Operations Management Wal-Mart Runs a Research Proposal

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Wal-Mart uses this technique extensively, since not only does it help to guarantee that its suppliers will be able to meet Wal-Mart's demand, but Wal-Mart wants to help its suppliers manage their supply chains better. If a supply managers its own supply chain more efficiently, it can supply the good to Wal-Mart at a lower price.

3. Wal-Mart's forecasting techniques have impacted its master schedules and production plans. The company is linked with its suppliers, such that Wal-Mart essentially dictates their production schedule on the basis of Wal-Mart's forecasted demand. Wal-Mart's demands for cost reductions impact capacity planning and workforce management at its suppliers. The more information that Wal-Mart gathers, the better it performs at inventory management.

Wal-Mart prepares its budgets with thorough use of forecasting techniques. It uses time series data to analyze long-term sales expectations. This is linked throughout its supply chain, such that suppliers are guided by these forecasts. Wal-Mart also makes continual adjustments to the forecasts, sometimes based on new data that has been gathered but also sometimes based on established causal relationships. Not only does the sales data go into the budget, but so does the cost of goods data -- Wal-Mart's negotiating power allows it to dictate prices so that it knows in its budget what its cost of goods sold is going to be. A Wal-Mart budget is an all-inclusive document that forecasts demand down to the day for 100,000 products and forecasts costs as well, taking advantage of the company's relative cost certainty.

4. Wal-Mart needs materials for store construction, store upgrades and for general conduct of business purposes. The company approaches materials resource planning (MRP) in the same way it approaches its supply chain management. Wal-Mart forecasts demand by planning store openings in advance, and then secures the necessary materials using many of the same techniques as it does for its merchandise.

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There is a significant difference between MRP at Wal-Mart and Toyota, as the former is a retailer and the latter is a manufacturer. Toyota strives to streamline its inventory of parts so that parts are available as needed, but that the company does not have a large inventory. When Toyota forecasts demand, it orders parts to be delivered according to its production schedule. Wal-Mart needs its materials ready when a project is ready to go. It does, however, have an approach to merchandise ordering as Toyota has. Wal-Mart orders based on forecasted demand, as does Toyota and both strive to have minimal inventory. The primary difference is that for Toyota, the inventory needs are certain given the fact that the company relies on strict production schedules. At Wal-Mart, merchandise demand is unknown, but estimated. There will always be a gap between the forecasted sales and the actual sales. For Wal-Mart, its entire supply chain management program is designed to reduce that gap as much as possible, but it can never do so to the level that a manufacturer can.

5. Wal-Mart is a world leader in supply chain management, and uses it as a source of competitive advantage for its cost leadership strategy. Efficient supply chain management allows Wal-Mart to reduce inventory holding costs and eliminate the costs associated with unsold merchandise. In doing these things, Wal-Mart is able to reduce its total operating costs. This contributes to the company's ability to pursue a cost leadership strategy. Competitors with lesser supply chain management cannot attain supply chain costs as low as those at Wal-Mart, putting them at a competitive disadvantage.

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