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Business

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Feb 20, 2024

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docx

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Zach Bowman QSO-330: Final Project 04/14/2023

Executive Summary: In this brief of the Wal-Mart in China, I will touch on the way the business goes about managing their warehouse and distribution. The aspects of their operation include demand forecasting, sourcing, warehouse management, and transportation. There has been a large adjustment in the way this region operates due to the hiring of Lesley Smith, who is the senior vice president of supply chain management. She has implemented everything from centralizing distribution centers, to opening warehouses that specialize in cross-dock flow and staple-stock flow. Demand Forecasting: The ability to practice efficient demand forecasting is essential for every company, but especially so for a corporation such as Wal-Mart. On average one Wal-Mart location holds anywhere from 15,000-20,000 stock keeping units on hand. This all has to be in coordination with the 2,658 different suppliers as of 2012. There are two different types of goods that go through the Wal-Mart distribution center. These consist of perishable and non perishable goods. They are stored in ambient warehouses (perishable goods) and traditional storage facilities. The ordering for the ambient warehouses must be spot on due to the short shelf life the perishable goods have. Evaluation: The main issue that stands out with the order and delivery of products in the distribution centers is the need for the company to meet the minimum order, while trying not to over order product. With the 20,000 plus suppliers, there was no leverage for Wal-Mart. Many of the suppliers would receive the order volume of around six or seven locations. Wal-Mart often struggled to meet the minimum order that the supplier required for delivery, which in turn meant

they either had to order way more than necessary, or the distributor would refuse the delivery all together. When more product was ordered than actually necessary, the carrying costs of the order would sky rocket. We also must consider that much of the product was perishable which meant delivery, processing, and storage must be quick and efficient. This required rerouting deliveries to ambient warehouses rather than the traditional storage facilities, which technically doubles the shipping cost of the load. Another major barrier in the demand forecasting was the lack of Wal- Mart owned warehouses which caused the company to rely on third party storage facilities that were expected to be out of space in the near future. Recommendations: For the first set of recommendations we must shift our attention to the minimum order quantities not being met. As mentioned, the locations were having to either run out of stock, or over order product that would sit on shelves and collect dust. In order to combat this there needed to be a better system for assessing which stores needed what quantities of product, and a centralized distribution center needed to be established. This would allow the orders from the suppliers to be much larger and use every space available on the tractor trailers. If all product is sent through one regionalized distribution center the specific needs of one hundred plus stores could be evaluated by one warehouse and the product could be sent out according to each locations demand. The current model has so many regional buying offices servicing so few stores that it is impossible to meet the minimum required by the suppliers. For the perishable goods it is essential to ramp up the flow through model in the ambient warehouses. This allows the product to essentially not be stored at all. It flows through the warehouse, processed, and sent directly to the location that requires that inventory. This model will decrease the time in which it takes for products to arrive on store shelves.

Sourcing: When it comes to sourcing for Wal-Mart in China, prior to 2012, there was an abundance of suppliers and distributors working with the chain. As mentioned above, there were 20,000 suppliers, and many of them were also distributors. This turned out to be an ordering and logistical nightmare that Lesley Smith would eventually step in and do a complete 360. This would require much collaboration with the suppliers to change the current shipping models. Evaluation: At first glance, the number of suppliers that Wal-Mart was sourcing from had to be drastically reduced. When the amount of suppliers is this high, you begin to lack the quality control necessary, which in turn leads to products that are not up to company standards slipping through the cracks. It seems as though the suppliers have no trouble keeping up with steady-state and peak demand. The issue lies with the distribution centers ordering and receiving the product. The communication seems as though it breaks down with so many middle men involved in the order and delivery process. It is essential that the quality and speed be maintained, especially considering that the company is dealing with perishable goods such as milk, eggs, and ice cream. Recommendations: The first step in improving the sourcing strategy for Wal-Mart China is limiting the number of suppliers. We can begin to do this by implementing a team that does quality assurance on the suppliers by performing specific audits to check the quality and reputation of the companies. Not only should they be concerned with delivering a quality product, but working conditions are essential, along with the fair treatment of their employees. Another route that the company could take would be to focus on a more centralized distribution center method. By having the regional buying offices so spread out it leads to contacting suppliers in a certain

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