The strength of US Wal-Mart are logistics
One of the world’s largest retailer’s back bone is the art of ordering, transporting, stocking and track merchandise
Wal-Mart pioneered a sophisticated hub-and-spoke distribution network in America using warehouses to service stores less than a day’s truck drive away. This leads to remove the middlemen, quickly replenish shelves and reduce costs.
In a report of the Wall Street Journal the author states that scanning technology tracks merchandise in distributions centres and flows at 6 mph on 2 miles of conveyor belts onto trucks. Some items spend less than 45 minutes in warehouses.
Supply trucks crisscross America and arrive daily at Wal-Mart’s more than 4000 U.S. stores. Shipments are based on real-time data of shopper purchases, transmitted by the second as employees scan items at store checkouts.
But with e-c-commerce operations starting in the late 1990s, Wal-Mart was less exacting, instead relying on makeshift spaces carved out of store serving warehouses and third party operators to hanjdle the load. Electronics ordered from Walmart.com are often delivered by third parties. Until recently, a warehouse in Carrollton, Georgia, west of Atlanta, has been the only company owned £U.S. distribution centre dedicated to online orders. In comparison, Amazon has spent 15 years building its e-commerce network, with more than 40 warehouses within 35 miles of major cities.
Wal-Mart is about to spend roughly USD 430 million in the ongoing year on e-commerce investments, including a logistics system tailored for web orders. It is building distribution centres, but also will use stores as mini distribution centres. With other words, Wal-Mart is still far away to dominate online retailing. It is obvious that the task is immense, because the fulfilment of online orders demands hundreds of millions of individual items to millions of homes, sometimes within hours. Items received from suppliers must be unpacked, scanned into a data base , and placed on warehouse shelves. When the order is placed, people grab items off massive racks, or from conveyor belts, and place them into boxes for shipment.
Logistics costs account for 3 % of price in average in stores, but they make up 15 % of the price of online orders.
Wal-Mart tries to wring efficiency from its original Georgia e-commerce warehouse on the cheap. Last year Wal-Mart tapped students from the Georgia Institute of Technology to figure out a way to increase the number of products it can process daily between 83000 to 133000 items. One of the students has been employed with Wal-Mart at the Georgia warehouse after her proposal to install additional shelves to hold more stuff. With other words, Wal-Mart does not want to invest high amounts of capital to upgrade infrastructure, but is looking for a low cost fix.