Wal-mart is facing significant threat to maximize sales and profits because of the stiff competition from similar stores, such as Dollar General and Amazon (Mark 1). Because of stiff competition from other stores, Wal-mart has experienced nine consecutive declining sales in all fiscal quarters. The competitors have copied Wal-mart’s distribution channel strategy to increase regional presence and sales. Some of the distribution channel strategies that competitors have copied include using cross-docking systems to reduce storage duration, the positioning of distribution stores near distribution centers and the adoption of an electronic system of communication with suppliers to manage ordering and shipping services of goods.
Sustainability of distribution strategy
Wal-mart’s current distribution strategy is sustainable because of the high reduction of operational cost. The current distribution policy implemented by Wal-mart is to deal directly with a manufacturer, controlling distributing systems and monitoring sales of products. The current strategy has enabled the company to maintain a sustained cost reduction in transportation, improve routing tools and improvising visibility (Mark 6).
Effect of EDLP
Wal-mart implemented an EDLP policy between 1970 and 1980 to ensure that products were undiscounted on a regular basis. The EDLP (every day low price) enabled Wal-mart to refrain from advertising products through different media platforms (Mark 6). The company used the saved money to reduce costs. () agrees that an “every day low price” strategy allows a company to cut advertising costs because it is improbable to advertize each sale product. The relationship between the business and its suppliers strengthened because of the increased volume of goods that Wal-mart requested from the suppliers. Also, the price roll back campaigns helped improve the relationship between buyers and suppliers, further enhancing the connection between the company and its suppliers.
Wal-mart monitors demand by conducting analytical work used to forecast demand. Also, the company works with suppliers to control demand for products. The company’s store level operations are efficient because the distribution centers have real time information regarding the level of stock in the stores. Therefore, in the case of a shortage of a particular product in the warehouse, wal-mart can automatically contact suppliers. Furthermore, the company can manually input orders or override impending deliveries (Mark 7). The system applies both for distribution of products from suppliers to the distribution centers to the distribution of the same products to local stores.
Advantage of RFID
The company adopted the RFID (radio frequency identification) policy in 2003 to facilitate tracking and assortment of inbound products (Mark 8). With the RFID system, the company ensures that products move swiftly through all distribution centers. Compared to other competitors, the RFID system enabled the company to increase stock visibility. Furthermore, the RFID system enabled the company to track the promotion of goods. According to Ray (394), an RFID system enables a company to keep track of inventories in warehouses. Also, the RFID is advantageous because it can help a company keep track of vehicles. In the case of Wal-mart, the use of the RFID tags enables the company to differentiate products in the sales floor and storeroom.
In consideration of the data provided in the case, it is possible for other companies to implement a similar strategy. Competitors managed to gain a competitive advantage over Wal-mart by copying its distribution system to distribute goods to a large area while reducing the costs of operations. Similarly, by understanding Wal-mart’s new distribution strategy, it is likely that they can copy the new system. However, it will take time for the companies to implement a similar system because they might incur additional costs to change the distribution strategy. Also, the competitors are using Wal-mart’s prior distribution strategy, which has enabled them to expand and open new stores across the country.
Mark, Ken. Half A Century Of Supply Chain Management At Wal-Mart. Richard Ivey School Of Business Foundation, 2013.
Ray, Rajesh. Supply Chain Management for Retailing. New Delhi: Tata McGraw-Hill Education, 2010. Print.
Stiving, Mark. Impact Pricing: Your Blueprint for Driving Profits. Irvine, Calif.: Entrepreneur Press, 2011. Print