Supply chain management and organizational profitability

Supply Chain

Wal-Mart drives profits through its supply chain management program. The company competes as a low cost provider, and the supply chain is critical to delivering the lowest prices to the customer. Wal-Mart not only leverages its considerable bargaining power to drive down the prices it pays, but it also makes extensive use of information systems to make its supply chain management system efficient. This efficiency comes from having goods in the supply chain for the shortest amount of time possible, from avoiding stockouts and from having increased knowledge of the suppliers' supply chains, which helps Wal-Mart in the negotiation process.

The company uses a just-in-time ordering system, and uses RFID technology to track shipments from suppliers, improving both the efficiency and transparency of its supply chain system (Millsap, 2012). This system, it should be noted, is designed to get the goods from supplier to the stores quickly, but from that point the store still has the responsibility to get the goods onto the shelves (Saporito, 2013). The RFID (radio frequency identification) allows the company to track goods throughout the supply chain, and it also introduced smart tags that will increase its capability to shorten the time from a stock out in-store to having more goods available (Traub, 2012). This information is fed back to the company's enterprise resource planning (ERP) system, which allows not only store managers to place timely orders but the procurement department of the company to do the same -- orders are transmitted directly to the vendor.