Physical Distribution is smooth and efficient flow of a company’s products through the channels of distribution that is from producer to the end-user. It includes the vital operations such as material handling, warehousing, order processing, inventory management, and transportation. It is important to Wal-Mart’s marketing strategy as they follow a cost-cut approach or cost-leadership incorporating physical distribution and physical distribution service.
According to Wal-Mart’s marketing theme “Satisfaction Guaranteed” physical distribution service is very important as it deals with the temporal and spatial context which gives the purchaser an opportunity to enjoy the psychological and physical attributes related to the product. This leads to a chain reaction resulting in higher sales (RFID, n. d. ). Wal-Mart to be in accordance with their “smile” marketing theme has to make sure that the customers experience is good and he gets what he wants at the store.
This is possible if inventory is well managed and handled [physical distribution enables this]. Physical distribution helps Wal-Mart to keep distant customers happy by a proper order processing system where customer could conveniently place his order and receive it as scheduled. On an average a grocery product takes around 84 days in the channel. The food is not fresh
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Why does Wal-Mart prefer to deal directly with suppliers rather than buying from wholesalers? Wal-Mart stores are known as the largest discounted stores and their prices are considered to be at least 15% lower than other retailers. They have a huge customer base, around 80% of US households shop at Wal-Mart. For such a large retailer it is possible to have direct relationship with the suppliers without including wholesalers. As including wholesalers would increase the cost and this would be in contradiction to the cost cut approach followed by Wal-Mart (Njikun, 2008).
Dealing directly with the suppliers gives them the advantage to avail special benefits and services like discounts. With a strong and large customer base they are also able to dictate terms to the suppliers and pressurize them for further cost cuts in a friendly way. It also provides them with an opportunity to collaborate with the suppliers like Procter & Gamble with Wal-Mart. No supplier would be willing to lose a huge selling store. Direct dealing with suppliers also prevents Wal-Mart from losing sales due to unavailability of goods.
As there is no third party interference and no long-chain in receiving the supplies, the process of receiving deliveries is fast. Wal-Mart is incorporating technology like RFID [Radio Frequency Identification Editorial] which yields best result if the supplier seller relation is direct. Wal-Mart has saved around 16% in out of stock items at RFID enabled stores. This giant discount retailer uses Cross-Docking inventory system which requires the good delivery every 48th hour. For such high reliability a direct dealing is essential with the supplier.
Wal-Mart according to few marketing analysts follow the policy of using its customer power in getting the warehouse cost from suppliers, because of this it has become controversial with its supply chain polices. Q3. How does Retail Link help Wal-Mart better control order processing and inventory management? Retail link is a bridge between Wal-Mart and its vendors / suppliers. Any one supplying to Wal-Mart is given access to Retail Link. This helps the suppliers to stay informed and to make decisions which yield the highest degree of benefit.
It helps suppliers to take care of their business with Wal-Mart. (DSN Retailing Today, 2004) It also gives the history and life of every product so it helps the suppliers to understand their product and quantify their market demand. It holds the record of every item, at every Wal-Mart store every hour of the day for two years. Like below. It is accessed through internet now. (Fishman, 2006). Through retail link the suppliers are able to keep a track of their product at the Wal-Mart store and are continuously updated through customer feedback.
This enables the supplier to alter or make necessary changes to satisfy the customer. As the product is sold out the supplier who is monitoring the sales immediately orders for another batch’s packaging which saves time and ensures that product is available when required. This helps Wal-Mart to concentrate on other issues rather than ordering and dealing with suppliers (Bergdahl, 2006). This has given the suppliers of Wal-Mart to ensure smooth running and availability of their products at the stores.
The issues of inventory management and order processing are dealt by the suppliers and Wal-Mart’s demand of any product is so huge that suppliers just cannot ignore it. Inventory is managed as Retail Link tells which store is out of stock, new product performance and distribution and even sales performance.
Bergdahl, M. (2006). What I Learned From Sam Walton: How to Compete and Thrive in a Wal-Mart World. Wiley DSN Retailing Today, (2004). Wal-Mart and RFID—it’s like Retail Link deja-vu all over again – radio frequency identification – Editorial.
Retrieved September 28, 2008 from http://findarticles. com/p/articles/mi_m0FNP/is_2_43/ai_112792448 Fishman, C. (2006). The Wal-Mart Effect: How the World’s Most Powerful Company Really Works–and How It’s Transforming the American Economy. Penguin Njikun, O. (2008). GLOBAL MARKETING CHANNELS AND PHYSICAL DISTRIBUTION. Retrieved September 28, 2008 from http://mp2globalmarketing. wordpress. com/2008/06/03/global-marketing-channels-and-physical-distribution/ RFID (n. d. ). WAL-MART. Retrieved September 28, 2008 from http://webmsi. free. fr/HEC-MSI-0805-TU-GRB/Wal-Mart. htm