MGMT Final project

Fundamentals of supply chain

MGMT4453
Final project
Comparison of two organizations

Submitted to: Sir Sarfraz Rashid

By: Nouman Nazir (L1S18BBAM0190)
Qudratullah khan (L1S18BBAM)185)
Kashaf Naeem (L1F17BBAM0269)

Date of submission: 9/23/2020

UNIVERSITY OF CENTRAL PUNJAB

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TABLE OF CONTENTS

MEASURES OF INVENTORY PERFORMANCE ………………………………………………………………

5
CONCLUSION……………………………………………………………………………………………. 6
REFERENCES…………………………………………………………………………………………… 7

“This work is dedicated to our respected sir Mr Sarfraz Rashid”

Introduction of organizations
Walmart:
Walmart Inc. is an American multinational retail corporation that operates a chain of
hypermarkets, discount department stores, and grocery stores, headquartered in
Bentonville, Arkansas. The company was founded by Sam Walton in 1962 and
incorporated on October 31, 1969

Best Buy:

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Best Buy Co., Inc. is an American multinational consumer electronics retailer

headquartered in Richfield, Minnesota. It was originally founded by Richard M. Schulze
and James Wheeler in 1966 as an audio specialty store called Sound of Music

Comparison of Walmart and Best Buy Inventory:

(1) Cycle inventory:

 The cycle inventory type is the most significant in Walmart’s business. Finished
goods arrive at the company’s stores. These goods are stored and the inventory is
replenished regularly. Thus, the role of this type of inventory is to support Walmart
store operations, where the finished goods are moved from the company’s
merchandise distribution centers to be sold to the retail buyers at the stores.
 Best buy also has cycle inventory but it is not that huge as compared to Walmart

(3) Safety inventory:

 Walmart uses the safety inventory type in its stores by keeping a small margin of
extra goods in order to maintain business continuity when demand suddenly
fluctuates. For this purpose, there will always be an extra stock of goods at Walmart
stores.
 Best buy does have a safety inventory but it is very limited as compared to Walmart

(3) Seasonal inventory:

 Walmart uses the seasonal inventory type to ensure optimal capacity to satisfy
consumer demand. However, the seasonal inventory type is based on seasonal
changes and corresponding empirical data on seasonal changes in the market. For
example, Walmart dramatically increases its inventory size right before and during
Black Friday to satisfy the massive increase in demand during this special shopping
day.
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 Best buy also use seasonal inventory on special events throughout the year on a low
scale.

(4) Level of product availability:

 Level of product availability is high at Walmart

 Level of product availability is low at Best Buy

Walmart inventory Management

I am going to discuss the Walmart inventory logistics. Walmart uses the cross-decking
inventory tactic which has been proved beneficial for them from a long time. Cross-docking
is a logistics practice that is the centerpiece of Walmart’s strategy to replenish inventory efficiently.
It means the direct transfer of products from inbound or outbound truck trailers without the need for
extra storage, by unloading items from an incoming semi-trailer truck or railroad car and loading
these materials directly into outbound trucks, trailers, or rail cars (and vice versa), with no storage in
between. Suppliers have been delivering products to Walmart’s distribution centers where
the product is cross-docked and then delivered to Walmart stores. Cross-docking keeps
inventory and transportation costs down, reduces transportation time, and eliminates
inefficiencies.

The effective inventory management of Wal-Mart mainly depends on the adoption of information
systems. Wal-Mart used information technology (IT) capacities to control the level of inventory, for
instance, Wal-Mart applied IT to capture the customers’ demand information and then store more
popular products for the customers’ demand leading to an overall reduction in the inventory.
Moreover, computers help Wal-Mart to connect to the vendors. The cooperation between P&G and
Wal-Mart is a successful example for Wal-Mart’s collaborative planning, forecasting, and
replenishment (CPFR) program. This cooperation enables Wal-Mart to maintain the inventory in
retail outlets and establish a reordering system that links all computers of P&G to Wal-Mart’s stores
and warehouses. Furthermore, RFID can also facilitate inventory management because this
technology enables retailers to know where and how many of inventory goods correctly without
counting manually, resulting in time savings for Wal-Mart.

Best Buy Inventory management:

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The system used by Best Buy to control inventory is called RSS (Retek Support System).
The system is self-sufficient that controls all inventory from becoming too high, or to keep it
from dwindling to levels too low. Best Buy uses the P system to control their inventory.
That is a periodic review system, sometimes called a fixed interval reorder system or
periodic reorder system, in which an item's inventory position is reviewed periodically
rather than continuously. The RSS system takes up to hour accounts of inventory. That is,
every time a product is sold the system removes it from inventory and generates an order at
the end of the week for the next shipment. The supply chain is being relied upon to improve
the flow of information. Sales associates are able to access detailed information on product
updates from the time an item is manufactured to its arrival at the store with the system. This
creates a more accurate date to when products will be actually available. Knowing these two
important lead times makes it possible to know when to place an order and how many units
must be ordered to keep production running smoothly. 

Walmart’s vs Best Buy Measures of Inventory Performance:

Considering the size of its business and the variety of products it offers, Walmart uses
numerous variables as measures of inventory performance. The following measures are
some of the most significant:

1. Inventory turnover

2. Stock-out rate

3. Inventory size

Inventory turnover is the rate at which Walmart’s and Best Buy inventory is sold out and
replenished. It is a measure of the cost of keeping each item in stock. A higher inventory
turnover rate is less costly and more desirable for the company. For example Walmart
inventory turnover rate for the 2nd quarter of 2020 was 2.50 while best buy has 1.8. The
stock-out rate is the frequency at which Walmart’s and Best buy inventory becomes
inadequate in satisfying demand. A lower stock-out rate is desirable. Walmart stock out rate

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is lower than best buy. In addition, the company uses inventory size as a gauge of cost.
Walmart have a high levels of inventory while Best Buy has low level of inventory.

Conclusion:

In summary, Walmart have a higher levels of inventory which increases their overall
responsiveness and reduce the costs of production and transportation costs because of
improved economies of scale in both functions. Best buy has low levels of inventory which
reduce their responsiveness and sales because customers are not able to get the desired
product according to their demands. Thus, Walmart is way much more successful and has
one of the best effective supply chains in the world

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Reference

file:///C:/Users/computer/Downloads/Wal-
Marts_Successfully_Integrated_Supply_Chain_an.pdf

http://panmore.com/walmart-inventory-management#:~:text=In
%20inventory%20management%2C%20Walmart%20uses,to
%20offer%20low%20selling%20prices.

http://team1bestbuy.blogspot.com/p/inventory-
management.html#:~:text=The%20type%20of%20inventory
%20Best,where%20demand%20is%20highly%20predictable.

https://en.wikipedia.org/wiki/Best_Buy

https://en.wikipedia.org/wiki/Walmart

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