Walmart Marketplace Management Services

How did WAL-MART manage to become a cost leader in the retail market?

a)  The advanced application of the principles of “economies of scale”  has allowed to obtain lower purchase prices of products (very high discounts obtained by the centralized purchase of large volumes of products or services). Wal-Mart has about 10,130 stores and continues to expand its market share through a number of opportunities, from opening new stores, entering new markets, acquiring small retail companies, expanding to online sales channels, development of new, innovative formats in the field of Wal-Mart's own brands.

b)  Development of partnerships with suppliers by applying the VMI technique.

Used in partnerships with major suppliers, the VMI (Vendor Managed Inventory) technique has now become a "best practice", being applied for the first time in the world of large retailers by Wal-Mart in its relationship with major suppliers. Recent studies show that this concept has been extended to other industries, such as chemistry, construction, electronics, IT and communications.

The VMI technique is applied to fast-selling products that have a very large share in both the supplier's sales volume and the buyer's purchase volume. The products targeted by the VMI technique are very important and valuable for the business development of both partners, supplier and comparator.

What is this technique? The supplier assumes the responsibility of walmart account management managing the stock to the buyer based on the access to the buyer's information regarding the level of stock and sales. In the following articles we will make a detailed presentation on the implementation of this technique, how payments are made, when to transfer ownership of the goods sold, partners' responsibilities for stocks of goods in case of excess or lack of stock, etc.

The main advantages obtained by Wal-Mart in the strategy of reducing costs by applying the VMI technique in the relations with the main suppliers:

• Eliminate the costs of supply orders, payment transactions, etc.
• Reducing transportation costs by consolidating freight items.
• The reduction of the level of stocks and implicitly of the storage expenses, as a result of the reduction of the bullwhip effect that appears in the Supply Chain due to the lack of real information regarding stocks and demand.
• Avoidance of risk costs regarding the interruption of deliveries by the supplier.

 c)  Making  investments in information systems oriented towards the efficient management of the Supply Chain. 

Wal-Mart achieves significant reductions in operating costs through its IT strategy, as follows:

1. The use of data mining in data analysis to understand the behavior of buyers and their requirements,
2. Integral monitoring of SC processes by extending RFID (radio frequency identification) technology .
3. Implementation of Cross-Docking operations in distribution policies, where products arriving at the warehouse in trucks are unloaded in the reception area and loaded immediately for delivery in trucks waiting in the shipping docks, without storing the goods in the storage area.
4. Reducing stock, storage and handling costs associated with excess safety stock by reducing replenishment times and the bullwhip effect.
5. Efficient management of its own transport fleet by applying the principles of consolidation of goods and economy of scale.

d)  Extending the product range

In order to attract as many customers as possible to the stores, walmart listing offers the world of retailers the widest range of products for sale.

e)  Extension of sales channels.

Benefiting from the status of the largest offline retailer, Wal-Mart has huge opportunities to increase sales by expanding its presence in online commerce.

In conclusion, a declarative cost strategy is not enough, it must be supported by aligning the other functional strategies with the common objectives of the company and the correct implementation of Best Practice techniques.