A Review of Walmart’s Logistic Infrastructure
Walmart’s logistic infrastructure consisted of three things; their transportation system, distribution centers, and cross docking. Their transportation system consisted of a minimum of 3,500 trucks which are all regulated under the restrictions and policies stated in the “Private Fleet Driver Handbook. This gave Walmart a big advantage over its competitors because they could determine how often they could restock inventory in a particular store.
As stated in the case study, the trucks would come two times a week to deliver shipments and had developed a specific system to unloading to keep up with the excess volume of inventory. Trucks could only unload at nights and they had a two hour gap in between each truck instead of just having all the trucks at the unloading dock. Walmart implemented these specific rules so that it would cut down the time it took to unload and make sure all of its inventory was accounted for. As stated above in the Product Distribution section, Walmart would account for its inventory based on two barcodes; the pallet and distribution center it came from. In addition, to an efficient transportation system made up on their own trucks, they also only hired drivers that had a clean driving record.
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Only applicants that had driven at least 300,000 miles without accidents were considered for the position. Lastly, the policies stated in the handbook were strictly enforced to emphasize to the drivers the importance of their role in the company. In Exhibit III, multiple examples are listed describing how Walmart would not terminate a driver if they failed to adhere to a policy and instead would work with them to correct their behaviors for future references. Walmart really tried to emphasize to their employees the importance of customer service and safety because they wanted to avoid liability for preventable accidents. The distribution centers were used as a middle man between the stores and the suppliers. They were also in charged of keeping up to date with the drivers which is why a coordinator was employed to schedule the drivers’ hours of service and routes. The main role of these coordinators was to make sure the drivers would safely deliver the shipments in a timely and efficient manner. However, to cut down the shipment times from the manufacturer to the customers , cross docking was implemented which took out the distribution center and store from the equation. Instead of having the customers go to the store to pick up the goods, and the goods delivered from the distribution center, purchase orders were sent directly to the supplier.
These purchase orders would then be completed in a certain amount of time and then taken to a “staging area which would allow Walmart to repack them and then directly send them to the customers. Walmart was able to use this technique to its maximum potential by allowing stores, distribution centers and suppliers to have more of a say in pricing and merchandising based on the customers’ demands. By taking it down from the corporate level, demand had more of an influence in the pricing and promotions of a store than supply. There are five types of cross docking listed in Exhibit IV; opportunistic, flow-through, distributor, manufacturing, and pre-allocated. Opportunistic cross docking allows ships to be directly sent to customers as long as they know the quantity, location, and from which supplier to purchase from. By obtaining this information, they are able to reduce storage space and costs. This was the main type of cross-docking used by Walmart as mentioned above. Flow-through cross docking is essentially made for goods that have a limited-shelf life (perishable) because it allows a steady flow of goods coming and leaving the distribution center. Distributor cross docking consists of eliminating distribution centers all together and only ship directly to the stores.
A big advantage of this type of cross docking is that it reduces transportation costs if it is done correctly. However, the transportation system has to be efficient because if it isn’t transportation costs will increase drastically to keep up with shipping to multiple locations in a short period of time. The retailer carries the highest risk with this type because the supplier no longer shares the risk of delayment. Manufacturing cross docking allows cross-docking facilities to act as storage spaces for goods and in return only ships small amounts of goods when needed. This reduces transportation and storage costs because goods are only shipped when needed and in small amounts so as not to take up storage. Lastly, pre-allocated cross docking is working with the supplier so that they can pack goods according to store orders so that the distribution center doesn’t have to repack them. This allows the goods to arrive in the original package from the supplier and reduce the time of delivery. Unfortunately, this type of cross docking requires close involvement with the suppliers and manufacturers to ensure the goods are shipped in a timely manner.