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Wal-Mart’s operations and supply chain management system
By
Scott Burns

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Love them or hate them, Wal-Mart was founded in 1962 by Sam Walton (Wal-Mart) and
continues to thrive. Wal-Mart’s operations and supply chain management system is
extraordinarily efficient. Wal-Mart is able to tie together the use of its barcode scanning with its
supply system at checkout to allow store managers, warehouses and suppliers to accurately
forecast demand, track and predict inventory levels. This allows the organization to create
highly efficient transportation routes through the use of cross docking and capacity planning at
Wal-Mart warehouses and distribution centers. This leads to lower product costs and highly
competitive pricing for the consumer.
What is capacity planning and how does it benefit an organization? According to
BusinessDictionary.com, capacity planning can be defined as a systematic determination of
resource requirements for the projected output, over a specific period. (BusinessDictionary.com)
Another way of saying this is the process of determining the production capacity needed by an
organization to meet changing demands for its products as well as determining product quantity
needed to meet the demands of customers. This is what allows Wal-Mart to have five
microwaves on the shelf instead of ten thereby allowing more open shelf space for other
merchandise that is in higher demand to be sold. Part of capacity planning is the amount of
capacity or the capacity cushion. In Wal-Mart’s case, the capacity cushion varies depending on
the item and the season. In the winter season, things such as snow shovels, winter clothing and
de-icing materials are stocked at much higher levels than other products. An example of this
could be seen with the forecast of an impending blizzard. Two days before the storm and the
aisles are filled with racks of heavy winter jackets when just the week before the inventory of the
same jackets was half the number. The capacity cushion for the winter jackets, for example,
could be forecasted as an estimated customer demand for a particular product during a specific

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period of time based on historical data. Simply put, looking at past winters, the sales of jackets
before winter storms could predict number of jackets to be sold in future winter months. Now
that the basic fundamental of capacity planning has been covered, could the in-sourcing or out-
sourcing of capacity planning benefit Wal-Mart?
One of the issues with selecting Wal-Mart as the company for this example is that they do
not manufacture their own products per se. When you walk into a Wal-Mart store, you will find
name brand products being offered as well as products offered under the “Great Value” name
brand. Products offered under the “Great Value” brand are other companies contracted by Wal-
Mart to produce the “Great Value” brand for the organization and Wal-Mart uses its logistics to
store and move their inventory around to stock the shelves in their stores across the country.
When discussing whether Wal-Mart should in-source or out-source the production of products, it
needs to be looked at the supplier of Wal-Mart’s inventory.
Recently Wal-Mart has made an announcement that they will begin to in-source
domestically for the products it sells. A copy of the announcement posted on the The Made in
America Movement website states “Wal-Mart and Sam’s Club will buy an additional $50 billion
in U.S. products over the next 10 years.” (Walmart to Boost Sourcing of U.S. Made Products &
Hiring 100k Veterans) This move made by Wal-Mart will not only improve the image of the
organization due to the support of domestically made products but also allow the company to use
capacity planning in regards to reacting to consumer demand. In regards to savings incurred by
the retail giant, it cannot be said at this time due to the lack of financial information published
concerning such a move, but when taking into account the costs of international shipment of
goods versus the domestic movement of the same type of products, the saving would have to be

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there. The other aspect to take into account is the ability to reach back into the supply chain for
quicker resupply of merchandise that has generated a high customer demand.
In summary, the use of capacity planning is a tool companies can use for forecasting
consumer demand not only the manufacturing of products but in regards to retail merchandising
stores such as Wal-Mart. This can be seen in the example of seasonal sales such as winter
clothing, holiday items, etc. Wal-Mart has and continues to use past trend analysis when
determining the need for increased inventory for future sales, this would help determine the
capacity planning needed in regards to the amount of inventory needed. Also, the $50 billion
investment Wal-Mart will make in the purchasing of domestic product could possibly allow for
quicker reactionary resupply to increased customer demand. As operation managers
understanding capacity planning and the ways to use it can benefit both the organization and the
manager.

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References
BusinessDictionary.com. (n.d.). Retrieved 02 22, 2013, from BusinessDictionary.com:
http://www.businessdictionary.com/definition/capacity-planning.html
Wal-Mart. (n.d.). Retrieved 02 22, 2013, from Wal-Mart: http://corporate.walmart.com/our-
story/heritage
Walmart to Boost Sourcing of U.S. Made Products & Hiring 100k Veterans. (n.d.). Retrieved 02
22, 2013, from The Made in America Movement:
http://www.themadeinamericamovement.com/2/post/2013/01/walmart-to-boost-sourcing-
of-us-made-products-hiring-100k-veterans.html