Walmart's ability to leverage its supply chain has significantly boosted productivity, allowing savings to be invested back into its business and deliver value for shoppers.
Bill Simon, CEO Walmart US, highlighted a number of the retailer's supply chain initiatives that have driven efficiency and productivity at the Morgan Stanley Retail and Restaurant Conference that was held on 23 May.
Driving leverage through the distribution centre network
Walmart's distribution centre network has been an area where the retailer has significantly enhance productivity. Working its physical infrastructure harder, the number of distribution centres (DCs) in the network has stayed the same since 2008, but the number of stores served by the network has increased by 7.6% and sales have increased by US$24 billion.
Bill Simon commented: "Once you get the optimal distribution network in place, it becomes a velocity game. You don't need to build new ones."
Enhancing flow-through capacity
Bill confirmed that Walmart will continue to leverage its existing distribution centre network and is not planning to build any more DCs in the next couple of years. The retailer has, however, invested in updating and reconfiguring the layout of its DCs to enhance flow-through capacity and processes.
As well as optimising the DC network as a whole, Walmart has also enhanced productivity through its warehouse processes, for example the number of cases picked per hour has increased by 3.2% in the first quarter of 2012, on top of an improvement of between 3 - 5% in 2011.
Reducing cost per case
Walmart has made considerable progress in generating efficiency in its transport operations, reducing its cost per case shipped by 5.4% in the first quarter of 2012. This has in part been achieved through optimising its delivery network in the last five years - Walmart has delivered 360 million more cases to stores but driven 290 million less miles. As well as significantly reducing its cost per case shipped, optimising transport significantly improves the retailer's carbon footprint.
Transferring capability from DC to store
Implementing some of its supply chain processes from its distribution centres into stores has also helped drive productivity. Since October, pallets are sorted, stacked and built in DC have been organised in aisles unique to a particular store. These pallets are then loaded to lorries in aisle order so when unloaded store staff take pallets from the lorry straight to the shelf significantly speeding up replenishment processes.
In the last 12 to 18 months Walmart has also introduced aisle locater technology that is used in DCs to its stores. In this system, aisle labels have been introduced to stores and product identifier technology means that as products come off pallets an aisle locater number on the label tells store staff exactly which location to go to in-store. This has added another level of detail that was not previously available to store staff as products were directed to a department not the exact shelf location. These back-of-store efficiencies have helped Walmart to lower costs and improve on-shelf availability.