• "People think we got big by putting big stores in small towns. Really, we got big by replacing inventory with information."

Sam Walton, Founder of Wal-Mart

Type Discount department store/Public (NYSE: WMT)

Founded   Rogers, Arkansas, USA (1962)

Headquarters   Bentonville, Arkansas, USA

Key people

Sa Walton (1918–1992), Founder H. Lee Scott, CEO S. Robson Walton, Chairman Tom Schowe, CFO

Industry Retail

Products Discount stores, grocery stores, and hypermarkets

Revenue US$351.1 billion (2007)

Industry US$11.3 billion (2007)

Products 1.9 million (2007)

Website http://www.walmart.com

Production Storage Customer

Material Flow and Storage

Information Flow and Storage

Plan Implement Control

Raw Materials

Supply Chain: The sequence of organizations - their facilities, functions, and activities - that are involved in producing and delivering a product or service.

Sometimes referred to as Sometimes referred to as value chains

Source: Adapted from Garrison Wieland for “Wal-Mart’s Supply Chain,” Harvard Business Review 70(2; March–April 1992), pp. 60–71.

Wal-Mart Supply Chain

• Lower inventories• Higher productivity• Greater agility• Shorter lead times• Higher profits• Greater customer loyalty

Wal-Mart gets benefited through Supply Chain

Wal-Mart Strategy

• “Everyday low price”• Effective use of logistics management• Effective inventory control• Bargaining power over suppliers• Global Expansion for new market opportunity

How Wal-Mart Manage the Supply Chain ?

• Procurement and Distribution• Logistics management• Inventory management

Procurement and Distribution Management of

Wal-Mart • Bull whip effect

• Vendor managed inventory

Bull Whip Effect

Occurs when slight demand variability is magnified as information moves back

upstream.

Bull Whip Effect

Vendor Managed Inventory

• A means of optimizing Supply Chain performance in which the manufacturer is responsible for maintaining the distributors inventory levels. The manufacturer has access to the distributors inventory data and is responsible for generating purchase orders.

• Manufacturers generate orders, not distributors or retailers Stocking information is accessed using EDI

• A first step towards supply chain collaboration• Increased speed, reduced errors, and improved service

Logistics Management

• Cross Docking

• Hub and Spoke

Flow-Time Analysis

Point-of-sale system

captures data in real-time

Data is transmitted to warehouses

for Inv. Mgmt.

Retail Link transmits data to supplier

Orders are generated from previous-day

sales

Merchandise is loaded onto trucks using

cross-docking

Merchandise is delivered to

the store

Merchandise is manufactured

based on historical and real-time data

Merchandise is shipped to warehouses

Customer made a

purchase

The store will re-stock the shelves with merchandise

Retail Link – real-time point-of-sales (POS) data transmission

Cross Docking

Fleet of 7,000 trucks in US

Cross docking

• Cross-docking means to take a finished good from the Manufacturing plant and deliver it directly to the customer with little or no handling in the process.

• In purest form this is done directly, with minimal or no warehousing.

Conveyor System

What makes Wal-Mart successful ?

Wal Marts Communication Network

• Cross Docking relies on continuous communication between Wal Mart’s suppliers, distribution centers, and every point of sale system in each store.

• This enables orders to flow in, get packaged and then shipped.

How does Wal-Mart do this?

•Wal Mart operates their own satellite network.

•Wal Mart’s satellite network sends the point of sale (POS) data directly to 4000 vendors

Inventory ManagementThe primary purpose to buffer against any uncertainty that might exist in the supply chain. Since holding of inventories can cost anywhere between 20 to 40 percent of their value, their efficient management is critical in supply chain operations.

These include deployment strategies (push versus pull), control policies --- the determination of the optimal levels of order quantities and reorder points, and setting safety stock levels, at each stocking location

Radio Frequency Identification

• Automated Data collection based on an electronics – not a barcode

• Tag can be imbedded in the product or stuck on the exterior case or pallet

• Reader instead of a barcode scanner • Allows fully automated data collection with the use

of portals• Can read many ID tags at a time

• Bar code and point-of-sale

– data creates an instantaneous computer record of a sale

• Radio frequency identification (RFID)

– technology can send product data from an item to a reader via radio waves

• Internet

– allows companies to communicate with suppliers, customers, shippers and other businesses around the world, instantaneously

Radio Frequency Identification cont…

How does RFID works ?

Information Technology: A Supply Chain Enabler

• Information links all aspects of supply chain• E-business

– replacement of physical business processes with electronic ones

• Electronic data interchange (EDI)– a computer-to-computer exchange of business

documents

• Increased productivity• Reduction of paperwork• Lead time and inventory reduction• Facilitation of just-in-time systems• Electronic transfer of funds• Improved control of operations• Reduction in clerical labor• Increased accuracy

Electronic Data Interchange

What we learned so far….

One of the keys to Wal-Mart's effective logistical system is the flexibility that it has when choosing suppliers. When Wal-Mart negotiates with suppliers and the suppliers know that Wal-Mart will only pay the most competitive prices. This is because it is very easy for them to find another supplier of that particular material with a lower price and very few logistical problems

Another reason that Wal-Mart's prices are so competitive is because they buy in such large quantities that transportation from one end of the supply chain to another is not as costly for additional units. This aspect of the logistical system does not come from skill or expertise it simply comes from the sheer size of the company, but this is still a factor. Wal-Mart buys so many supplies from different places throughout the world, that they have the luxury of using bigger trucks and using less fuel to go back and forth. Also if by chance they have to use shipping services to transport material from one location to another, Wal-Mart will give them so much business that they will get huge discounts

Sources

www.wal-Mart.comwww.altavista.comwww.google.comCase Study of Retail