Walmart of China’s poor transportation system contributed to their supply chain inefficiencies. The issues with the transportation was caused by the various amounts of disbursement centers and the distance between them. Although, the company had large cube trucks the issue was that they would only ship with full loads and with the various disbursement centers carrying limited inventory it could take up to two weeks before a shipment was ready. (Johnson, 2015) With this cost effect method for the transportation department many inefficiencies were created for the stores, either empty shelves for lack of product or over packed inventory spaces to avoid running out of goods for sale.
The inefficiencies in Walmart of China’s transportation department is largely since the countries transportation infrastructure is very poor, according to Robert Salomon in his article, Here’s Why Walmart Stumbled on the Road to China. Although recently China has invested heavily in its transportation infrastructure it is still inefficient to transport goods due to both the country’s size and its air, ground, and rail infrastructure does not meet developed country standards. (Salomon, 2016) These inadequacies burdens Walmart financially and erodes its ability to properly supply their facilities with scheduled inventory levels. Especially their highway systems only the larger cities in the country have adequate roadways for travel making the trucking distribution of inventory extremely difficult. Until China’s transportation methods are more efficient the delivering of goods and meeting those supply demands will remain impossible.
Transportation costs of goods in China is four times as high as western countries. (Yanrong, 2013) This is a major concern for Walmart of China, because there is a high risk of impacting profit margins if transportation and logistics were to encounter any inefficiencies. The need to evaluate and rectify any potential gaps in the supply chain can reduce business strains and improve product flow from suppliers to consumers. They have already been successful in consolidating both its distribution centers and purchasing locations to aid in a more efficient distribution hub. With a strong centralized distribution they can now expand its capabilities and connect with the growing distribution networks According to Knowler as of July 2018, China now has over 12,500 miles of high speed rail lines that are now beginning to be utilized to ship cargo items, (Knowler, 2018) and with these new connections to their distribution centers items can be shipped across longer stretches in shorter timelines.
This implementation will enable Walmart to keep pace with a growing economy and the necessity to maintain inventory levels for consumers. With improving distribution, the focus of the transportation department Walmart of China can work with the existing trucking distribution centers by focusing their routes on closer locations making routine stops easier for replenishing their inventory and focusing on implementing the use of the railway cargo system to accommodate the locations that are outside trucking areas. Although this use could be costly to implement the return on investment could be strong because the stores will stay stocked with inventory to maintain profits.
Walmart of China has been damaged with supply chain inadequacies which embodied multiple warehouse locations without central direction and alliance. In 2011, Walmart of China had five distribution centers that serviced all their stores, which suffered for operation shortfalls and could not properly service both product suppliers in the stores. This lead to many stores taking on the extra cost of renting extra warehouse space to store extra inventory so they could keep their shelves stocked. To fulfill this space Walmart of China has increased their amount of distribution centers to 20 by 2015. (Johnson, 2015) Along with expanding physical locations they consolidated the buy offices and adopted the Walmart of the United States warehousing strategies of cross docking and staple stock. (Johnson, 2015) With the increased distribution centers, they solicited third party logistic service providers to aid in inventory requirements. Some of this is a shared space with limited availability, it was a critical decision to allow proper support to maintain current growth and forecasted demand. Walmart of China runs a risk of limited space in a short amount of time when using third party providers.
These distribution centers have successfully adopted the practice of cross docking and staple stocking to reduce inventory holding costs and warehouse space requirements. The ability to cross dock allows warehouse flexibility and the ability to service a larger number of stores and products with little to no barriers since the items are rapidly transferred to another truck within the facility. This practice does however become problematic when it comes to scheduling with both product and store delivery distributers. Logistics must be scheduled proficiently, if not deliveries will become conflicted. To prevent this conflict, they need to use the staple stock method, where they store warehouse inventory and tactically load the crates for delivery. This allows for easy substitutions to prevent any mistakes. By applying these strategic methods, it has allowed Walmart of China to reduce costs that effect their competitive customers pricing.
The ability to securely hold hazardous material has become a large concern as of late 2015, after a warehouse explosion in Tianjin. The explosion was due to the improper handling of hazardous materials in a warehouse facility. This resulted in increasing investigations to ensure hazardous materials or dangerous goods are stored within the safety compliant measures. (Trayner, 2015) This has resulted in an increase of security which end results were two harbors being shut down. This presents real adversity for supply chain practitioners who are used to holding a safety stock of product after import in a licensed DG warehouse; and likewise, for those who are used to manufacturing for stock and then shipping for export or domestic sale at short notice. This possibility now no longer exists. Stocks have had to be eliminated, and production cycles for export now need to match exactly the departure of the intended vessel so that the container can be carried straight from the factory to the harborside DG warehouse. (Krassenstein, 2016) The importance of a dangerous goods qualified warehouse is a necessity to facilitate the ability to supply hazardous material products to Walmart of China’s consumers.
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