How Walmart's Procurement Process Works

Introduction 

Walmart is the largest retailer in the world and arguably the most powerful in terms of sales, operating profits, and inventory turnover. In 2016, the corporation was recognized as the largest grocery retailer in the US which was a major factor propelling its total sales to $478.614 billion. Wal-Mart’s US operations accounted for 62.3% as of these total sales in 2016. The corporation is also identified as the largest private employer in the US with approximately 1.4 million employees spread across thousands of stores across the country (Ramanathan, 2014). The organization employs a further one million workforce who coordinate the operations in the foreign countries. One of the major factors that have led to the retail giant’s success is its ability to provide consumers with discounted prices on almost all merchandise offered (Ramanathan, 2014). The organization continues to provide competing prices even with other brick-and-motor retailers able to match the low prices. As a commercial organization, the retail giant has to develop effective measures to continue outperforming others in the industry (Ramanathan, 2014). In this regard, innovation is a critical factor in this practice where the company will seek to improve on its ability to embrace new technology such as e-commerce platforms which has provided a major challenge in the industry. 

Breakdown of Procurement Process 

The supply chain management of the company plays a crucial role in enhancing competitive advantage and assuming market leadership. The organization initially sought to make more cost effective measures in supply by purchasing goods in bulk before transporting them directly to the stores (Qrunfleh, & Tarafdar, 2014). This eliminated costs of warehousing and storage. A major innovation in the 1980s was to eliminate the multiple links in the supply chain by working directly with the manufacturers. This would help to manage the supply chain more efficiently and cut costs by receiving significant discounts. Through Vendor Managed Inventory (VMI) the organization allowed manufacturers to manage their products in Walmart stores ensuring near 100% order fulfillment (Ramanathan, 2014). Due to the rapid growth of the company and its increased number of stores, the organization has established distribution centers in different geographical locations across the country. Through the use of Radio frequency identification (RFID) tags, the procurement managers can track the level of inventory in real-time (Qrunfleh, & Tarafdar, 2014). The information helps ensure full stock of goods at the right place and times. Cross docking has also been employed by Walmart as it seeks to minimize the number of warehouses (Qrunfleh, & Tarafdar, 2014). The practice involves direct transfer of goods from inbound to outbound trailers without the need for extra storage space. 

Difference in Procurement Process from Amazon 

One of the major competitors in the retail industry is certainly Amazon which largely practices as an e-commerce corporation. The organization has revolutionized logistics and the distribution process as an integral factor in the online retail experience. In a span of over two decades, Amazon has transformed from a lowly online bookstore that makes hand-deliveries to a formidable juggernaut processing more than 400 orders in a second. The organization has actively been investing in innovation and a consumer-centric approach with emphasis on frugality. Unlike Walmart that sets its products in stores and waits for the consumer to come and purchase, Amazon has focused on making deliveries to its consumers at their homes or offices. In the recent years, its strategic goal was to reduce delivery time and it has dropped to same-day delivery while other retailers offer two-day or more. The organization is looking to incorporate drones in the near future to further revolutionize the delivery of goods (Bamburry, 2015). The recently-introduced “Dash” button enables consumers to make orders of basic household supplies at the touch of a button. The vast technology of the company provides procurement managers with real-time data on demand for a product in its rise and fall which helps make adjustments to the stock. 

References 

Bamburry, D. (2015). Drones: Designed for Product Delivery. Design Management Review, 26 (1), 40-48. doi:10.1111/drev.10313 

Qrunfleh, S., & Tarafdar, M. (2014). Supply chain information systems strategy: Impacts on supply chain performance and firm performance. International Journal of Production Economics, 147 , 340-350. 

Ramanathan, U. (2014). Performance of supply chain collaboration–A simulation study. Expert Systems with Applications, 41 (1), 210-220.