Wal Mart - Operation Management

Introduction

Operation Management is the process of providing services and/or creating goods. It comprises of capacity planning forecasting, capacity planning, buying material and equipment, managing inventories and many more (Stevenson, 2012). It’s basically the process of producing output with all the inputs. Operation Management is one of the main pillars of a typical organization because it works along with marketing and financing. Operation Management functions in all of the process related to producing goods and/or providing services and during this transformation from inputs to outputs the operations function to add value because inputs are required to get finished goods.

Analyze Wal-Mart using any 5 of the 10 Critical OM decisions

There are 10 Operation Management Decisions which every operation manager have to look at, which are to make effective decisions and to achieve either differentiation, low cost or response operations strategy. These decisions will also allow the managers to support a organizations missions. I will be analyzing Wal-Mart with 5 OM decisions.

Process of determining production capacity needed to cater the changing demand for its products and also meeting the demand of consumers on the quantity needed by the firm is called capacity planning. This is where Wal-Mart is excellent because in their capacity planning they have included 3 OM Decisions which are Facility, Product and Service and also Human Resource.  In terms of facility In United States Wal-Mart operates in 50 states and they have 4300 stores and globally they have 4081 stores in 14 countries. Each and every shop has been classified based on their operation where Wal-Mart supercenters functions as a full service supermarket which averages around 102000 sft in size.  There are also Discount Stores which are discount department stores which averages to 192000sft in size, Neighborhood Markets which are normal shops for daily necessary goods where it averages to 42000sft in size and also there are Sam’s Club Warehouses which are membership based store which is 133000sft in size on an average (Sanjana, n.d) .They also operate with a single large warehouse for a single state and this warehouse will cover all the stores in the particular state. In terms of Goods and Services Design they go by an everyday low price strategy because their prices are lower than all the competitors. Nearly one third of United States population visit Wal-Mart. The reason is because Wal-Mart actually really reflects the advertising slogan which is “Low Prices, Always” which was from 1962-2006. Their prices are low because their operations cost is low. They are partners with 2500 suppliers and there are properly networked or orders are made through Just in Time method. Their Human Resource is very good because they have both high skilled and low skilled workers (Kaufman, 2009). They achieve this by hiring students who need skill and senior citizens who need income for sustainability and they are all paid an hourly wage. They have 2.1 million employees throughout the world currently. By interlinking these three areas they are able to be successful because this becomes an operation strategy.

             Another Operation Management decision which is very fundamental is Supply Chain Management. Wal-Mart has been able to sustain because of its supply chain strategies and it comprises of a few key components of its Supply Chain Management which are vendor partnership, cross docking and distribution management, integration and technology.  They begin by finding the best price suppliers and making partnership with them for long term as mentioned earlier. The largest Information technology infrastructure in any private firm in the world is owned by Wal-Mart. Their Technology systems are useful for them to do efficient forecasting and predict inventory levels and also manage customer relationship and have efficient transportation routes. Highly competitive pricing for the consumer, reduced inventory cost, lower product cost, and improved in-store variety helped Wal-Mart to sustain because of their supply chain management strategy. They became a big player in the global market. (Usanfranonline.com, 2013)

Besides Supply Chain Management, another Operation Management decision I will be analyzing Wal-Mart is Inventory. It’s with this OM decision questions like when do we have to reorder and How Much of Inventory Items we have will be answered. (Stevenson, 2012)

[pic 1]

Chart 1      Source : Systems and Operations Management: Wal-Mart (Keller,2010)

As shown in chart 1, this is how Wal-Mart restocks its merchandise and the cycle is not more than 48hours this is possible because they have a 7000 trucks fleet in United States alone. Apart from that they have an excellent data transmission tool called Retail Link.  It’s connects the suppliers with Wal-Mart. It’s an online system which contains the sales data, inventory data and etc. This helps the suppliers to be aware of the sales and supplies of the products.  Plus they also practice Cross Docking. Cross Docking is the process of delivering a finished good directly to the retail store from the manufacturing plant. This process is good because this is how they are able to reduce their operating cost because this slightly reduces inventory level to minimum and they are able to cut the holding cost of certain items. [pic 2]

Chart 2      Source : Systems and Operations Management: Wal-Mart (Keller,2010)

Wal-Mart also have great Inventory Management as shown in Chart 2 because there are the most known retailer who applied Radio Frequency Identification (RFID) in the supply chain management system and it required 100 of its top suppliers to use the technology also. RFID technology is good because there is automated data collection without using barcode and the tags used can be stuck on the product. A reader is used instead of a barcode scanner and it can read as many at a time (Keller, 2010). Statistics shows that there is a 26% improvement from the implementation of this tech. This tech can eliminate out of stock situation and progress customer service and fulfillment rates and reduce operation cost in terms of inventory and labor. Plus it makes them more efficient.