The Supply Chain of Walmart in China

The success in distribution and transportation of goods at Walmart acts as a competitive advantage. The company spends on the improvement of the system as it lowers the operation costs. This paper assesses the supply and demand of Walmart and its product flow, as discussed in the Walmart China case study.

Demand Forecasting

Walmart started its operations in China in the year 1996, and it had expanded significantly over the years. In 2015, the company had established 416 retail stores in the country. Walmart has a wide range of consumables with about 20,000 items of general merchandise, consumables, grocery and fresh products (Johnson, 2015). For this reason, the demand for the products in Walmart stores is high. The suppliers shipped the products directly to the stores. The quantity shipped by the suppliers depended on the requirements of each store. Since the demand for the products was high, the suppliers are unable to meet the required or demanded quantity.

In this way, a single supplier could be handling orders from six stores. The quantity required may be high for the supplier. The suppliers have low order quantities, and this affects the amount supplied, therefore, raising the costs. Also, the stores experience low stock and on-shelf availability. For instance, the company was forced to order 18 items from 144 distributors since the supply of each supplier was low (Johnson, 2015). This supply chain has several demand-forecasting constraints. The low quantity supplies from distributors affect the on-shelf availability of products. The products were shipped in economic order quantities. This may take time for the quantities to be filled. To avoid this, the stores over ordered which resulted in storage problems.

Sourcing

The company utilizes a centralized buying. Between the year 2012 and 2015, the company reduced the number of regional buying centers and suppliers. This strengthened the capacity of the distribution centers. Currently, the company operates a total of 20 distribution centers (Johnson, 2015). The suppliers ship their products to the DC, and the stores get their supply from the DC. In so doing, the company has improved the supplier fill rates. By cutting down the distributors, the company purchased directly from the producers. The order quantities are met in this case. Also, as the supplies are collected from a centralized point, different distributors can bring their products which are merged to fill the demanded quantities. This has made it possible for the stores to improve their in-stock performance.

The current DC model consists of staple stock flow and cross-dock flow. Staple stock flow offers short-term storage. It, therefore, requires space and investments, unlike the cross-dock flow. In the cross-dock flow, the incoming products are loaded directly onto the outbound vehicles and transported to the stores immediately. This reduced the storage costs making the company’s sourcing system efficient.

The current cross dock flow would present challenges in scheduling and manage the supplied capacity. Also, since the deliveries of all the stores are made at the same time disregarding the distance to the stores. Therefore, the company needs to devise a well-balanced sourcing system. In such a system, both the cross-dock flow and staple stock flow strategies will be applicable. The cross-dock flow will enable efficient transportation of supplies to the stores. This will ensure a stable supply of stock. The staple stock flow will ensure that the company can respond to the demand variations such as during the festive seasons.

Reference

Johnson, F. (2015). Walmart China- supply chain transformation. Richard Ivey School of Business Foundation.