Tuesday, July 22, 2014

How to Achieve Effective Supply Chain Management?

This article demonstrates an effective supply chain management strategy.Effective supply chain management strategy helps businesses to lower their product/service costs. This enables them to offer their products & services at highly competitive prices to customers.

We have taken the example of Walmart. It’s regarded as world’s largest &perhaps most powerful retailer. Walmart credits all its achievement in terms of highest sales/square foot, highest inventory turnover & highest operating profit than any other discount retailer to its effective supply chain management. It owes its evolution from a regional retailer to a global powerhouse to its effective management of supply chain.

This clears one thing that effective management of supply chain is crucial for businesses to reduce their costs and stay ahead of competition.

Further you can learn the strategies Walmart employed to achieve world-class supply chain-
#Provide customers with goods they want
Walmart began with the goal to provide customers with the goods they wanted. Walmart believes that good must reach customers at the right time & at the right place.
#Developing cost structures
In order to achieve the above caveat of providing customers with goods they want,Walmart focused on developing its cost structures. This allowed Walmart to offer products at low prices everyday!
Walmart achieved this by effective replenishment of its inventories. This wasthe centerpiece of Walmart’s strategy to achieve effective supply chain management.Walmart used a logistics technique called as “cross docking”. Cross dockingallowed Walmart to re-route its products from suppliers to the Walmart’s warehouses. From the warehouses, the products where then shipped to various stores. This prevented sitting of products for long periods in inventory. This strategy decreased Walmart’s costs significantly. As a result, Walmart was able to pass on those savings for their customers’ benefitsby offering products at highly competitive prices.
Further, Walmart focused on developing an enhanced supply chain management strategy to further exploit &leverageits competitive advantage.

Elements of Supply Chain Management (SCM)-
  •  The main elements of a supply chain include purchasing, operations, distribution &integration.
  •   The supply chain begins with purchasing. Purchasing managers or buyers are typically responsible to determine which products their company will sell. This is followed by sourcing product suppliers & vendors. Further, the purchasing managersprocure products from the selected vendors at prices &terms which meet profitability goals.

In order to achieve effective supply chain management, the supply chain operations of a business must focus on accurate demand planning, forecasting & inventory management.

Forecasts help a business to estimate demands of customers for a certain product during certain period of time. This is calculated based on historical data &external drivers like upcoming sales & promotions. Also the changes in trends & competition affect demand planning. This practice of employing accurate demand planning will help to create accurate forecasts. This is critical for effective inventory management which is at the crux of effective supply chain management.

Walmart’s Strategy of Managing its Supply Chain
Walmart enjoys market leadership position primarily because of its efficient integration of suppliers, manufacturing, warehousing &distribution to stores.

#Walmart’s supply chain strategy employs 5 key components which are-
  •  Vendor partnerships
  • Cross docking
  •  Distribution management
  •  Technology
  •  Integration

Walmart’s supply chain starts with strategic sourcing to search for products at best prices from suppliers. Also Walmart ensures that the suppliers will be able to meet any demand. It establishes strategic partnerships between most vendors. Walmart offers selected vendors, the potential for long-term & high volume purchases. And in exchange Walmart gets bulk-purchases at lowest possible prices!

The suppliers then are responsible to ship the products to Walmart’s distribution centers. Here, the products are cross docked & delivered to the Walmart stores.

Hence, Walmart uses cross docking, effective & collaborative distribution management &efficient transportation management to keep inventory & transportation costs down. This reduces the transportation time & eliminates inefficiencies.

Another major feature of Walmart’s effective supply chain management is Walmart’s possession of largest IT infrastructure than any private company around the world!

Walmart regards technology to play a key role in it effective supply chain management. Walmart’s state-of-the-art technology & network design enables accurate forecasting & demand planning. Also it enables Walmart to monitor &predict inventory levels &create efficient transportation routes. This helps Walmart to manage long-term customer relationships & provide immediate service response logistics to customers!


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