Wal-mart Inventory Management

Background Information

Wal-Mart is the most influential retail store in the USA. It currently operates more than 4150 trade facilities in the global market. The company’s first store was instituted in 1962 in Rogers, Ark. Since then it has undergone significant developments and is the dominant retail facility in nations such as the UK, Canada and Mexico. The corporation offers a supply of general commodities comprising crafts, electronics, fabrics, toys and household equipment. Its corporate management system includes selling quality commodities and brands at inexpensive costs (Hayden et.al., 2002). Wal-Mart ensures that it achieves this objective by integrating advanced electronic technologies and warehousing. The company’s community outreach targets to offer consumer satisfaction engage in community participation and provide scholarships. Its management strategies further emphasize its organizational culture and its labor force. Employees concerns are addressed in order to enhance improvements to corporate practice. Employees are also offered with financial rewards through profit-sharing plans constituting stock-purchase options and comprehensive training programs.

Wal-Mart’s inventory system is one of the major contributors to its accomplishments. Effective inventory systems are crucial considering the massive size of the company. Consequently, it has incorporated technological applications and innovation to maximize its inventory management capabilities. The company has implemented numerous strategies to handle its inventory, which have certainly influenced how inventory is managed in each store. Using the satellite communication system, the organization is able to monitor the occurrences in its centers and manage its own inventory and stocks. It also utilizes smart tags on clothing such that its employees are able to identify particular items in the inventory room and thus be able to maintain stocks (Holt et.al., 2012). The smart tags use radio signals to classify the products. The company also contains an automatic reordering that enables it to monitor its stocks regularly, and identify which products are making profits. The company considers three critical factors prior to assessing inventory performance including inventory size, inventory turnover and stock-out rate. The inventory turnover metric enables the stocking of various items. A higher inventory turnover is equivalent to fewer costs which is more desirable for the corporate. The stock-out rate analyzes the frequency at which the company’s inventory is insufficient in meeting demand hence a lower stock-out rate is desirable. Wal-Mart utilizes inventory management systems to weigh costs and benefits. It expends fewer costs with smaller inventories hence being capable of reflecting the cost minimization objectives that necessitate low costs to sustain low selling prices.

Inventory types

Inventory types are generally categorized into raw material, finished goods, MRO goods and work-in-process (Singh & Verma, 2018). Wal-Mart utilizes a variety of inventory systems, though the most common include:

  • Anticipation Inventory
  • Finished Goods Inventory
  • Buffer Inventory
  • Transit Inventory

Anticipation inventory– Wal-Mart incorporates the anticipation inventory to ascertain optimal capacity and gratify customer demand.  The company maintains extra stocks of products to tackle an increase in demand. In essence, the central role of this inventory is to address expected seasonal increases in demand. For instance, Wal-Mart expands its inventory size during holidays in order to meet the increasing demands during particular periods.

Buffer inventory-This inventory is applicable for the corporate because it enables the storage of extra goods in order to sustain business stability, especially when there are sudden demand fluctuations. Therefore, this inventory ensures an adequate capacity of commodities throughout.

Finished goods inventory-this inventory is the most important in Wal-Mart. The finished goods are distributed to various company’s stores where they are stored and the inventory is replenished regularly. This inventory aids the business in supporting store operations by maintaining sufficient finished products to fill consumer orders required for after sales service.

Transit Inventory– Wal-Mart utilizes the transit inventory in supporting its retail operations and mainly for commodities that are held while in transit. The large-scale extent of Wal-Mart’s supply chain implies that several products are frequently in transit for days or weeks. The company uses this inventory to support the refill of finished goods inventory within its stores and distribution centers.

As evidenced from the following chart, inventory management especially that of finished goods is important in Wal-Mart stores.

 

ABC Analysis

The finished commodities traded in Wal-Mart’s stores and operations equipment are classified as category A. This category A items are regarded as the products with highest value within Wal-Mart stores. They are frequently monitored and documented. These items contribute significantly to the overall returns while costing less on seller’s resources. Category B commodities are less critical than those in Category A; though they can potentially be considered as category A if there sales are significant. The company’s category B products constitute other supplies used for operations, such as office furniture and maintenance equipment. These commodities are moderately monitored and have moderate recording accuracy. Category C items consist of items that are least valued since they have the least impact on the company’s regular retail operations. These items include office supplies and janitorial supplies. They are least monitored and the least documented.

 

 

References

Hayden, P., Lee, S., McMahon, K., & Pereira, M. (2002). Wal-Mart: Staying on top of the fortune 500: A case study on Wal-Mart stores Inc.

Holt, C., Klutts, M., Aldendifer, M., Hafermann, E., Hines, O., & Rhodes, K. (2012). Inventory Managment.

Singh, D., & Verma, A. (2018). Inventory management in supply chain. Materials Today: Proceedings, 5(2), 3867-3872.

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