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Wal-Mart China Case Study

Updated August 8, 2022

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In the second milestone we will be evaluating Wal-Mart China’s transportation and warehousing network. I will identify any all constraints found within the transportation supply chain and provide recommendations on how they can improve the areas with concerns. I will also assess the warehousing infrastructure and identify any concerns with how things are stored and how they can improve the inventory process while reducing cost.

Transportation refers to the movement of product from one location to another as it makes its way from the beginning of a supply chain to the customer’s hands. Manufacturers and retailers found having a “state of the art” supply chain management to decrease warehousing and many inventory costs while advancing and speeding up the distribution to the end customer. Walmart has effectively used a responsive transportation system to lower its overall costs. At distribution centers, Walmart uses cross-docking, a process in which product is exchanged between trucks so that each truck going to a retail store has products from different suppliers (Robinson, 2018).

The Walmart China case study, showed a few limitations within the transportation network. The first limitation presented in the case study the transportation network lacks appropriate infrastructure within China. There is an obvious lack of infrastructure, outside of some the big cities like city of Beijing, Shenzhen, Guangzhou and Shanghai. This is makes it very difficult for transporting goods in a viable way. China simply cannot accommodate one of Walmart’s greatest strengths: an ultra-efficient and technologically advanced supply chain. (Salomon, 2016). This creates a limitation on the infrastructure and how goods can be shipped throughout China’s rural areas.

The second limitation within the Walmart China case study is the companies’ dependencies third-party logistics. With other companies handling the fresh operations, limits Wal-Mart China capacity with space and inventory as they would need to share storage space with others. The effect this constraint has on Wal-Mart supply chain creates a significant limitation on the quantity of perishable goods that Wal-Mart can keep in their stores. Meager infrastructure makes it tough for Wal-Mart to make any real profit in China as they have seen in US. Currently Wal-Mart China only represents 3% of the company’s profits.

Wal-Mart China has 20 Distribution Centers (DC’S), 11 perishable DC’s and 9 dry. The perishable DC’s are controlled environments with three temperature controls. This allow for them to store frozen goods like Ice Cream, chill for meats and dairy and normal for fresh fruits and eggs. The dry DC’s can store consumable and general merchandise. The DC’s that store the perishables are designed to operate with “flow-through design the used cross-docking to bypass any storage” (Johnson, 2015). This has allowed for the company to directly transfer products from receiving to shipping to the Wal-Mart stores. The volume shipped primarily through cross docking, accounted for 85 percent, with the remainder accounting for staple stock.

With the distribution allowing for suppliers to ship directly to stores, allow for full truck loads, this contributed to the consolidation of DC’s. This also led to ship based on the needs of each individual store. With the implementation of these model DC’s, it allowed for the reduction of supply chain cost and improvement of customer service. It also allowed for the reduction of transportation cost, while improving inventory levels at the DC’s.

The distribution cost for overall cross-dock flow cost about $7.2 million, the staple stock distribution cost was about $11.8 million, due to Material Handling Equipment (MHE). The total distribution costs are rather high since the warehouses must have the capability to store inventory.

[bookmark: _Hlk442869]For Wal-Mart China to truly find success in China, they need to consider investing in the infrastructure, they depend on so heavily. With the geographical challenges they have in cities like Beijing and Shanghai Wal-Mart China needs to not only invest in transportation vehicles that can sustain but also on technology. Many issues in the transportation supply chain are addressed through analytics that are provided by systems like TMS. This would have allowed for Wal-Mart China to make better decision when functioning on a larger scale. Technology creates better processes for integration between the product transportation and visibility of what is in inventory.

When evaluating the warehousing infrastructure, I looked at the differences between the Wal-Mart China DC’s and Walmart US DC’s. The organization prior to 2015 was disjointed on distribution and limited DC’s for perishables. Wal-Mart China comprised of 29 self-directed buying offices across the country, with a working dry network made up of 5 DCs servicing all stores. The warehouses where practically empty in the early years due to the number of suppliers that were direct to store (Johnson, 2015). The infrastructure at the time allowed for local suppliers to control 85 percent of what was being ship directly to store, this contribute to inflated cost, bad customer service and inventory waste. Even though the retail and suppliers followed the “ship-direct-to-store” model it still had issues with stock keep units (SKUs), especially when Wal-Mart carried an average of 15,000 to 20,000 SKU’s. It was just unproductive and unrealistic for the suppliers who had no leverage on the quantity.

Presently, Wal-Mart China warehousing has effectively changed the way they storage. They have implemented cross-dock and staple stock, as part of their supply chain. The cross-dock meets the needs for the perishable foods and staple stock for general and staple products. Wal-Mart has recognized that 95 percent of the products provided to Wal-Mart China is supplied by local suppliers. Wal-Mart China should consolidate food distribution to allow for cost reduction for perishables and improve investment over time to improve the infrastructure in their supply chain.

REWRITE When it comes to the handling of hazardous materials, Walmart would need to take a couple of considerations. One thing the company should take into consideration is the proper control measures that are needed when dealing with hazardous materials. For instance, all staff should be properly trained on how to handle hazardous materials in accordance with regulatory requirements. Another consideration the company should consider is the different storage that would be needed to store the hazardous material properly. For instance, if the company were to handle hazardous materials, they would need to make sure they store the material in accordance with Chinese standards. The impact this would have on warehousing for the current mix of products that Walmart’s supply chain manages would be significant since the company would have to increase their storage abilities to properly store the new material.

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Wal-Mart China Case Study. (2022, Aug 08). Retrieved from