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DECLARATION

I declare the following that:

Plagiarism Declaration:

The material contained in this paper is the end result of my

own work and that due acknowledgement has been given in

the Bibliography and References to all sources be they

printed, electronic or personal.

The word count of this paper is 5900 words.

Sankal

p Kukal

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ACKNOWLEDGEMENT

Amateurs talk strategy and professionals talk logistics. People can

discuss all sorts of grand strategies and dashing maneuvers but none

of that will be possible without first figuring out how to meet the day-

to-day demands of providing an army with fuel, spare parts, food,

shelter, and ammunition. It is the seemingly mundane activities of the

quartermaster and the supply sergeants that often determine an

armys success.

First I would like to extend my deepest gratitude to my Director,

Professor (Dr.) Suman K. Mukerjee for his constant encouragement that

motivated me to perform to the best of my ability.

Secondly, I express my sincere thanks to my teacher in charge of this

paper, Mr. Amal Kumar Ray for his guidance and advice. Moreover, he

was always ready to provide me with a feedback that helped me to a

great extent in the betterment of my work.

Also, I would like to convey my gratitude to the Learning Resource

Center of our college. It proved to be an excellent source of all relevant

material and information I required.

Sankalp Kukal

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CONTENTS

Topic

Page no.

1. Abstract

1

2. Introduction

2

3. Literature Review

44. Methodology

6

4.1 Introduction to research methodology

6

4.2 Data gathering

7

4.3 Data analysis

8

4.3.1What is Supply Chain Management

8

4.3.2Logistics

8

4.3.3Components of Supply Chain 9

4.3.3.1 Customers

9

4.3.3.2 Retailers/Distributors

10

4.3.3.3 Manufactures

10

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4.3.3.4 Suppliers

10

4.3.4Objectives of Supply Chain Management

11

4.3.5Benefits of Supply Chain Management

12

4.3.6Strategic Fit

13

4.3.6.1 What is Strategic Fit

13

4.3.6.2 How is it achieved

14

4.3.7Supply Chain Drivers

15

4.3.7.1 Production

16

4.3.7.2 Inventory

19

4.3.7.3 Location21

4.3.7.4 Transportation

22

4.3.7.5 Information

24

5. Hypothesis

26

6. Case study WAL-MART

27

7. Conclusion

37

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8. Executive summary

39

9. Annexure

41

10. Bibliography

45

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1. ABSTRACT

A Supply Chain consists of all parties involved, directly or indirectly, in

fulfilling a customer request. The supply chain not only includes the

manufacturer ad suppliers but also transporters, warehouses, retailers

and customers themselves. Within each organization, such as a

manufacturer, the supply chain includes all functions involved in

receiving and filling customer request. These functions include newproduct development, marketing, operations, distribution, finance and

customer service.

2. INTRODUCTION

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Area of Management: International Business is all commercial

transactions private and governmental between two or more

countries. Private Companies undertake such practices for profit and

the Government may or may not do the same in their transactions.International Business comprises a large and growing portion of

worlds total business. Today, global events and competition affect

almost all large and small companies because most sell output to and

secure supplies from foreign countries.

A company operating internationally will engage in modes of

business, such as exporting and importing, which differ from those it is

accustomed to domestically. To operate effectively, managers must

understand these different aspects of international business. Thus, is

the importance of International Business Management in the present

scenario.1

Project topic: A major study in International Business is that of The

Supply Chain Management. It is the area of study and business

improvement that came into prominence in the early 1980s and has

received immense attention from corporate and management experts.

Supply Chain Management can be seen as the process of strategically

managing the procurement, movement and storage of materials, parts

and finished inventory (and related information flows) through the

organization and its marketing channels in such a way that current and

future profitability are maximized through cost effective fulfillment of

orders.2

Objective of present research: The objective of this term paper is to

study the need for Supply Chain Management in the Global Market

today. Businesses the world over are struggling to sustain

competitiveness in a global zing economy.

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3. LITERATURE REVIEW

-The book International Business: An overview explains the major

reasons for business becoming global, these being-

Transportation is quicker

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Communications enable control from afar.

Transportation and communications costs are more

conductive for international operations.

-The book Supply Chain Management elucidates that the major

objectives of supply chain management is to provide the required

level of customer service to a particular customer group.

-The book Logistics by Donald waters describes that the overall aim

ofLogistics is to achieve high customer satisfaction.

-Supply Chain Management: Concepts and Cases primarily aim at

providing a more concrete understanding ofSupply Chain

Management concepts. It explains why many Indian Companies

are experiencing serious problems in managing their supply chain

practice.

-The drivers of Supply Chain Management- (Facilities, Inventory,

Transportation and information) are introduced to us through the

book Supply Chain Management by Sunil Chopra and Peter Meindl.

-Fundamentals of Supply Chain Management by John T.Mentzer

brings to our knowledge the importance of inventory and

information in the supply chain process.

-ICFAI, Supply Chain Management, Case Studies, the books provides

us with a case study on WAL-MART, showing us the evolution of its

supply chain practices.

-http://lcm.csa.iisc.ernet.in,The website provides us with an

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overview of the supply chain management concept.

-Designing of a supply chain network is shown very extensively in

the book Supply Chain Management An Introduction by Chaturvedi,

Braj Mohan, published by the ICFAI press.

-http://www.microsoft.com/industry briefly elucidates the trends of

the components in Supply Chain Management Network.

-The ICFAI Dictionary of Supply Chain Management Terms by Kumar

Pradeep, defines value chain as a sequence of activities that, when

combined, define a business process.

4. METHODOLOGY

4.1 INTRODUCTION TO RESEARCH

METHODOLOGY

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A research methodology defines what the activity of research is, how

to proceed, how to measure progress, and what constitutes success.

It also states the type of data used in the research.

4.2DATA GATHERING

The material of this study comes from an on-line and print

literature review, books on marketing available from the British

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Council Library, the Learning Resource Center in our college and

The National Library. The content has been gathered from

extensive reading and analysis of the various marketing books

written by various authors in this field of management as well as

extensive searches of various websites and articles available.

4.3DATA ANALYSIS

4.3.1 What is Supply chain Management?

All over the world, organizations are under pressure to reduce

product development times, improved product quality and

reduce product lead times and costs. Organizations have

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recognized the need for better coordination with upstream

firms that supply units and the network of downstream firms

responsible for the distribution of their products to consumers

and after sales service. This has resulted in the emergence of

the concept of Supply Chain Management (As shown in

figure 1 of the annexure), -advocating the integration of

business processes across the supply chain to reduce costs

and improve the responsiveness of producers to consumers

demands.3

4.3.2 LogisticsAll organizations move materials. Manufacturers build

factories that collect raw materials from suppliers and deliver

finished goods to customers; retail shops have regular

deliveries from wholesalers.

Logistics is the function that is responsible for this movement.

It is responsible for the transport and storage of materials on

the journey between suppliers and customers. Ordinarily we

only see a small part of logistics. We might see lorries driving

down a motorway, visit a shopping mall and drive through a

trading estate. However, these are the visible signs of a huge

industry.

People use different names for supply chains of activities and

organizations. When hey emphasize on operations they refer

to the process; when they emphasize marketing, they call it

logistics channel; when they look at the value added, they

call it a value chain; when they see how customer needs are

satisfied, they call it a demand chain. The movement of

materials in generally called supply chain.4

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4.3.3.3 Manufacturers

The manufacturer plays a key role in deciding the structure

of a supply chain. Depending on the market situation, the

manufacturer either uses the pull or the push strategy to

generate demand required for the movement of products

in the supply chain.

4.3.3.4 Suppliers

Suppliers facilitate the manufacturers production process

by ensuring continuous supply of raw materials.

Manufacturers place orders with suppliers on the basis of

forecasted customer demand. Since it is very difficult to

forecast demand accurately, manufacturers try to integrate

their processes with those of the suppliers to be in a better

position to respond to fluctuations in customer demands.

Suppliers help manufacturers to decrease their inventory

levels by arranging for just in time supplies.

4.3.4 O bjectives of Supply Chain

Management

One of the major objectives of supply chain management is

to reduce the total amount of resources necessary to

provide the required level of customer service to a

particular customer group. Some of the objectives of

supply chain management are to:

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Reduce inventory levels

Improve customer service

Make more efficient use of human resources Ensure better delivery through reduced cycle times

Increase the sharing of information and technology

among the participants in the supply chain

Decrease the time required to market new products

Enable firms to focus on core competencies

Enhance the public image of companies

Induce greater trust and interdependence betweensupply chain partners

Increase shareholder value

Gain competitive advantage over others.5

4.3.5 B enefits of Supply Chain Management

The following list suggests some benefits of a well-

designed Supply Chain:

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Producers locate operations in the best

locations, regardless of the locations of their

customers.

By concentrating operations in large facilities,

producers can get economies of scale.

Producers do not keep large stocks of finished goods,

as these are held further down the supply chain

nearer to customers.

Wholesalers place large orders, and producers pass

on lower unit costs in price discounts.

Wholesalers keep stocks from many suppliers, giving

retailers a choice of goods.

Wholesalers are nearer to retailers and have short

lead times.

Retailers carry less stock as wholesales provide

reliable deliveries.

Retailers can have small operations, giving a

responsive service near to customers.

Transport is simpler, with fewer, larger deliveries

reducing costs.

Organizations can develop expertise in specific types

of operations.6

4.3.6 Strategic Fit

4.3.6.1 What is strategic fit?

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Strategic fitmeans that both the competitive and supply chain

strategies have the same goal. It refers to consistency between

the customer priorities that the competitive strategy hopes to

satisfy and the supply chain capabilities that the supply chain

strategies aim to build. All functions that a part of a companys

value chain contributes to its success or failure. These functions

do not operate in isolation; no one function can ensure the

chains success. Failure at any one function, however, may lead

to the failure of the overall chain. A companys success or failure

is thus closely linked to the following keys:

The competitive strategy and all functional strategies must

fit together to form a coordinated overall strategy. Each

functional strategy must support other functional

strategies and help a firm reach its competitive strategy

goal.

The different functions in a company must appropriately

structure their processes and resources to be able to

execute these strategies successfully.

A company may fail either because of lack of strategic fit orbecause its processes and resources do not provide the

capabilities to support the desired strategic fit. In thinking of

major tasks of a CEO, there are few greater than the job of

aligning all of the core functional strategies with the overall

competitive strategy to achieving strategic fit. If this

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alignment is not achieved, conflicts between different

functional goals arise. Such conflicts result in different

functions targeting different customer priorities. As processes

and resources are structured to support functional goals, a

conflict in functional goals leads to conflicts during execution.

4.3.6.2 How is strategic fit achieved?

A competitive strategy will specify, either explicitly or

implicitly, one or more customer segments that a company

hopes to satisfy. To achieve strategic fit (as shown in figure 3

in the annexure), a company must ensure that its supplychain capabilities supports its ability to satisfy the targeted

customer segments.7

There are three basic steps to achieving strategic fit:

Understanding the customer and supply chain

uncertainty where first a company must understand

the customer needs for each targeted segment and

the uncertainty the supply chain faces in satisfying

these needs. These needs help the company define

the desired cost and service requirements. The

supply chain uncertainty helps the company identify

the extent of disruption and delay the supply chain

must be prepared for. Understanding capabilities of

the different supply chains, each of which is designed

to perform different tasks well. A company must

understand what its supply chain is designed to do

well.

To achieve a strategic fit by restructuring the supply

chain to support the competitive strategy or alter its

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strategy in case a mismatch exists between what the

supply c chain does particularly well and the desired

customer needs.8

4.3.7 S upply Chain Drivers

How does the Supply Chain work?

The goal or mission of supply chain management can be

defined using Mr. Goldratts words as Increase throughput

while simultaneously reducing both inventory and operating

expense. In this definition throughput refers to the rate at

which sales to the end customer occur. Depending on the

market being served, sales or throughput occurs for

different reasons. In some markets customers value and will

pay for high levels of service. In other markets customers

seek simply the lowest price for an item.

There are five areas where companies can make decisions

that will define their supply chain capabilities:

Production Inventory Information Transportation

Chopra and Meindl define these areas as performance

drivers that can be managed to produce the capabilities

needed for a given supply chain. Effective supply chain

management calls first for an understanding of each driver

and how it operates. Each driver has the ability to directly

affect the supply chain and enable certain capabilities. The

next step is to develop an appreciation for the results that

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can be obtained by mixing different combinations of these

drivers (as shown in figure 4 of the annexure).

Following are the drivers:

4.3.7.1 Production

Production refers to the capacity of a supply chain to make

and store products. The facilities of production are

factories and warehouses. The fundamental decision that

managers face when making production decisions is how

to resolve the trade-off between responsiveness and

efficiency. If factories and warehouses are built with a lot

of excess capacity, they can be very flexible and respond

quickly to wide swings in product demand. Facilities where

all or almost all capacity is being used are not capable of

responding easily to fluctuations in demand. On the other

hand, capacity costs money and excess capacity is idle

capacity not in use and not generating revenue. So themore excess capacity that exists, the less efficient the

operation becomes.

Factories can be built to accommodate one of the two

approaches to management:

Product focusA factory that takes a product focus

performs the range of different operations required to

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make a given product line from fabrication of different

product parts to assembly of these parts.

Functional focusA functional approach concentrates

on performing just a few operations such as only

making a select group of parts or only doing assembly.

These functions can be applied to making many

different kinds of products.A product approach tends to

result in developing expertise about a given set of

products at the expense of expertise about anyparticular function. A functional approach results in

expertise about particular functions instead of expertise

in a given product. Companies need to decide which

approach or what mix of these two approaches will give

them the capability and expertise they need to best

respond to customer demands. As with factories,

warehouses too can be built to accommodate different

approaches. There are three main approaches to use in

warehousing:

Stock keeping unit (SKU) storageIn this traditional

approach, all of a given type of product is stored

together. This is an efficient and easy to understand

way to store products.

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Job lot storageIn this approach, all the different

products related to the needs of a certain type of

customer or related to the needs of a particular job are

stored together. This allows for an efficient picking and

packing operation but usually requires more storage

space than the traditional SKU storage approach.

Cross dockingAn approach that was pioneered by

Wal-Mart in its drive to increase efficiencies in its supply

chain. In this approach, product is not actually

warehoused in the facility. Instead the facility is used to

house a process where trucks from suppliers arrive and

unload large quantities of different products. These

large lots are then broken down into smaller lots.

Smaller lots of different products are recombined

according to the needs of the day and quickly loaded

onto outbound trucks that deliver the products to their

final destination.9

4.3.7.2 Inventory

Inventory is spread throughout the supply chain and

includes everything from raw material to work in process to

finished goods that are held by the manufacturers,

distributors, and retailers in a supply chain. Again,

managers must decide where they want to position

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themselves in the trade-off between responsiveness and

efficiency. Holding large amounts of inventory allows a

company or an entire supply chain to be very responsive to

fluctuations in customer demand. However, the creation

and storage of inventory is a cost and to achieve high

levels of efficiency, the cost of inventory should be kept as

low as possible.

There are three basic decisions to make regarding the

creation and holding of inventory:

Cycle InventoryThis is the amount of inventory

needed to satisfy demand for the product in the period

between purchases of the product. Companies tend to

produce and to purchase in large lots in order to gain

the advantages that economies of scale can bring.

However, with large lots also comes an increase in

carrying costs. Carrying costs come from the cost to

store, handle, and insure the inventory. Managers face

the trade-off between the reduced cost of ordering andbetter prices offered by purchasing product in large lots

and the increased carrying cost of the cycle inventory

that comes with purchasing in large lots.

Safety InventoryInventory that is held as a buffer

against uncertainty. If demand forecasting could be

done with perfect accuracy, then the only inventory that

would be needed would be cycle inventory. But sinceevery forecast has some degree of uncertainty in it, we

cover that uncertainty to a greater or lesser degree by

holding additional inventory in case demand is suddenly

greater than anticipated. The trade-off here is to weigh

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the costs of carrying extra inventory against the costs of

losing sales due to insufficient inventory.

Seasonal InventoryThis is inventory that is built up

in anticipation of predictable increases in demand that

occur at certain times of the year. For example, it is

predictable that demand for anti-freeze will increase in

the winter. If a company that makes anti-freeze has a

fixed production rate that is expensive to change, then

it will try to manufacture product at a steady rate all

year long and build up inventory during periods of low

demand to cover for periods of high demand that will

exceed its production rate. The alternative to building

up seasonal inventory is to invest in flexible

manufacturing facilities that can quickly change their

rate of production of different products to respond to

increases in demand. In this case, the trade-off is

between the cost of carrying seasonal inventory and the

cost of having more flexible production capabilities.10

4.3.7.3 Location

Location refers to the geographical sitting of supply chain

facilities. It also includes the decisions related to whichactivities should be performed in each facility. The

responsiveness versus efficiency trade-off here is the

decision whether to centralize activities in fewer locations to

gain economies of scale and efficiency, or to decentralize

activities in many locations close to customers and suppliers

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in order for operations to be more responsive. When making

location decisions, managers need to consider a range of

factors that relate to a given location including the cost of

facilities, the cost of labor, skills available in the workforce,

infrastructure conditions, taxes and tariffs, and proximity to

suppliers and customers. Location decisions tend to be very

strategic decisions because they commit large amounts of

money to long-term plans. Location decisions have strong

impacts on the cost and performance characteristics of a

supply chain. Once the size, number, and location of

facilities is determined, that also defines the number of

possible paths

Through which products can flow on the way to the final

customer. Location decisions reflect a companys basic

strategy for building and delivering its products to market.

4.3.7.4 Transportation

This refers to the movement of everything from raw

material to finished goods between different facilities in a

supply chain. In transportation the trade-off between

responsiveness and efficiency is manifested in the choice of

transport mode. Fast modes of transport such as airplanes

are very responsive but also more costly. Slower modes

such as ship and rail are very cost efficient but not as

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responsive. Since transportation be as much as a third of the

operating cost of a supply chain, decisions made here are

very important.

There are six basic modes of transport that a company can

choose from:

Ship:It is very cost efficient but also the slowest mode

of transport. It is limited to use between locations that

are situated next to navigable waterways and facilities

such as harbors and canals.

Rail: it is also very cost efficient but can be slow. This

mode is also restricted to use between locations that

are served by rail lines.

Pipelines: It can be very efficient but are restricted to

commodities that are liquids or gases such as water, oil,

and natural gas.

Trucks: These are a relatively quick and very flexible

mode of transport. Trucks can go almost anywhere. The

cost of this mode is prone to fluctuations though, as the

cost of fuel fluctuates and the condition of roads varies.

Airplanes: These are a very fast mode of transport and

are very responsive. This is also the most expensive

mode and it is somewhat limited by the availability of

appropriate airport facilities.

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Electronic Transport: Itis the fastest mode of

transport and it is very flexible and cost efficient.

However, it can only be used for movement of certain

types of products such as electric energy, data and

products composed of data such as music, pictures, and

text.

Someday technology that allows us to convert matter to

energy

and back to matter again may completely rewrite the theory

and practice of supply chain management. Given these

different modes of transportation and the location of the

facilities in a supply chain, managers need to design routes

and networks for moving products. A route is the path through

which products move and networks are composed of the

collection of the paths and facilities connected by those paths.

As a general rule, the higher the value of a product (such as

electronic components or pharmaceuticals), the more itstransport network should emphasize responsiveness and the

lower the value of a product (such as bulk commodities like

grain or lumber), the more its network should emphasize

efficiency.

4.3.7.5 Information

Information is used for two purposes in any supply chain:

Coordinating daily activitiesrelated to the

functioning of the other four supply chain drivers:

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production; inventory; location; and transportation. The

companies in a supply chain use available data on

product supply and demand to decide on weekly

production schedules, inventory levels, transportation

routes, and stocking locations.

Forecasting and planning to anticipate and meet

future demands. Available information is used to make

tactical forecasts to guide the setting of monthly and

quarterly production schedules and timetables.

Information is also used for strategic forecasts to guide

decisions about whether to build new facilities, enter a

new market, or exit an existing market. Within an

individual company the trade-off between

responsiveness and efficiency involves weighing the

benefits that good information can provide against the

cost of acquiring that information. Abundant, accurate

information can enable very efficient operating

decisions and better forecasts but the cost of buildingand installing systems to deliver this information can be

very high. Within the supply chain as a whole, the

responsiveness versus efficiency trade-off that

companies make is one of deciding how much

information to share with the other companies and how

much information to keep private. The more

information about product supply, customer demand,market forecasts, and production schedules that

companies share with each other, the more responsive

everyone can be. Balancing this openness however, are

the concerns that each company has about revealing

information that could be used against it by a

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competitor. The potential costs associated with

increased competition can hurt the profitability of a

company.11

5. HYPOTHESIS

Supply chain is the link between the manufacturer

and the end consumer.

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6. CASE STUDY

W al-Mart

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Wal-Mart Background

Wal-Mart is a global retail organization, in the business of

serving customers. In the United States, their operations are

centered operating retail stores and membership warehouse

clubs. International, they are centered on retail stores,

warehouse clubs and restaurants. Their business is to offer

customers quality merchandise at low prices. Wal-Mart

mission is to be the place where prices are low and value and

customer service are high everyday.

Wal-Mart has established critical strategies in multiple

functional areas to hit its goals for supply chain management

excellence:

Financial

Operations

Logistics Processes

People

Facts and Figures

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Annual Sales

$285 billion

Total Employees worldwide 2.1

million

No. Of Stores worldwide

7250

Total number of Suppliers

65,000

No. of pallets shipped by Wal-Mart trucks every week 50

million

Total floor area

18.3sq.miles

Yearly Advertising expenditure $570

million

Highest one-day sales $1.52

billion

No. of Customers at stores worldwide 138

million

Estimated Market capitalization $11.1

trillion

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Wal-Mart Achievements

1970,first retailer-CENTRALIZE DISTRIBUTION SYSTEM

(Hub & Spoke system).

1977, CTN (Computer Terminal Network)-real time

information sharing between Stores & Headquarter and also

between Wal-Mart & suppliers.

1978, Set up of first FULLY AUTOMATED DISTRIBUTION

CENTRE

Employed Advanced Conveyor Belts System for goods

movements.

Made use of logistics technique Cross docking for efficient

goods transportation.

1983, POINT OF SALE (POS) scanning system- at all Wal-

Mart stores.

Suppliers placed Bar Codes on each and every item and case

shipped to Wal-Mart

Installed UPC (Universal product Scanners) to read the bar

codes of products being sold to customers.

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1987, SATELLITE COMMUNICATION SYSTEM (SCS)- virtual

communication link b/w all stores & distribution centers & HQ

via 2-way voice, data & 1-way video.

Managed to achieve JIT inventory replenishment in all the

stores in US.

Sales increased from $1.2b (1980) to $26b (1990).

No of Stores increased from 276 to 1528.

1990, Surpassed K Mart and 1991, Sears Roebuck & Co.

to become the largest Retailing Company in U.S.

Distribution Cost of total sales - 3 % against 4.5 -5% of its

rivals.

Mid 1990s - Full-fledged use of Internet enabled technologies

to manage its Supply Chain.

Wal-Marts Procurement

Wal-Mart emphasized the need to reduce purchasing costs

and offer the best price to the customer.

The company directly procured from manufacturers, by

passing all intermediaries.

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Wal-Mart finalizes a purchase deal only when it is fully

confident that the products being bought is not available

else where at a lower price.

Wal-Mart spends a significant amount of time meeting

vendors and understanding their cost structure.

By making the process transparent, the retailer can be certain

that the manufacturers are doing their best to cut down costs.

Using EDI for Procurement

The computer systems of Wal-Mart were connected to those of

its suppliers.

EDI enabled the suppliers to download purchase orders along with

store-to-store sales information relating to their products sold.

On receiving information about the sales of various products, the

suppliers shipped the required goods to Wal-Marts distribution

centers.

Logistics Management

An important feature of Wal-Marts logistics infrastructure was its

fast and responsive transportation system. More than 3500

companies owned trucks serviced the distribution centers. Wal-

Mart believed that it needed drivers who were committed and

dedicated to customer service. The company hired only

experienced drivers who had driven more than 300,000 accident-

free miles, with no major traffic violation.

Cross-docking

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To make its distribution process more efficient, Wal-Mart also

made use of a logistics technique called cross-docking. In this system, the finished goods were directly picked up

from the manufacturing plant, sorted out and then directly

supplied to the customers.

The system reduced the handling and storage of finished

goods, virtually eliminating the role of the distribution centers

and stores.

Inventory Management

Wal-Mart invested heavily in IT and communication systems

to effectively track sales and merchandise inventories instores across the country.

With the rapid expansion, it was essential to have a good

communication system. Thus, Wal-Mart set up its own satellite

communication system in 1983.

Wal-Mart was able to reduce unproductive inventory by allowing

stores to manage their own stocks, reducing pack sizes across

many product categories, and timely price markdowns.

Instead of cutting the inventory across the board, Wal-Mart

made full use of its IT capabilities to make more inventories

available in the case of items that customers wanted most,

while reducing the overall inventory levels.

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Employees at the stores had the Magic Wand, a hand-held

computer which was linked to in-store terminals through a

radio frequency network.

These helped them to keep track of the inventory in stores,

deliveries, and backup merchandise in stock at the

distribution centers.

The order management and store replenishment of goods

were entirely executed with the help of computers through

the Point-of-Sales (POS) system.

Through this system, it was possible to monitor and track the

sales and merchandise stock levels on the store shelves.

i) Voice-based Order Filling (VOF)

In 1998, Wal-Mart installed a voice-based order filling (VOF)

system in all its grocery distribution centers. Each person

responsible for order picking was provided with a

microphone/speaker headset, connected to the portable (VOF)

system that could be worn on waist belt. They were guided by

the voice to item locations in the distribution centers.

The VOF system also verified quantities picked, and could respond

to a variety of requests such as providing product detail (type,

price, barcode number, etc.)

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By installing the VOF system, Wal-Mart eliminated misspeaks

and product labeling costs since the system did not require

paper lists and labels to be affixed on the goods.

ii) Quick Replenishment

Since the floor area of any Wal-Mart store varied between

40,000 to 200,000 square feet, movement of goods within the

store was an important part of logistics operations.

Wal-Mart made significant investments in IT to quickly locate and

replenish goods at the stores.

iii) Darn Quick Displays

The company asked its suppliers to ship goods in store-ready

displays called pretty darn quick (PDQ) displays. Goods were

packed in PDQ displays that arrived at the stores ready to be

boarded on the racks.Wal-Marts employees could directly replace the empty racks

at the stores with fully packed racks, instead of refilling each

and every item at the racks.

iv) Retail link system

In 1990, Wal-Mart invested approximately $4 billion to build a

retail link system. Retail Link connected Wal-Marts EDI

network with an extranet, accessible to Wal-Marts thousands

of suppliers. More than 10,000 Wal-Mart retail suppliers used

the retail link system to monitor the sales of their goods at

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stores and replenish inventories. Details of daily transactions

(~10 million per day) were processed through this system.

The suppliers could find out how their product was performing

vis--vis competitors products in a particular product

category.

CPFR

By the mid 1990s, Retail Link emerged into an Internet-

enabled SCM system whose functions were not confined to

inventory management alone, but also covered collaborative

planning, forecasting and replenishment (CPFR).

In CPFR, Wal-Mart worked together with its key suppliers on a

real-time basis by using the Internet to jointly determine

product-wise demand forecast.

CPFR is defined as a business practice for business partners

to share forecasts and results data through the Internet, in

order to reduce inventory costs while at the same time,

enhancing product availability across the supply chain.

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Though CPFR was a promising supply chain initiative aimed at a

mutually beneficial collaboration between Wal-Mart and its

suppliers, its actual implementation required huge investments

in time and money. A few suppliers with whom Wal-Mart tried to

implement CPFR complained that a significant amount of time

had to be spent on developing forecasts and analyzing sales

data.

RFID Technology

To reduce costs and increase efficiency, in July 2003, Wal-Mart

asked its top 100 suppliers to be RFID compliant by January

2005.

Wal-Mart planned to replace bar-code technology with RFID

technology.

The company believed that this replacement would reduce its

supply chain management costs and enhances efficiency.

Due to the implementation of RFID, employees were no longer

required to physically scan the bar codes of goods entering

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the stores and distribution centers, saving labor cost and

time.

Wal-Mart expected that RFID would reduce the instances of

stock-outs at the stores. Although Wal-Mart was optimistic

about the benefits of RFID, analysts felt that it would impose a

heavy burden on its suppliers. To make themselves RFID

compliant, the suppliers needed to incur an estimated $20

Million.

Of this, an estimated %50 would be spent on integrating the

system and making modifications in the supply chain

software.12

7. CONCLUSION

It can be concludedthat Supply Chain Management (SCM) is

Maximizing added value and reducing total cost across the

entire trading process through focusing on speed and

certainty of response to the market. Due to globalization,

Supply Chain Management has become a tool for companies

to compete effectively either at a local level or at a global

scale. It has become a necessity especially for manufacturing

industry when it comes to deliver products at a competitive

cost and at a higher quality than their competitors.

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Supply Chain Management helps give an organization

competitive edge through core competencies and a value

advantage.13

Supply chain management remains at the top of the agenda

for many enterprises today as a way to reduce operating

costs and be more responsive to customers. The limitation of

Supply Chain Management is the nature of its process, which

means that there is very little, if any, margin for recovery if

something goes wrong along the way. Retailers have to be

confident that any changes to their systems and processes

will be as seamless and risk-averse as possible. Retailers are

essentially looking at technologies that not only bring

business benefits to their supply chains but also mitigate that

risk at an early stage. They also want a very quick return on

investment.

I expect many companies to adopt more sophisticated supply

chain solutions that allow them to track products all the waythrough the distribution and delivery phase, right up until they

actually hit the shelves. Perhaps more importantly, they will

aim to track by exception. There is also the danger of

functionality overload and the potential for confusion and

missed benefits. However it is recommendedthat a pragmatic

approach in this area will definitely suit the supply

community.14

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8. EXECUTIVE SUMMARY

Supply Chain Management is the management of the movement of

goods and flow of information between an organization and its

suppliers and customers, to achieve strategic advantage. Supply

chain management covers the processes of materials management,

logistics, physical distribution management, purchasing, and

information management.

Supply chain is not a series of links forged together for a common

purpose. However, it minimizes the reality of the chain and how

each link in that chain must design its own logistics process to

function within the chain. As a result, there are supply chains within

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9. ANNEXURE

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(Source: www.myadjutant.com/images/supply_chain.bmp)

FIGURE 2

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(Source:http://www.axtin.com/solutions/images/supply_chain_diagram.jpg)

FIGURE 3

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(Source: www.thinkagain.cn)

FIGURE 4

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Source: http://images.google.co.in/imgres?

imgurl=http://www.tex-

plastics.co.uk/clientfiles/Image/headers/plant_supply)

10. BIBLIOGRAPHY

1. Daniels John D, Lee H.Radebaugh, Daniel P.Sullivan, International

Business: Environments and Operations, Low Priced Tenth Edition,

Published by Pearson Education, Chapter 1, Page 39.

(Page 2 of the present research).

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2. Altekar Rahul V, Supply Chain Management: Concepts and Cases,

Prentice-Hall of India, Chapter1, and Page3-4.

(Page 2 of present research

3. Supply Chain Management, Published by ICFAI Center for

Management Research, Chapter1, Page 4-5.

(Page 8 of the present research)

4. Waters Donald, Logistics: An introduction to Supply Chain

Management, Published by Palgrave Macmillan, Chapter 1,

Page 4.

(Page 9 of the present research)

5. Supply Chain Management, Published by ICFAI Center for

Management Research, Chapter1, Page 4-5 and 13.

(Page 11 of the present research)

6. Waters Donald, Logistics: An introduction to Supply Chain

Management, Published by Palgrave Macmillan, Chapter 2, and

Page 12.

(Page 12 of the present research)

7. http://www.wisegeek.com/what-is-supply-ainmanagement.html.

(Page 14 of the present research)

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15. http://lcm.csa.iisc.ernet.in

(Page 39 of the present research)

16.http://www.supplychainbarain.com

(Page 40 of the present research)

http://lcm.csa.iisc.ernet.in/http://lcm.csa.iisc.ernet.in/