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Zach Bowman
03/20/2023
QSO-330 Supply Chain Management
3-2 Milestone 1: Demand Forecasting and Sourcing
Executive Summary
:
Based out of Bentonville, Arkansas, Wal-Mart Inc. is the sector’s biggest retail outlet store. The company employed 2.2 million associates worldwide and operated approximately 11,000 stores, under 72 banners in 27 countries (Fraser, 2015). Walmart entered China in 1996, opening its first Super-center and Sam’s Club in Shenzhen, Guangdong Province. By August 2015, the company’s Chinese presence had grown to 416 retail stores, consisting of 404 Super-
centers and 12 Sam’s Club stores, covering 166 cities among 19 provinces, two autonomous regions and four municipalities nationwide, and employing more than 100,000 associates (Fraser,
2015). It is easy to see that Wal-Mart’s supply chain, distribution, and transportation has made the company a lot of money throughout the years. This is mainly due to the senior management team viewing this part of the company as a competitive advantage.
In this executive summary, I will focus on the demand forecasting of Wal-Mart in China via analyzing the supply and demand and how the make improvements to their business to increase their profits and performance.
Demand Forecasting
:
While examining Wal-Mart’s supply chain, it is necessary to first examine the demand forecast. This is the process of using predictive analysis of historical data to estimate and predict customers’ future demand for a product or service. It is essential that Wal-Mart keeps high-
demand products in stock at all times. It can be detrimental to run out of products that are needed
by the consumers at peak demand. At any given time, large retailers in China, such as Walmart, carried 15,000 to 20,000 stock keeping units (SKUs) in a typical store, and the assortment varied across stores (Fraser, 2015) Wal-Mart used distribution centers to ship products for suppliers using full truckloads or economic order quantities. Shipments to stores were consolidated at the
DC and shipped on the basis of individual store need. Walmart China operated two types of DCs in 2015: 11 perishable DCs and nine dry DCs. The latter, also referred to as “ambient DCs,” handled dry grocery items, consumables and general merchandise products, such as electronics, apparel and toys. The volumes shipped through the dry DCs were primarily cross dock, which accounted for approximately 85 per cent of the total, with the balance as staple stock, which were
pulled from inventory held in the DCs. Perishable DCs handled products that required temperature- controlled environments across three temperature zones: frozen (–8 degrees Celsius
or below; e.g., frozen food and ice cream), chill (0 to 10 degrees Celsius; e.g., meat, dairy, deli and produce) and normal (12 to 18 degrees Celsius; e.g., tropical fruits, chocolate and eggs). These perishable DCs operated with a flow- through design that used cross docking to bypass storage, transferring products directly from the receiving area to the outbound area for shipping to Walmart stores (Fraser, 2015).
Evaluation
:
When Lesley Smith arrived to Wal-Mart in China in 2011, she walked into a very fragmented business. The company had 29 autonomous buying offices across the country, with a serviceable dry network made up of five DCs servicing all stores. Logistics charged a warehouse fee to suppliers for using our network, so suppliers and buyers were not interested in going through our DCs because of the high costs and horrible service (Fraser, 2015). The company often did not meet minimum order quantity and the distributors would not deliver, affecting their order fill rates that cascaded into low in-stock and on-shelf availability. Or, they would overcompensate by ordering more inventory than needed, which affected their carrying costs.
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