Inventory management is control over the state of the available quantity of goods, as well as the decision-making process aimed at saving time and money. The purpose of this phenomenon is to minimize the cost of goods that a particular enterprise purchases and sells. As the company under investigation, the world-famous retailer Wal-Mart is taken, which is the leader in the trade sphere, to evaluate its indicators of supply chain management. The principles of organization of inventory mechanisms used by this corporation are sufficiently competent to analyze them and draw appropriate conclusions.
Type of Inventory System
Due to numerous innovations in the field of IT technologies, Wal-Mart has managed to establish an inventory system in which all goods are labeled with barcodes and entered into a shared database. It means that the corporation uses a fixed order quantity system where each item has a number. This approach to supply chain resource management makes it is easy to track goods and count them carefully. According to Schroeder, Rungtusanatham, and Goldstein (2013), an inventory system of this type is often used by trading companies and is successfully implemented in practice.
Such a system is of practical value both for the leadership and employees. Workers do not need to monitor and check manually how many goods are stored in their warehouse. The computerized control of the volume of supplied and sold products makes it possible to count all the products and allows finding necessary items quickly. Probably, that is why this system is used today by many other retailers that also take leading positions in the trade sphere.
One of the issues that Wal-Mart faces when organizing the supply of the necessary quantities of goods is transportation costs. Despite the fact that the logistic system of the corporation is carefully thought out, delivery expenses are quite high. According to Brandenburg, Govindan, Sarkis, and Seuring (2014), transportation costs are a significant economic aspect of any supply chain management policy. Therefore, when organizing work, it is essential to take this moment into account and take measures to plan such costs effectively.
Another issue that the management of Wal-Mart periodically encounters is the urgent need for specialized storage facilities. As this organization is one of the largest in the world, it needs much space to accommodate all the goods.
At the same time, it is crucial to observe necessary storage conditions, especially for food products. As Monczka, Handfield, Giunipero, and Patterson (2015) claim, if customers are sure of the quality of products that they purchase, the relationship between sellers and buyers will be trustworthy. That is why all the company’s products are stored in large warehouses, and every year, Wal-Mart spends significantly much money to equip large premises with appropriate facilities.
Also, the company’s management is forced to closely monitor the number of orders that they purchase from suppliers. As Christopher (2016) remarks, it is explained by the fact that even the most advanced technologies cannot entirely free employees from the need to monitor the volume of purchases. Moreover, since the Wal-Mart organization is a corporation with a large number of sales outlets and branches, its management is forced to control the volume of orders daily. Otherwise, there is a risk that there will be either too many or too few purchased goods. In any case, the company will have to suffer losses.
Benefits of the Inventory System for the Company
The chosen inventory system is perfectly suitable for the business of Wal-Mart, despite the fact that the control over supplies and their transportation requires many efforts. The use of an electronic and satellite goods tracking system is a modern method of managing large trade objects (Schönsleben, 2016). For such big corporations as Wal-Mart, a barcode system and computerized databases are quite effective ways to monitor the turnover of goods.
Also, as Wisner, Tan, and Leong (2014) note, other control options that small enterprises often use are unlikely to be convenient for large organizations. Large trading corporations are forced to adapt to a large volume of purchases and take the right measures not to suffer losses. The strategy of the researched company allows it to occupy the leading position in the world ranking. Therefore, the effectiveness of the Wal-Mart strategy of supply chain management and tracking of resources is quite productive, which is proved in practice.
Thus, the principles of Wal-Mart’s organization of inventory mechanisms are efficient enough to implement them in the company’s business. A fixed order quantity system makes it possible to control the amount of purchased and sold products and make appropriate conclusions according to the obtained information. The corporation sometimes faces some difficulties connected with the process of supplies and the cost of transportation. Nevertheless, careful planning of all expenses allows avoiding great losses and helps to make a profit. The inventory system used by Wal-Mart’s management is suitable enough and can be regarded as one of the most successful mechanisms of the company’s work.
Brandenburg, M., Govindan, K., Sarkis, J., & Seuring, S. (2014). Quantitative models for sustainable supply chain management: Developments and directions. European Journal of Operational Research, 233(2), 299-312.
Christopher, M. (2016). Logistics & supply chain management (5th ed.). London, UK: Pearson.
Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2015). Purchasing and supply chain management (6th ed.). Boston, MA: Cengage Learning.
Schroeder, R., Rungtusanatham, M. J., & Goldstein, S. (2013). Operations management in the supply chain (6th ed.). New York, NY: McGraw Hill.
Schönsleben, P. (2016). Integral logistics management: Operations and supply chain management within and across companies (5th ed.). Boca Raton, FL: CRC Press.
Wisner, J. D., Tan, K. C., & Leong, G. K. (2014). Principles of supply chain management: A balanced approach (4th ed.). Boston, MA: Cengage Learning.