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Key Topics
Requirement
How to implement a competitive approach to warehousing and distribution?
Need for Cost-effective approach to warehousing and Distribution.
4.1 How to find areas of eliminating waste of resources?
4.2 Evaluate the different types of Stock
4.3 Describe the methods of stock allocation
4.4 Explain the impact of landlocked countries
Understanding various roles of inventory, different types of inventory and inventory drivers. Analyzing how inventory decisions affect other areas of the supply chain. Discussing the Inventory positioning issues, and the impact of transportation, packaging, and material handling considerations.
5.1 Evaluate ABC analysis and provide details of other inventory control analysis 5.2 Nature of stock and methods of shipment of the stock.
To understand the customs clearing and freight forwarding environment as well as the complication of statutory documentation
6.1 Explain the role of FCL and LCL?
6.2Analyze the need for NVOCC
6.3 Describe the impact of Demurrage and Dunnage?
6.4 Describe the various strategies in shipping techniques?
Solution
About the Company:
Walmart is a global retail giant, which has been constantly ranked at the top of the Global Fortune 500 rankings. They are mainly in the Brick and Mortar style of Retailing and deal with almost 10 million plus SKUs of items spread across the geography of 200 plus countries and with 11.500 stores with a total capped area of some 32 square miles. These facts are enough to justify the fact that they are dealing with huge business complexities daily, getting the right SKU at the right location in the right quantity across the globe is the basic SCM problem they have to deal with.
Coming to the business specific data, Walmart is headquartered at Bentonville, USA and they are in business of hyper marts, grocery stores and discount stores. It is currently chaired by Greg Penner and Doug McMillion. Their basic modus operandi is the cost leadership model that they have developed all these years by effective vendor management and lean supply chain operations. In order to maintain the cost leadership crown that they currently have, they got to keep lean operations and remove all possible error areas and gain cost effectiveness at various echelons of supply chain. The report is understanding the same.
Note: For the analysis, only grocery and packed food items are taken into consideration, the same is chosen because they have very low shelf life and hence supply chain has to be very effective and lean.
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Finding potential areas to eliminate wastage of resources:
The major resources identified are Shelf Area Space, Warehouse Operation and Point of Sales Operations.
Shelf Area Space:
Since the major operations is Brick & Mortar Retail and the shelf space is very critical. The actual information of on self-inventory is extremely important, based on that the reorder schedule is to be chosen. This will ensure that shelf is occupied with the correct product always.
Warehouse Operations:
Since the shelf life for grocery is very low and correct judgment for that is very important. The resources get waste there, to match the correct quality and quantity of the goods. Hence, the correct monitoring of the warehouse operations is very important.
Point of Sales Operations:
The point of sales is the point where the customers pay the amount and leave. A lot of self-help kiosks are available to optimize this operation, which otherwise need a good number of resources to be deployed. It is one of the very appropriate mode of cost reduction.
Type of Stocks:
There are mainly two categories of goods that Walmart deals with and they are Perishable Goods and Non – Perishable Goods.
Perishable Goods:
They are the goods which have a limited and defined shelf life and they have to be consumed within that time band only. The struggles of supply chain elevates while dealing with such goods as the logistics set up has special requirements as also some special warehousing needs. This is also complicated by the strict timelines and Quality Control guidelines that the product needs. These are more complicate lot of products.
Non – Perishable Goods:
These are those goods which do not have a strict shelf life and hence logistics set up is not very complicated and they also do not have very complex warehousing needs. However, these type of goods are bounded by the market trends and hence have to be presented on time and in sufficient quantity to quench the market needs. This is the major supply chain challenge of such goods.
Method of Stock Allocation:
The stock allocation is probably the most complex problem that the Walmart supply chain has to deal with. There are so many locations in different market dynamics and so many SKUs with different and special logistics needs. Hence the stick allocation depends on the following parameters:
Market Demands:
This is a basic requirement that is to be satisfied by the SCM professionals that product must reach the shelf based on the market demands prevailing and hence satisfy the customers need. The demands are dynamic and seasonal, so require strict enquiry.
Product Need:
Product need is another important criterion that is to be fulfilled by Walmart to satisfy the needs of the store and warehouses. There are some products with special requirements and hence a special delivery strategy is to be followed for the same. This is a very critical activity that is to be looked into with criticality.
Current Inventory:
The current stock level is a major trigger to specify the stock allocation strategy. There are some products that sells round the year and hence need to be monitored closely, so that the correct quality and quantity is shipped on time.
Logistics Requirements:
There are products with very special logistics requirements, so the allocation strategy depends largely on that. Like fruits and vegetables need to send through cold logistics and hence it impacts the allocation strategy.
ABC Analysis and Inventory Control Analysis:
They does follow ABC Inventory analysis for the Grocery business. The ABC analysis is done on two major criterions, which are Cost Implication (C) and Volume Contribution (V). The contribution of both C and V is the major decider for ABC Analysis. This makes the most sense for the Walmart business, since they deal with volume and cost leadership and hence these contributors will be the decider.
Cost Implication:
This is the amount of money that is put in by Walmart is buying that good, hence this is a criterion in classifying the inventory. If the money involved is huge, it goes on to prove that they will like that inventory to be clear soon. Hence it makes it to the A Class classification.
Volume Contribution:
The volume of an item is very critical and important, because if the item is very large in number then it will involve a lot of overhead cost and hence makes it to the criticality list of the business. So the classification is under A category and accordingly B and C categories are decided.
Nature of Stock and its method of shipment:
The nature of stock is an indicator of the type of logistics set up to be deployed to ship the product, there are two major categorization of products that define the product shipment category apart from the Perishable and Non – Perishable product categorization. These two types of products have already been defined in the previous sections, so the other two type of classification are being discussed here:
Centrally Procured:
These type of products can be shipped in bulk and then follow the hub and spoke model. This is the most optimized method of dealing with the centrally procured products as they are usually the products with long shelf Life.
Locally Procured:
These are usually the products which cannot tolerate large logistics time and also they can be best procured locally due to cost advantage. Hence they are distributed using independent logistics chain. This is the best way of dealing with such products.
Role of FCL & LCL:
The two concepts plays a pivotal role for Walmart operations, as they have to deal with various products and SKUs and in varying quantities. This goes on to show that all the time the Full Container load is a little ambitious to keep. There are various stores that needs the same or different products in varying quantities and at the same time, if the stores are nearby then the LCL is the needed methodology. This ensures that the logistics set up is utilized to the full capacity or at least at some optimization level. This is the method that ensures the optimal usage of the logistic set up and hence both the concepts are pretty much prevalent in Walmart’s operations. The variety and Quantity of SKUs are the reason for this methodology deployment.
Need of NVOCC:
There is thorough analysis of the Walmart management that they never want a NVOCC to manage its operations, they believe that it is a good for Small and Medium sized business, who do not have large loads to justify the logistics set up. That is surely not the case with Walmart and hence that seriously does not make much sense for Walmart. They also believe that NVOCC will never attain a market cap of more than 20 to 25%.
Impact of Demurrage:
The demurrage has dual impacts on the Value Chain of Walmart:
Cost impacts in case of 3PL:
There may be cases due to improper planning that there is no ullage and the carrier is standing outside, this calls for demurrage charges, which can be on per hour basis as well. This can lead to a lot of costing for the company and the worst part here is that it is no – recoverable.
Loss of Product:
The loss may be even worse in case the product has a very low shelf life, this is because in there is no ullage, then the products are there in the carrier, which should have been on the shelf otherwise and hence losses are huge due to that.
Shipping Strategies:
There are various different shipping strategies that are deployed by Walmart for their business operations:
Alliances:
This is the major strategy that is followed by Walmart and it make sense also, as they are prevalent in such a huge geography that they have to maintain good alliances with 3PLs, so that the operations may be run by specialists and with professionalism in a cost effective manner.
Specialization:
They need to incubate specialized shipping services like Cold Storage, Compartment based shipping etc. The variance in the kind of products they deal with makes specialization a thorough need for them. Their dealing with perishable goods is way too high and hence this set up is needed.
Cost Leadership:
This is the value proposition which they present to the market and they gain a lot of competitive advantage and this strategy makes all more sense to them. The mode of load sharing, milk run is the testimony for that.
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