Wednesday, February 10, 2016

Walmart's Inventory Management

Walmart’s inventory management is one of the main reasons for the huge success this company has had in recent years. The inventory model that Walmart has perfectly demonstrates the benefits that technology can have on the success of a business. Radio-frequency identification (RFID), Walmart’s vendor-managed inventory model, and the many different types of inventory that Walmart uses are all key factors in the company’s ability to grow and maintain success. 

RFID technology transfers data stored on tags on a product, facilitating identification and tracking. RFID tags are more advantageous than traditional barcodes as they store more data, provide real-time information, and can be scanned from a distance with clear sight. This makes more inventory management more efficient, as demonstrated by Walmart cutting the volume of excess inventory by almost one-third. As a result of RFID’s the supplier as well as the retailer, which leads into the vendor-managed inventory model, must manage inventory. In this model "suppliers access data from Walmart’s information system, such as data on current inventory levels and the rate at which certain goods are sold. Suppliers decide when to send additional goods to Walmart, while the company monitors and control the actual transit of goods from warehouses to the stores.” The biggest benefit of this is minimizing delays and costs in the movement of inventory across the supply chain. 

Walmart uses many types of inventory, each fulfilling a certain role in the company’s inventory and supply chain. The four main types Walmart uses are finished goods inventory, transit inventory, buffer inventory, and anticipation inventory. The finished goods inventory is the most important, as the role of this type is to support the store operation, where the finished goods are sold from the inventory to the customers. Transit inventory refers to goods that are held in transit- the role being to support the replenishment of the finished goods. The buffer inventory is used by keeping a small amount of extra goods to ensure that the firm is able to satisfy a sudden increase in demand. Anticipation inventory is similar to the buffer inventory as the store keeps extra stocks of goods in case an increase in demand, but in this case based on seasonal changes. 

The article does an excellent job of explaining how Walmart’s inventory management works and minimizes costs. However, it would have been nice to get more detail how the RFID technology initially impacted Walmart’s inventory model and their suppliers. Radio-frequency identification is still relatively new, so it will be interesting to see the impact it has on smaller less known firms.

1 comment:

  1. Over that last decade it appears that inventory management has become something that is more and more talked about. Wal-Mart, an obviously very successful company has really taken advantage of their inventory management. Their RFID system allows them to not only scan barcodes but also track data about purchases and inventory every time a product is scanned. This is extremely important for a big company such as Wal-Mart because they want to know what their customers are buying and what items are popular or unpopular. This system appears to be very efficient for Wal-Mart, especially in the United States because this system minimizes delays as well as minimizes the costs in the movement of inventory across the supply chain. This system seems to be working well but I am sure there are several potential issues that could occur from this RFID system. What if a barcode is scanned and the wrong data is reordered? What if data is not being stored or data is being doubled? Although there is the potential for issues I think that overall this is a very productive and efficient system that appears to be working well for Wal-Mart.


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