Have you ever thought about how a huge company like Wal-Mart keeps their shelves full of all those products.
Well I was looking at their Web site recently and it states that it all comes down to logistics and
that’s how Wal-Mart works when most of us hear the word logistics.
We think of the system that delivers finished goods to the customer.
The part of the business that makes marketing and sales people happy because our customers are happy.
Actually this is known as outbound logistics and it is only a part of the overall logistics function.
Because of this focus on keeping the customer satisfied outbound logistics is of course very important
to every business but it is even more important to a business like Wal-Mart.
Wal-Mart of course has a lot of stores and each of those stores carries a lot of different products.
Each of those products come from many different suppliers in many different locations around the world.
So Wal-Mart has to have a pretty intensive effort to get those many products into their many stores
and into the hands of their many customers.
Distribution centers are of critical importance to Walmart’s outbound logistics system.
These are the places where Wal-Mart receives the merchandise in large volumes and then breaks down those
volumes into smaller sizes to fill the orders from the individual stores.
The size and the number and the location of these distribution centers are very important considerations
for success and success is defined as having the merchandise on the store shelf.
When the customer wants it no out-of-stock Wal-Mart operates 158 distribution centers in the U.S. a
pretty big operation to say the least.
To enable their outbound logistics success Wal-Mart owns and operates one of the largest fleets of trucks
in the United States and they drive about 700 million miles per year to make stronger deliveries.
Believe it or not there are also a huge buyer of transportation services from independent trucking companies.
When businesses especially heavy they outsource part of their delivery process rather than add more
In logistics terms Wal-Mart is known as heavy and outbound logistics.
Their logistics system is focused on getting products from their distribution centers to their stores.
Of course they’re also involved in bringing products from suppliers into distribution centers but suppliers
also deliver to Wal-Mart centers.
So they have a little help with that part of logistics once the merchandise is in the distribution center.
Wal-Mart has the sole responsibility to deliver that merchandise to the final customer.
They are heavy in the outbound flow to the customer.
So there’s a big emphasis on facilities and physical distribution of the products.
Constant changes in products and customers create the need to constantly re-evaluate the size the number
and the location of your distribution centers.
Operating a large truck fleet also means there is a need to continuously reduce the cost of the delivery
system by driving energy efficient trucks alone cost efficient routes if your company is heavy and outbound
logistics your emphasis is on efficiently moving your products from factories through distribution centers
and stores to your customer.
Everything you do is focused on the customer.
I was talking with some people from Boeing Corporation recently and I could not help but notice how
much pride they take in their ability to support their customers needs.
Not just in delivering airplanes but also in delivering spare parts to keep those airplanes flying.
And they should be proud because they are pretty good at this.
But I wonder if they realize how much effort it takes to deliver all the parts and components and subassemblies
to their factories so that those airplanes can be assembled.
This is called in-bound logistics and sometimes it is referred to as inbound to operations logistics.
These are the activities that get the right stuff into the factory or assembly plant at the right time
so you can make the final product for your customer.
Think about it.
Boeing has a lot of stuff going into the factory and only one thing coming out the airplane.
This means they are heavy in inbound logistics.
They have a very heavy inbound flow and a relatively simple outbound flow automobile manufacturers are
another good example of companies that are inbound heavy.
If any one of those components are late the product is delivered late.
It’s as simple as that.
So inbound heavy companies certainly want to consider which suppliers they’ll use and where those suppliers
are located when the suppliers close the supply chain channel to short.
That’s lowering the risk of delivery interruptions.
The more reliable the supplier is the better because you have a greater chance of those parts and components
arriving on time.
Supplier selection is one key to success for inbound heavy companies.
Locating new distribution centers is also a very important consideration.
Now there’s often a bit of confusion here.
Distribution centers are usually known for shipping products to customers but many companies also use
inbound distribution centers.
In some situations I may want to buy in large volumes to get a price discount from my supplier so I
need to store this item somewhere and send it to the factory as needed.
I might also want a kit some items for my assembly plant and this is quite common in making airplanes
and cars for example which have a lot of electronic components and simply put it kitting in the process
of gathering related parts and putting them into a kit that is used for a specific task on the assembly
If I am installing a navigation system for example into a car or a plane there might be 14 different
items that are needed to perform that one task.
Rather than have the assembly worker gather those parts himself it makes a lot of sense to have this
done in advance.
This makes the assembly worker and the plant much more efficient.
The assembly plant orders kits from the distribution center which then orders the 14 individual items
and puts them into a kit to be sent to the plant as needed.
Based on my company’s needs I can operate my own in-bound distribution centers or I can outsource this
to an independent distributor electronic parts distributors add much value by performing kitting functions
for their customers.
Remember however that even if you have someone do this for you you still must manage this very important
activity very closely.
And don’t forget the transportation aspect here.
You have to work very closely with your suppliers to ensure all those parts and components and raw materials
arrive on time to the distribution center or to the plant where you’re picking them up or your suppliers
delivering them to you understanding everyone’s capacity to deliver is very important here.
Are you having an inbound logistics.
If yes it’s a good idea to re-evaluate those capabilities on a regular basis.
For example have you changed any key suppliers lately.
That usually is a signal to do some in-depth analysis as you focus on the factory and their inbound logistics needs.