As the world’s largest retail enterprise, Wal Mart has more than 4,000 stores worldwide, serves 200 million customers every week, and maintains cooperation with 100,000 suppliers. A core reason for Walmart’s stable customer supply and low out-of-stock rate lies in its scientific and standardized restock rules and efficient inventory restock system. Under such a huge scale, Wal Mart has realized the competitive advantage of “daily parity”, the secret of which is the revolutionary inventory management and restock system.
Wal Mart’s most innovative practice is to transfer inventory management and restock responsibility to suppliers. In the traditional mode, retailers need to predict demand, issue orders, and manage inventory and arrange restocks, while Wal Mart’s VMI (Vendor Managed Inventory) mode allows suppliers to independently judge restock time and complete circulating inventory restock. By accessing Wal Mart’s real-time sales data (POS system), suppliers can independently determine the exact restock time and restock quantity for each store and warehouse. This mode minimizes the inventory level of both parties and ensures timely restocks to avoid shortages. Wal Mart saves the tedious purchase and manual restock arrangement business and greatly saves labor and warehousing costs. The cooperation between P&G and Wal Mart is a model of VMI restock collaboration. By sharing real demand information, it effectively alleviates the “bullwhip effect” brought by demand fluctuations and realizes accurate and timely restock.
Wal Mart implements continuous inventory restock and replenishment (CRP) with multiple frequencies and small quantities, which is the core answer to when Walmart restocks its goods. Different from traditional retail’s fixed-cycle restock, Walmart adopts irregular dynamic restock according to real-time sales volume and inventory data. It transmits shipment information by EDI before shipment through ASN (advance shipment list), so that stores can directly put restocked goods on shelves without inspection. This “zero inventory” restock strategy allows Wal Mart to save millions of dollars in storage costs every year and ensure shelf inventory is always sufficient. At the same time, Wal Mart requires that more than 85% of the goods are restocked and supplied by the distribution center, while competitors can only reach 50%, which ensures that stores can focus on sales rather than inventory management and realize rapid batch restock.
Wal Mart is generous in technology investment to realize accurate restock time judgment and automatic restock scheduling. The company invested $400 million to launch a commercial satellite and establish a global networking system that can complete inventory checks for all stores within one hour, so as to quickly judge when each store needs to restock. By establishing an automatic ordering and restock system with suppliers through EDI electronic data exchange, real-time supply chain restock collaboration has been achieved. After entering the AI era, Wal Mart deployed more than 1 million RFID tags, and the inventory accuracy rate reached more than 99%, providing accurate data support for restock time formulation. In 2023, Wal Mart will pilot the application of space-time map neural network (ST-GNN) for multimodal demand forecasting, intelligently predicting restock time and quantity, the out of stock rate of pilot stores will be reduced by 35%, and the inventory turnover rate will be increased by 18%.
Wal Mart’s intelligent restock and inventory management reform has brought amazing financial performance and retail service effects. Between 2001 and 2002, the company’s annual sales increased from $165 billion to $218 billion, a growth of 32%, but inventory only increased by 12.8%, benefiting from precise restock scheduling. What is more noteworthy is that the proportion of its delivery costs to sales revenue had dropped to 3% in 1992, while its competitors were 5-6% during the same period. In recent years, the out of stock rate of Wal Mart has dropped from 2.5% in 2010 to 1.5% in 2020, and the proportion of inventory cost in sales has dropped from 21% to 18%, all thanks to standardized restock time arrangement and intelligent restock decision-making. During Thanksgiving 2023, the AI system accurately judged the restock time for a certain air fryer with surging demand, predicted a surge in demand, and increased regional warehouse inventory in advance, avoiding potential out of stock losses exceeding $5 million.
Wal Mart’s success proves that the competition in retail industry is essentially the competition of supply chain efficiency and restock management capability. By shifting inventory and restock management responsibilities forward, utilizing technological means to achieve real-time inventory visualization and accurate restock time prediction, and establishing deep data sharing with suppliers, enterprises can minimize inventory holding costs while ensuring timely restock and stable service levels. This intelligent restock and inventory linkage model has become the gold standard of global retail inventory and restock management.
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