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Transportation and Warehousing

Michelangelo Orsini

QSO 330

Transportation

Walmart's incredibly successful supply chain has made it an unstoppable force in the global market. It manages more than $32 billion in inventory, operates more than 11,000 stores in 27 countries, and stocks products made in more than 70 countries. The company has an operational feature called a cross-docking inventory system that moves material from the receiving dock to the shipping dock, bypassing the storage units. This feature is part of its successful supply chain management system that allows it to reduce inventory carrying costs and transportation costs. However, as much as the company is enjoying success, there are a few constraints within its transportation network that may affect the whole supply chain system.

For instance, in China, the company had a hard time in transporting products to its consumers due to the country's vast size. Most people preferred to pick up one product at a time because they biked or walked for long distances. They were also brand conscious and purchased impulsively rather than according to plan. In other words, the consumers shopped around for best bargain, that's why the company found it challenging to cultivate ad loyalty among them. Similarly, the company experienced problems with the country's poor infrastructure. Here, they were unable to do anything as the highways were costly to use, and the toll fees were 10% higher than the total freight costs. In fact, toll collection at the local level was illegal and arbitrary. Generally, the company experienced unwanted extra costs because of the underdeveloped highway network it depended on.

Secondly, another constraint was the issue of fresh products. Consumers in China demanded fresh produce, and with the country's poor infrastructure, the organization was finding it hard to fulfill that objective. It had to procure foods locally instead of through the company's centralized procurement system. In other words, the interrupted supply chain and the reduced economies of scale meant that the company had to experience higher costs in satisfying the very demanding Chinese customers. Similarly, procuring foods locally meant that the company had to deal with the ever-growing number of local and international suppliers. The country was packed with both locally and intentionally renowned retailers who were taking each other head-on without fear. They were making it hard for Walmart to operate, and to make things worse, domestic players primarily dominated the supermarket segments. Generally, I think that the presence of stiff competition and the inability of the company to transport fresh produce was one of the primary reasons the company couldn't succeed in China in the first place.

Still, on the issue of transportation, I think that the company is using the correct modes of transportation based on time, cost, and quantity. According to its website, the company has a private fleet of trucks and a vast number of skilled truck drivers who are continually working to ensure the company is moving merchandise in responsible and sustainable ways. The drivers also work to minimize the number of "empty miles they drive," and they follow the most efficient routes to their destination. In a way, the company uses less fuel, drives fewer miles and maximizes on the merchandize they deliver while minimizing environmental impact.

Finally, there are a few recommendations I would suggest when I look at the transportation constraints identified above. I would advise Walmart to open up stores in city centers, to collaborate with local suppliers, and to provide quality products. It will help them attract new customers within a short period.

Warehousing

Walmart has a massive warehouse that allows it to operate smoothly. Its warehouse enables it to be flexible, and I believe it meets its storage needs. I think the company has an inventory storage system in these warehouses that allows it to track how suppliers handle their products. The system also enables them to monitor the actual transit of goods from the warehouses to the stores. If the company were to expand, I think it would be a significant benefit for them as they already have fully functional warehouses.

Furthermore, expanding in their home country would be an added advantage as they would attract a large customer base. However, expansion comes typically with a few constraints. For instance, the locations that they would build their new warehouses might be far from the city center. This may bring about extra transportation costs as well as loss of perishable products. Simply put, the company needs to evaluate all their options before they expand.

On the issue of handling hazardous materials, I think the only consideration the company needs to look at is to train their staff on how to handle hazardous materials. They also need to look at the storage locations and the requirements that are necessary to prevent the elements from contaminating other products. Reason being, if these materials are not stored correctly, Walmart runs a risk of potentially putting their customers and employees in jeopardy. Generally, the company needs to handle hazardous materials with care to operate smoothly and avoid unnecessary incidents that may cost them their reputation.

Lastly, the recommendation I would give to ensure adequate availability of resources for the organization is for the company to adopt information systems. This will help their employees to work efficiently, and they will not lose their data easily. Similarly, another recommendation that i would give Walmart is to create an inbound supply chain and to adopt a voice enabling technology. It will help them increase productivity and handle their inventory effectively. Furthermore, it will improve its network by reducing personnel costs and facility costs. In other words, the recommendation will enable them to improve on their delivery schedules, and it will also help them to manage the receiving dock and yard better.

References

HUANG, J., & Yu, J. I. A. (2015). Wal-Mart Development in Chinese Market: Problems and Countermeasures—Based on the Enterprise Culture and Ethics. International Business and Management, 10(2), 11-15.