Operational Planning for Walmart

Operational Planning for Wal-Mart

Introduction

The first Wal-Mart was opened in Rogers, Arkansas, in 1962. By 1969 it was incorporated into Wal-Mart Stores, Inc., and in 1972 went public on the New York Stock Exchange. The company grew steadily across the United States, and by 1990 was the nation's largest retailer. In 1991 and 1994, Wal-Mart moved into Mexico and Canada respectively. By 1997 it was incorporated into the Dow Jones Industrial Average. As of 2005, Wal-Mart has stores in the United Kingdom, and Puerto Rico, and brings in revenue of close to 300 billion dollars a year. In 2006, Wal-Mart invaded the China and India's markets. During the last two decades, Wal-Mart has been able to take advantage of the rise of information technology and the explosion of the global economy to change the balance of power in the business world (Wikipedia, 2006). Today Wal-Mart continues to grow and their success is not only from their sound strategic management planning but also from its implementation of those strategic plans. In other words operational planning has been an important key to their success.

The Definition of Operation Planning

Once plans have been developed, an organization must address how management will be accomplishing be those plans. This involves operational plans that must flow from strategy; specify resource, time issues, and commitment of human resources. Operational plans at the lower - levels of the organization, have a shorter time horizon, and are narrower in scope (Bateman, Snell 2003 p.113). A good example of this is Wal-Mart's main strategic goal. It is to provide quality merchandise at an affordable low cost to consumers. Its operational goals focus on efficient logistics requiring technology and inventory management systems to help reduce costs so it can be passed on to the customer. Operational plans are derived from a tactical plan and are aimed at achieving one or more operational goals (Bateman, Snell 2003 p.113).

Wal-Mart and Their Operational Plans

Wal-mart has a reputation for caring for its customers, of course their employees, and for the prospective public. So Wal-Mart can be an industrial leader for the world of shoppers with an eye for lower affordable prices, company decision makers would continue it's systematic strategies that it's founder and president established years ago. Sam Walton believed in three guiding principles in his strategy planning they were to provide the customer with good value and service, to have a good relationship with its associates, and to be involved with the community. One of the reasons why the company leads the way as the largest marketing business is derived from the company's efficiency in logistics. The use of technology and inventory management systems helps keep product prices at a discount so shoppers can buy and maintain their wallets.

One operational feature that was incorporated in Wal-Mart was its cross-docking inventory system. Cross docking is the process of moving material from the receiving dock to the shipping dock, bypassing storage; cross-docking reduces inventory carrying costs, transportation costs, and costs associated with order fulfillment and material handling. Cross docking has help Wal-Mart to achieve an efficient way to transport their goods which reduces its costs. With the cross docking system goods can be transported to stores rapidly by-passing stock count. This will cut the cost and eliminate extra expenses making sales more liable. This process also gives those in management a little more convenience (St. Onge, 1996).

Wal-mart also has its own transportation system which helps in shipping goods from the warehouse to the store. This allows Wal-Mart to restock their stores more rapidly than that of competitor businesses. Sam Walton's company is provided with one of the highest most prestigious data programs on the industry level. It has a state-of-the-art processor that keeps up with product shipment so that the company is aware of reports of product and items that are in demand (Hoffman, W. 2006).

In Wal-Mart's operational planning, as a market leader it has leveraged in volume with its suppliers. Wal-Mart works with it's sellers until they feel they have the best quality for their money spent (Hoffman, W. 2006). One example, Wal-Mart has an automatic recording system that is in connection with one of their clients which lets Wal-Mart know when it is time to re-stock product. After notification, the store orders a re-supply at the closest Procter and Gamble factory. The product is then transported straight to the branch of the store that separates the product to go to each receiving store. The current plan of operation between this receiving store and Proctor and Gamble creates better coordination which allows Proctor and Gamble to cut its costs giving savings to the buying store (Bolan, C. 2005).

Strengths, Weaknesses, Opportunities, and Threats in Wal-Mart's

Operational Planning

Wal-Mart has established their selves as a market leader by using simple strategy of offering merchandise at lower prices. By the use of efficient logistics that consist of the latest technology and inventory management processes, Wal-Mart improve its buying power, scale of operations, and minimizes cost for the company as one of their strengths (Wal-Mart Stores, Inc. SWOT Analysis 2006).

One of company's weaknesses is the declining prices and diminishing margins. With the increase in operational efficiencies and import of Chinese goods in the US market, Wal-Mart has been suffering from decreasing gross margins in certain product categories due to this price decline (Wal-Mart Stores, Inc. SWOT Analysis (2006).

. Wal-Mart has an opportunity to enter into the banking industry. Every month Wal-Mart currently receives approximately $140 million worth of payments through debit card, credit card, and electronic check transfer. By incorporating operational plans to establishing its own bank, this would help Wal-Mart in saving cash on third-party electronic payment processing (Wal-Mart Stores, Inc. SWOT Analysis 2006).

Wal-Mart is the pinnacle of retail stores and coined the philosophy of the one-stop-shop. Wal-Mart's success and involvement with majority of the population in areas where stores operate makes them a direct target and vulnerable to the common threats within business affairs. The retail market is a congested environment with highly competitive pricing where corporation's reputations

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