Walmart Case Study Analysis

QSO330 Milestone Two

Supply Chain Evaluation: Walmart

Southern New Hampshire University

        An efficient transportation network is crucial to the success of an organization. Transportation is the key element linking a company’s supply chain network. An efficient transportation network means that an organization has created a strategic plan to minimize costs and maximize customer service. The development of transportation has contributed to both global economic growth and a competitive factor for many organizations. Walmart’s transportation network allows the company to move product from manufacturers, to distribution centers, to retail stores.

        There are many factors that Walmart must consider when implementing an effective transportation network. First, the company must consider geographical locations of stores and distribution centers. Walmart has strategically placed regional distribution centers and local distribution centers that serve stores surrounding a 250-mile radius (Alyea, 2012). Walmart uses their own fleet of trucks to transport product from distribution centers to stores. In effort to create a cost savings in transportation, Walmart has specifically built stores surrounding a distribution center. Given the fact that shorter distances are traveled by the fleet, less fuel costs and repair costs are absorbed.

        Further efforts to reduce excess costs have created a system of minimal inventory being stored at the warehouse or distribution center. This process has allowed for quick replenishments at the store level. There are even certain automotive or drug products that Walmart will require the supplier to ship directly into the store (Alyea, 2012). In addition to minimal stored inventory, Walmart utilizes a technique called cross-docking. Cross-docking moves product from the manufacturer to the retailer or customer with very little material handling in between (Murray, 2018).

        In 2010, Walmart announced that it had three sustainability goals that it wanted to achieve. These goals were: to be supplied 100% by renewable energy, to create zero waste, and to sell products that sustain people and the environment (Bokhari, 2010). Walmart has since increased their fuel efficiency in the private fleet using more aerodynamic trucks. The company also utilizes a system that tracks the driver’s tendencies to break, speed up, and gear selection. This technology is called Electric On-Board Recorders (EOBR) and is used to coach and train fuel efficient drivers (Bokhari, 2010). The use of EOBR is a fantastic effort to reduce transportation costs but, this technology is only utilized for a portion of Walmart’s private fleet (Bokhari, 2010). There is a greater opportunity to further efficiency with Walmart’s third-party logistics companies (3PL’s).

        Walmart may have an opportunity for improvement by negotiating better rates with their 3PL’s through different incoterms. An incoterm is a freight term that distinguishes if the buyer or seller will pay for shipping costs (Bokhari, 2010). A popular incoterm that is used by retailers is DDP. This term means that the seller arranges and pays for the freight and the freight costs is rolled into the price of the merchandise (Bokhari, 2010). Walmart makes almost 3.7 Million inbound deliveries on a yearly basis (Bokhari, 2010). With the extremely high volume of deliveries, Walmart should have significant leverage to negotiate the most competitive rates possible with its vendors.