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by Spixxy on August 31st, 2004

Spixxy

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How do companies like Wal-Mart keep their prices low?

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  • by Alonzo Garbonzo on June 14th, 2005

    Alonzo Garbonzo

    http://www.cio.com/research/scm/edit/012202_scm.html

    Wal-Mart is a pioneer of supply chain management, which is explained below (from the above site).

    Supply chain management is the combination of art and science that goes into improving the way your company finds the raw components it needs to make a product or service, manufactures that product or service and delivers it to customers.

    Let's look at consumer packaged goods as an example of collaboration. If there are two companies that have made supply chain a household word, they are Wal-Mart and Procter & Gamble. Before these two companies started collaborating back in the '80s, retailers shared very little information with manufacturers. But then the two giants built a software system that hooked P&G up to Wal-Mart's distribution centers. When P&G's products run low at the distribution centers, the system sends an automatic alert to P&G to ship more products. In some cases, the system goes all the way to the individual Wal-Mart store. It lets P&G monitor the shelves through real-time satellite link-ups that send messages to the factory whenever a P&G item swoops past a scanner at the register.

    With this kind of minute-to-minute information, P&G knows when to make, ship and display more products at the Wal-Mart stores. No need to keep products piled up in warehouses awaiting Wal-Mart's call. Invoicing and payments happen automatically too. The system saves P&G so much in time, reduced inventory and lower order-processing costs that it can afford to give Wal-Mart "low, everyday prices" without putting itself out of business.

    Comments

    • Interesting stuff. Well written and informative. I'm ready to shop. Does WM sell milk?

      Jodie44

      by Jodie44 on September 12th, 2005

    • Good job and analysis.

      tomsims

      by tomsims on November 20th, 2007

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