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Walmart China- Supply Chain Transformation- Demand Forecasting and Sourcing
Walmart is a leading retail firm whose operations are worldwide. Walmart China: Supply Chain Transportation case study explores its operations in China, magnifying the firm’s demand forecasting within the region. It also explores its network sourcing strategy, showing various concerns for Walmart China’s operations, leading to recommendations on improving efficiency.
Demand Forecasting
Walmart as a global leader in the retail industry constantly seeks to expand territories across the world with its outreach getting to the China market. Walmart China: Supply Chain Transportation case study reports that the retail firm entered the Chinese market in 1996 following the "opening of its first Supercenter and Sam's Club in Shenzhen, Guangdong Province and by 2015 the retail stores expanded to 416 covering 166 cities (in 19 provinces) and four municipalities nationwide." It further suggests that at the initial stages, "Walmart carried stock keeping units (SKUs) ranging from 15000 to 20000 in a typical store with the assortment varying across stores." The ship-direct-to-store model adhered to by Walmart suppliers facilitated inefficiencies, resulting in the application's impracticability for Walmart and its suppliers. The retail firm's distribution center (DC) offered the suppliers the space to ship products facilitated by full truckloads alongside container loads and equally created by the platform to use economic order quantities.
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Walmart's DC played a significant role in the consolidation of shipments leading to shipment to stores based on needs. It provided substantial value-added operations with a positive potential regarding mitigating overall supply chain costs. The unrolling concurrently enhanced customer service due to reduced transportation fees accompanied by making good use of inventory levels. Despite the ideal structure, the enacted model did not work well with perishable items leading to the adoption of two DCs types (perishable and dry) in 2015 by Walmart China. It resulted in 11 of the former type while nine for the latter. The shipped items were cross-dock for the dry faction, constituting approximately 85% of the total with the balance as staple stock. The perishable type applied a flow-through design applying cross-docking to bypass storage, eventually leading to direct acquisition of the received goods (from the receiving area), thereby transcending to the outbound area for shipment to other stores.
Walmart's recent operations in China illustrate seeking to meet demand through the DC network and attempting to satisfy customer needs. Walmart China prevalently reduced the regional buying offices number alongside dry and perishable products suppliers’ using centralization of the purchasing model to achieve this fete. The supply chain equally enhanced the shipment volume to the DC network to massive levels by capacity strengthening and capacity building. It equally bolstered collaborative efforts for the suppliers targeting the transformation of shipment plans to deliver on the plot. Furthermore, the firm recognizes the customers' central role, which necessitates meeting their needs to retain them. The customers act rationally by demanding quality products at low costs with unlimited access to different platforms such as online or physical locations (stores). Walmart China exudes meeting consumer requirements through the multiple retail stores across different regions in China accompanied by the online-to-offline (O2O) channel. The latter, named "Walmart to Go," is in Shenzhen serving customers by allowing them to order be-it pick-up or home delivery.
The Walmart customer requirements put to task the leading retail firm's suppliers regarding the consolidation of enacted operations and meeting consumer demand. Walmart utilizes strategic sourcing to locate goods and services at affordable prices from suppliers who exude capability of meeting customers' intensive demands. It enables the retail firm to meet its objective of customer requirements with satisfaction as the ultimate goal therein leading to sufficient influx and profits. Apart from Walmart suppliers seeking to meet demand, the establishment equally requires them to keep up with schedules and order quantities. It communicates Walmart's commitment to uninterrupted service delivery by reducing risks that may arise from complicating scheduling. The suppliers equally face the task of adaptability which the firm demands them to meet at high levels which necessitates frequent rescheduling of shipments to meet the firm's and customers' needs. Therefore, Walmart suppliers play a significant role in delivering on the demands with a model set to work for the organization and customers at large.
Walmart uses efficient models to facilitate its suppliers' operations with the target of meeting customer requirements and firm targets. As earlier mentioned, supplier selection uses the capability of meeting market demand as a basis accompanied by ideal sourcing products that sell at affordable prices. The retail establishment recently required suppliers to increase product delivery to their warehouses at adequate times with fines as a penalty for failure. Walmart China’s move communicates the goal of maintaining low inventory levels accompanied by stocking shelves. Walmart is also engaging in seeking an emerging universal replenishment system that is fully-functioning to facilitate real-time service delivery by suppliers according to requirements. It exudes improving the efficiency of meeting organizational demands transcending to customer needs due to real-time inventory. Walmart is equally targeting reducing inventory at store levels by enhancing out-of-stocks facilitated by improved forecasting systems. The latter involves another store stepping in to cover space left by released stock-keeping stores running.
Walmart China's supply chain faces demand-forecasting constraints. The hardships include inventory storage and the proximity between stores. According to Walmart China: Supply Chain Transportation case study, "Walmart had 29 autonomous buying offices throughout China, with a serviceable dry network of five DC's that served all 416 retail stores." The enrolled action magnifies the distance between stores with the constrained number of offices servicing a vast region. The case study further posits that "the logistics charged warehousing fees to suppliers for using their network so suppliers and buyers were not interested in using Walmart's DCs because of high costs and horrible service with the situation leading to hiring huge trucks for dispatch only when completely full." It reduced costs at the expense of emptying shelves leading to further adversities in over-ordering and renting warehouses to accommodate the additional inventory. It communicates the constraint of inventory storage.
Sourcing
Walmart initially had 29 autonomous buying offices across China facilitated by serviceable dry networks of five DCs; however, between 2012 and 2015, the retail firm altered the sourcing system to accommodate 20 DCs in multiple urban dwellings. The latter's composition entailed 9 dry and 11 perishable centers. It concurrently saved time and raised costs considering the limited capacity. The senior vice president of supply chain management, Lesley Smith, proposed constructing a new perishable DC located in Dongguan towards the end of 2015. It would replace the inefficient models considering the potential to peak demand at 70% with a product mix entailing "3,500 SKUs across a broad range of products like deli, seafood, dairy, frozen meat, produce, flowers, bakery, grocery, chocolate, ice cream, and tropical fruits" as submitted in Walmart China: Supply Chain Transportation case study. The senior vice president's estimates pinpointed a case that would involve 300 shipment suppliers to the new DC supported by 200 stores peaking 142000 daily cases.
Upgrading Walmart China's order system would help the firm optimize its sourcing network by increasing stock delivery and orders. It will mitigate the adversity of empty shelves at stores and reduce chances for over-ordering goods. Walmart China should equally factor a cross-dock system to handle labor costs and the demand for warehousing. It would require the firm to pump resources and efforts towards adequate training, especially for the warehouse employees, while concurrently enacting strict measures for controlling the inventory processes. Applying the recommendation will enhance the implementation of the mentioned model while mitigating losses and damages.
