores including both Walmart Stores, Sam’s Club warehouse, and small format stores. Globally, the company has approximately 11,500 stores in 28 countries. According to the financial report January 30, 2015, the company had increased its sales by 1.9 percent with a staggering consolidated income of 482.2 billion. Walmart has an appealing retail dynamism that has yet to meet any fixed merchandise in the market. Walmart has succeeded through a well-defined logistic and supply chain management that have given it an outstanding competitive advantage over its competitors. Thus, the paper seeks to analyze Walmart’s competitive advantage, particularity its logistics operation and supply chain management to determine reasons for its dominance in the grocery industry.
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Walmart’ s Competitive Advantage
Walmart’s performance can be attributed to its overall costs leadership power which has been established over the years. It started developing its leadership position by using the undeserved rural segments to announce its arrival into the market. Also, it employed the use of innovation leaves, customers centrality and effective stakeholders management. Successfully, it managed to surpass its competitors after it leveraged its strategy to achieve the overall cost leadership. Subsequently, the company earned a low cost proposition that granted it high returns despite the competitive nature in the industry (Hoskisson, Hitt, Ireland, & Harrison, 2012).
Walmart adopted the learning curve concept that later allowed it to achieve economies of scale. According to the report on grocery industry, Walmart is three times bigger than its closest rival Carrefour. Large economies of scale has enabled Walmart to minimize its costs of production and this has allowed Walmart to become the industry price leader, as it can set prices lower than its competitors and still is making profitable returns (Fishman, 2006). The company’s economies of scale facilitated the acquisition of capital and specialized equipment that improved production utilizing workforce of skilled employees. Regarding management, Walmart has attained an efficient management system which has yielded a good relationship among all the stakeholders. Moreover, Walmart’s decision to operate in a large economy led to the expansion of its market coverage by 65 percent in the US and 41 percent globally, beating competitors like Costco, Carrefour, Tesco, and Whole Food (Greenwald & Kahn, 2014). Its retail stores are strategically located in high traffic streets in metropolitan cities to enhance its accessibility to the customers. Through this, the company has established a strong brand recognition as well as creating customer’s loyalty.
Another factor that has granted Walmart a strong competitive advantage is its engagement in the production and distribution of diverse products and services. Walmart avails its customers with different categories of products ranging from groceries and consumables, home and apparels, technology, offices and entertainment, health and wellness to fuel and other categories (Marcilla, 2014). The customers get attracted to the idea of accessing numerous types of products from one retailer. Lastly, the company has an intensive product promotion strategy that involves using different kinds of billboards in the various countries; media, social media advertising as well as franchising technique to attract more customer to continue dominating in the market (Tallant, 2011).
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Walmart’s Logistic and Supply Chain Management
According to Supply Chain Digest, Walmart has an incredible and successful logistic and supply chain management than any other retail company in the grocery industry. Through this, Walmart has managed the distribution of inventories produced in more than 70 countries to its numerous stores that operates in 28 countries across the world (Akhir, 2014). Additionally, the supply chain digest indicates that Walmart manages over 32 billion different kind of inventories. Thus, for it to deal with these kind of numbers, the company has established an imperative, effective and efficient logistic and supply chain management system. The system encompasses unique strategies such as the cross docking inventory tactic, strategic vendor partnership, and technological innovation (Liu, 2011).
Walmart has used the cross docking as its primary logistic strategy to replenish inventory efficiently. Cross docking entails direct delivering of products by transporting it from an inbound and outbound truck trailers without extra storage. The process avoids storage cost by ensuring the items are unloaded from an incoming truck and directly loaded into an outbound that distributes it to other location (Hill, Jones, & Schilling, 2014). Through these methods, the suppliers’ roles have been minimized since the loads are cross-docked once they arrive at Walmart’s distribution centers. Later, Walmart’ further distributes to other distribution centers which are often at an average of 130 miles apart where they are repackaged and distributed to its stores without sitting on inventories (Roberts & Berg, 2012). The process of crossing the goods from one truck to another takes averagely 24 hours and the truck returns empty or with the unsold merchandise. Cross docking only facilitates the routing of products from the suppliers to Walmart, thus reducing inventory sitting time and holding costs.
Under strategic vendor partnership, Walmart uses the strategic sourcing by contracting with providers who can offer supplies at reasonable prices and the one who can meet the company’s demand (Akhir, 2014). Therefore, Walmart has created a network of strategic partnership with suppliers to avoid interference from the competitors. Additionally, the company has created a reliable system of communication and relationship with suppliers to improve material flow as well as lowering inventories costs. The network of Walmart’s supplier retail stores, warehouse forms a single like firm which is independent. According to the Walmart CEO, Carl Douglas McMillon, the company’s supply chain management has attained efficiency due its principle of collaboration and good relationships with customers.
Finally, due to the intense competition, nature, and dynamism of the grocery industry, Walmart has incorporated modern technology in logistics and supply chain operations. The company has a more sophisticated information technology and infrastructure compared to its competitors. A network of information database and state-of-art technology allows Walmart to predict and track inventory levels, forecast budget, demand, establish a sophisticated transportation, controlling service response logistics and managing customers’ relationship. For example, Walmart’s implemented the Universal Product Codes to all its stores across the world, a technology that stores, collects and analyze information about store level. Another information technology application such as Retail Link and mammoth Bentonville database, which uses the real-time sales data from the company’s distribution centers and cash register, has facilitated the forecasting of suppliers’ demand and supplier network (Liu, 2011).
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Strategies Support of Walmart
Apart from an efficient logistics system and supply chain management, Walmart has a set of supporting strategies to improve its competitive advantage. First, Walmart has after sale services that include deliveries, repairs, and technical assistance on specific products. For instance, Walmart has a website that allows customers to submit complaints and help issues regarding the purchased products. Second, the company has hired a team of purchasing and procurement expertise who have the skill of analyzing inventories to determine shortages, ordering and reordering time to ensure a sustainable inventory supply (Akhir, 2014).
Effects of Logistics Supply Chain Management on Walmart’s Competitive Advantage
First, cross docking helps in reducing Walmart’s costs incurred in inventory control as well as the cost of transportation. Also, it reduces the tedious and long-time procedures likely to be involved in transportation and elimination instances of inefficiencies. The primary objective of the cross docking is to ensure a constant supply of products to avail customers with goods and services at any given time and location. As a result, the company wins customers’ loyalty which leads to enhancing its brand name in the market. Consequently, this strategy allows Walmart to set highly competitive prices from costs reduced on transportation and inventory control. Similarly, strategic vendor partnership offers the company with high-volume and long-term purchases of supplies in exchange for the affordable prices.
Finally, Walmart’ sophisticated information technology has improved the logistics and supply chain management system. This has enhanced regular corporate of information among distribution centers, stores, suppliers as well as facilitating a less centralized control. Additionally, the technology has allowed the real-time communication between Walmart and its suppliers through a network system than can allow automatic re-ordering of products, hence limiting instances of inventory shortages. The application of information technology in supply chain management has enabled the company to shift from traditional methods of inventory control and transportation to meet the customers demand.
Walmart’s sophisticated system of logistics and supply chain management has granted the company with several realistic competitive advantages. First, Walmart has successfully managed to lower its costs of production. Reducing the cost of controlling inventories allow setting competitive prices to become easy. Additionally, the company’s efficient logistics system has ensured a constant flow of inventory to keep up with the demand in the market. Relatedly, this provides customers with variety products at affordable prices. Technology has evolved Walmart’s supply chain management through innovation and creativity to ensure a sustainable value chain. These strategies have granted Walmart a competitive advantage that has led it to become a dominant player in the grocery industry.