Walmart Changing Transportation Strategy

Walmart has decided to breakdown some of the orthodoxies that it has always had when it comes to shipping product (article here).  No longer will they wait for the supplier to deliver the product to their distribution warehouses.  Now Kelly Abney says,

“…it’s all about squeezing out costs by keeping Wal-Mart’s own trucks busy and by accepting delivery of merchandise at the supplier’s loading dock instead of at a Wal-Mart distribution center.”

This seems like the right thing to do.  Distribution centers are non-value added for the consumer which means they are nothing but a cost (or waste) for Walmart.  Does this mean they won’t have any distribution centers?  The article does not say what it means for the DCs.  My thoughts are there would still be DCs but maybe they need to be smaller because less is going through them saving on equipment, manpower, land, etc…  Also, what is mentioned but now focused on, is Walmart is trying to utilize its resources and not just source out everything and let their resources have waste in their processes.

Abney also says it allows suppliers to,

“focus on what they do best, manufacturing products for us.”

The main reason for this change is Walmart is having a big enough problem with receiving errors at the distribution centers.  Errors like:

“…missing pallets or delayed shipments.”

How does Walmart picking up the goods at the suppliers’ dock help?

“…when a Wal-Mart driver picks up a load at a supplier’s loading dock that same driver will have to scan each pallet’s RFID tag as it’s loaded. The driver will then transmit the data so it can be matched up in real-time with EDI documents that specify what’s in the shipment. Sending that data ahead doesn’t just give Wal-Mart the inventory information a few hours earlier. It gives the retailer the chance to have unpleasant inventory surprises corrected in minutes at the supplier’s loading dock, not days later.”

I like the concept.  Quicker feedback into the loop.  I still have a lot of questions though.  It is great that the problem is identified right away, but what if they don’t have the correct product or remaining amount available?  Is the data collected by the driver given to the supplier after every pickup so the supplier can track trends in types of errors in order to problem solve?

Once the pallets are on the truck, Wal-Mart also gains complete control over when that truck will arrive at the distribution center. Such knowledge creates much more predictability for arrival times, which in turn produces better scheduling options for the loading dock. It also means faster turnaround times. And, stores will know what they’re getting, and when.

Predictability is something that lean organizations strive for.  It creates less waste in resource availability.  Once this is accomplished, Walmart could take the next step in leveling the flow of trucks throughout the network.  I would bet by owning their own trucking and creating predictability they will create more savings then they even realize.

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Posted on June 7, 2010, in Retail, Transportation and tagged , , , , . Bookmark the permalink. 2 Comments.

  1. I enjoy this quote from the article the most: “But Wal-Mart isn’t in the trucking business any more than its suppliers are”. I think if you have your own trucks, pay your own drivers, and a huge chunk of your operations involves moving goods from where they are made or stored to a point of sale, you are pretty much in the trucking business.

    On a different plane, since they are accepting shipments earlier, wouldn’t that lead to more days of inventory in their system? That’s great if they are going to use that as a driver to force down total lead time to check out. If not, aren’t they just tieing up cash flow in more inventory?

    I realize the article is kind of a one sided take from a mostly IT perspective, but it reads to me as if the inventory issue being a side benefit to Wally World being able to take on the transportation without paying a mark-up to 3rd party carriers.

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