Walmart’s Inventory Management

Walmart’s Inventory Management

Walmart Inc.’s inventory management is one of the biggest contributors to
the success of the multinational retail business. Effective and efficient
inventory management is of critical importance in operational effectiveness.
Walmart is known for cutting-edge technological applications for its
inventory management aspect of operations.Advanced inventory
management is the core organizational capabilities that enable Walmart’s
leadership in the global retail industry.

Walmart’s inventory management is a key success factor in the firm’s ability

to grow to its current industry position as the leading retailer in the world.
The company’s strategies for various business areas are linked to inventory
management

Walmart’s Vendor-Managed Inventory Model

In this model, suppliers access data from the company’s information

systems, such as data on current inventory levels and the rate of
goods . Suppliers decide when to send goods to Walmart, while the
company monitors the actual transit of goods from warehouses to the
stores.

This model helps in minimizing delays in the movement of inventory across

the supply chain as suppliers can directly access current data about the
inventory of their goods. Another benefit is the minimization of costs in
inventory management activity. The company does not need to spend for
extra personnel to manage each supplier’s goods.

Types and Roles of Inventory at Walmart Inc.

Walmart uses many types of inventory. Each type fulfills a certain role in the
retail company’s inventory

1. Finished goods inventory. The Finished goods arrive at the

company’s stores. These goods are stored and the inventory is
replenished regularly. Thus it helps to support Walmart store
 operations, as they are moved from the company’s merchandise
distribution centers to be sold to the retail stores.
2. Transit inventory. This type of inventory refers to the goods that
are held while in transit. This means that some goods are in
transit for days or weeks. It helps to support the replenishment
of the finished goods inventory in the merchandise distribution
centers.
3. Buffer inventory. This type of inventory is used by keeping a
small margin of extra goods in order to maintain business
continuity when demand suddenly fluctuates.There will always
be an extra stock of goods at Walmart stores.It ensures the
adequate capacity of the company to satisfy sudden increases in
demand.
4. Anticipation inventory. It is used to ensure optimal capacity to
satisfy consumer demand.It is based on seasonal changes. For
example, Walmart dramatically increases its inventory size right
before and during Diwali season to satisfy the massive increase
in demand during this special shopping day. It enables the
company to satisfy expected seasonal increases in demand.

Just-in-Time Cross-Docking in Walmart’s Inventory Management

Just-in-time inventory is the method involves measures and activities
for the operational objective of minimizing storage and related costs.
Just-in-time inventory method is applied in the form of cross-docking.
In cross-docking, suppliers’ trucks and the company’s trucks meet at
the company’s warehouses or merchandise. Goods are transferred
from the suppliers’ trucks directly to Walmart’s trucks, which deliver
the goods to the stores.

The main benefit of cross-docking is the minimization of inventory size.

Fewer goods are stored at the warehouses. A smaller inventory is less
costly to maintain. It also enables to quickly deliver goods to the
stores. In this way the firm can respond rapidly to fluctuations in
demand in the market.

Walmart’s Measures of Inventory Performance

There are 3 variables to measures the inventory performance.

1. Inventory turnover
2. Stock-out rate
3. Inventory size

Inventory turnover is the rate at which Walmart’s inventory is sold out.

It is a measure of the cost of keeping each item in stock. A higher
inventory turnover rate is less costly and more desirable. The stock-
out rate is the frequency at which Walmart’s inventory becomes
inadequate in satisfying demand. A lower stock-out rate is desirable.
The company uses inventory size as a gauge of cost. So less inventory
size is desired to minimize the inventory holding cost to maintain
attractive low selling prices.