Analysis Of Inventory Management In Walmart And Amazon
Technology at our fingertips has really changed the way we expect everything. Ordering a product on Amazon and getting a guaranteed delivery date of two days. It seems unreal at some point we were all waiting for our package for seven to ten business days. Two major service companies that mansge their inventories are Walmart and Amazon. The companies both use methodical ways to ensure their customers are happy and keep items in stock. The methods of inventory depend on where the product is coming from, who the seller is and who’s in charge of the product inventory. Inventory is a list of items such as property, goods in stock, or the contents of a building. Walmart’s inventory management program is the reasoning for their success. Walmart uses a vendor-managed inventory model. The model allows suppliers to access data from the company’s systems. Suppliers decide when to send additional products based on current inventory and the rate at which goods are sold. This allows the company to be in control of their products shelf-life. They can send more products and hope it sells fast or monitor how quickly the product is selling and determine whether to send Walmart on the following shipment. This eliminates the hiccups of not having a product in stock. Walmart uses multiple ways to determine inventory on goods. Finished Goods Inventory to replenish products that are sold. Transit Inventory to replenish good that take more time to get to the store. Buffer Inventory is when a small quantity of are stored in case of a fluctuation in demand. Anticipation Inventory is based on seasonal changes. “Inventory supports Walmart’s cost leadership strategy through cost minimization. Walmart’s cross-docking as a form of the just-in-time inventory method also helps reduce inventory costs by minimizing inventory. This combined approach supports the company’s profitability and financial soundness.” Since its competition with Target and Amazon, the company has opted to same day ship for some products and one hour pick up. Amazon has over three-billion products available for sales. Amazon uses a fulfillment and inventory management strategy. They provide means for vendors to advertise and sell their products to customers. Amazon also stores the items in its centers, pick, pack, and ship them, and provide customer service like handling returns. The warehouse uses multiple inventory methods. Lean inventory management is having just enough inventory to keep up with demand.
Inventory stock is not so much that it is harmful to the business. Amazon soon noticed how hard it would be to find items with billions of products available. They decided revamping their warehouses to make it easier for workers to locate, sort, and ship customer orders. Items that are generally ordered together or commonly purchased in bundles are in close range to each other. They use a similar system to Walmart’s inventory management software to estimate customer demand and reduce stock-outs. Vendor Managed Inventory is when suppliers restock items every time a product hits its reorder number. This method allows suppliers to take care of their own products. Over half of the products listed on Amazon are sold by third party sellers. Vendor Managed Inventory improves delivery times, creates workflow, and increases demand prediction accuracy. According to Fox Business, Amazon is behind on business profits compared to Walmart. Walmart’s sister-store, Sam’s Club, is extremely profitable in the food industry; while amazon is not. Amazon owns Whole Foods but is not showing profits like Walmart is. Amazon is more successful in their third-party sales. Lean operations should be a model for all businesses because it helps reduce unnecessary expenses and allows more room for goods that are high in demand. Adopting management systems, can significantly transform manual tasks and increase visibility. Partnering with a company like Amazon, can further simplify your distribution practices and be scalable with the growth of your business. Process layout is a layout that groups resources based on similar functions. For example, food stores typically have all their produce, dairy, frozen, and miscellaneous items all grouped together. This type of layout is seen in companies with intermittent processing systems.
Advantages of this layout are there will be less duplication of machines, offers better and more efficient supervision through specialization at various levels, greater flexibility in equipment Product layout is when the processing equipment and machines are arranged according to the sequence of operations of the product. In this type of layout, only one product of one type of products is produced in an operating area. This product must be standardized and produced in large quantities in order to justify the product layout. The advantages are it lowers total material cost, less work in processes, better utilization of workers and machines, less floor area is occupied by material in transit and for temporary storages. Fixed layout is when production takes place in a fixed location, other materials, parts, tools, machinery, manpower and other supporting equipment’s are brought to this location. Usually equipment is too heavy or too big to be moved around. Combination layout is a combination of two layouts. Usually this is best fit for companies as it provides flexibility. If the good features of all types of layouts are connected, a compromise solution can be obtained which will be more economical and flexible. The companies are both successful. Amazon is forcing its competitors to invest more, lessen delivery time and increase the number of warehouses. Amazon’s supply chain strategies and technological innovations have already changed the way supply chain management works by impending advances in robotics, cashier-free stores, drones and vehicles. Walmart’s inventory strategies have allowed for successful practices and since Amazon offers its super-fast shipping, Walmart now offers next-day delivery. I think both companies will continue to excel and make their consumers happy. The way both companies do inventory have shown its success and I do not think it’s necessary to change anything at this time. Once Amazon expands again, I think they will need to reconsider their layout as they will have an even greater number of goods and expectation of shipping needs.
References
- Amazon Inventory Management Strategy: 3 Ways To Ace It - Clear Spider. Retrieved from https://www.clearspider.com/blog-amazon-inventory-management-strategy/
- Greenspan, R. (2019, February 21). Walmart's Inventory Management. Retrieved from http://panmore.com/walmart-inventory-management
- Lea, B. D. (2019, June 10). Walmart vs. Amazon: Who is ahead in battle for retail dominance? Retrieved from https://www.foxbusiness.com/retail/walmart-amazon-retail-dominance
