Why physical distribution is the key to Wal-Mart’s marketing strategy and lower prices
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Physical distribution, the activities used to move products from producers to consumers and other end users Pride and Ferrell 2008) is important to most retailers but especially Walmart.
Walmart is the largest majority private employerand the largest groceryretailer in the United States. In 2009, it generated 51% of its US$258 billion sales in the U.S. from grocery business. Wal-Mart has 8,500 stores in 15 countries, with 55 different names (wikipedia.org). With so many stores and distribution centers, a top notch, efficient physical distribution is vital to a successful marketing strategy for Walmart.
Walmart and its in store companion were leaders in the implementation of Just in time (JIT) inventory system. The Just in time system is an inventory management approach in which supplies arrives just when needed for production or resale (Pride and Ferrell 2008). The goal of JIT is to improve a business's return on investment by reducing in-process inventory and associated carrying costs (wikipedia.org). This inventory supply system represents a shift away from the older "just in case" strategy where producers carried large inventories in case higher demand had to be met (investopedia.com).
Why Wal-Mart prefers to deal directly with suppliers rather than buying from wholesalers.
One of the main reasons Walmart prefers to deal directly with suppliers rather than buying from wholesalers is the reduction in cost. The second reason would be more control of the product and the price set by the wholesaler. Wholesaler is an individual or organization that sells products that are bought for resale for making other products or for general business operations (Pride and Ferrell 2008).
Walmart being the powerhouse it is will be able to exact more control over the wholesalers, setting the prices, having the technology to determine when the product is needed and using the JIT inventory to reduce storage space required to house products and thus reducing over-head cost of the company
How Wal-Mart’s physical distribution and supply chain management processes and strategies have become a company-wide competitive advantage.
Walmart through the companies use of a precise physical distribution; including suppliers, manufacturers, wholesalers, and use of the JIT inventory management, distribution centers, modes of transportation, superstores and hypermarkets, has been able to become a leader in the its market worldwide. With stores in the US, Mexico, UK, Japan, India, Argentina, Brazil, and Canada require the company to review every aspect of the organization and minimize cost. Physical distribution would be one of the largest expenses outside of employees where the company could save money. In such the company and refined every aspect of the process to reduce cost, increase customer satisfaction and continue to expand in global dominance.
Reference:
Investopedia.com. Retrieved February 10, 2011
http://www.investopedia.com/terms/j/jit.asp
Pride, W. M., & Ferrell, O. C. (2008). Marketing (14th ed.). Boston: Houghton Mifflin.
Wikipedia.org. Retrieved February 10, 2011
http://en.wikipedia.org/wiki/Just-in-time_(business)
Wikipedia.org. Retrieved February 10, 2011
