Supply Chain of Wal-mart

1. Supply Chain of Wal-mart

Members:

Chan Man Ching

Chan Mong Tik

Chui Wai Ka

Lam Fei Fei

Man Ka Yu

Background Information of Wal-mart

Supply chain of Wal-mart

Flow chat of the supply chain

Technology used in various stage of SC

Impact of Wal-mart

Types of industry: one stop shopping center

Founder: Sam Walton

Year of establishment: 1962

First store: in Arkansas

Revenues: $315,654,000, 000 in 2005

Stock value from Aug 1972 to May 2006:

Supply chain plays an important role

Supply chain:

a method of collaborating horizontally among suppliers, retailers, and customers to create value

108 centers in USA

Place that various goods are gathered, sorted and delivered to different store

About 80% of merchandises shipped from centers

24 hours operation

Past----written instructions

Now----radio and headphone

Use both hands

Keep contact with the headquarter

Behind or ahead the expectation

Adjust to any sudden changes

Benefit: Cost

Inside distribution centers

equipped with headphone

Computer give direction to driver in voice

What merchandises to transport

Where the merchandises should be carried to

Which truck the merchandises be loaded

Report progress, ahead or behind schedule

Benefit: productivity and efficiency

Standardized bar code system

applied by every supplier

Helps facilitating large scale operation

Pallets passed through conveyor belt are scanned automatically

Product codes are transferred to centralized computer system

Matching with the computer database and generate useful information

What it is. What quantity it is. Which packing compartment and truck to go. Which store to go

Processes take place simultaneously

Save time and labour sorting merchandises

Smooth logistic processes

Radio Frequency Identification System

Use radio waves to identify objects

Tags with microchip and antenna built in

Store data (type, quantity, manufacturer, expired date)

Generate HF signal to transfer data

Allow Wal-mart to keep track of pallets at various stage of supply chain

Sensors in the distribution center detect and receive information from chips

Locate where the pallet is and the condition of it

temperature

Humidity

Automatic senser avoid scanning codes one by one

Basic function

Difficult to penetrate through liquid and metals

UHF signals

Further improve logistics efficiency

Save time identifying merchandises

Convenience in checking inventory

Information pre-stored in the chips = convenience of data processing

Invested in 1983

Simultaneously rang up sales and tracked inventory deductions for rapid re-supply.

Electronic scanning of Uniform Product Codes (UPC)

- to price-mark merchandise

- to ensure accurate pricing

Self-labeling system

The merchandise replenishment process

Installed in 1987

to improve communication between stores

Link all of the stores to headquarter, giving Wal-Marts central computer system real-time inventory data.

Allow sales data to be collected and analyzed daily, and enable managers to adjust immediately.

Daily information of individual store can be compared.

AC ollaborativeP lanning,F orecasting, andR eplenishment program.

Just-in-time inventory program began.

Advantage:

To reduce carrying costs.

Less excess inventory.

Cost of goods is estimated to be 5 to 10 percent less.

Wal-Mart merchandise is tailored to individual markets and individual stores.

Store managers choose which products to display and allocate shelf space.

A store devote only 10% of its square footage to inventory.

Wal-Marts culture stress the key role of associates.

Information and ideas are shared at individual stores.

As Wal-Mart grew, its relationships with some suppliers evolved into partnerships

Sharing information electronically to improve performance.

How do they share information?

Open its databases

Retail Link private extranet system:

- to see exactly how its products are selling and when it might need to up its production

- to give more than 2000 suppliers computer access to point-of-sale data

Advantages:

- Gain more information about the customers.

- Shelves will always be stocked with the right items at the right time.

Enabled an estimated 3600 suppliers (about 90% of Wal-Marts dollar volume) to receive orders and interact with Wal-Mart electronically.

Later expanded to include forecasting, planning, replenishing, and shipping applications.

to replenish stocks

Wal-Mart transmitted sales data, orders of products, delivery plan and reports of warehouse inventory status to them daily

to plan inventory levels, generate purchase orders, and ship exactly what was needed

both benefited from reduced inventory costs and increased sales

Each Wal-Mart department developed computerized, annual strategic business planning packets for its suppliers

including:

departments sales, profitability, and inventory targets, macroeconomic and market trends, and Wal-Marts overall businessfocus

Wal-Marts expectations on them

Suppliers recommendations

Domestic Suppliers:

Wal-mart imported 18 billion worth of goods from 5,000 Chinese suppliers in 2004

Ranked as Chinas 8 biggest trading partner ahead of Russia, Australia and Canada

Used power to squeeze domestic suppliers profit

Wal-mart Defense :

If all of supplier were squeezed dry

Wal-mart no suppliers

Suppliers found ways to survive

do better at what they did before

Wal-mart not only selling foreign imported goods, also encourage the use of domestic American products

Buy American Program

Retained over 1.7 billion in retail purchases that produced offshore.

Domestic workers :

Face keen competition from overseas markets,

offshore manufacturing

Close down of factories

Loss of jobs

Competition with Wal-mart

Competitors cut labors health care benefits and wages

Wal-mart Defense:

Insist not responsible for the off-shoring of manufacturing

Example :

Sanyo ( TV sets producers ) planned to close the plant and move Mexico and Asia.

Wal-mart buys the TV sets from Sanyo if they dont move

Eventually stay in US

Destructive Creation

Shrinking of manufacturing and labor intensive sectors

Technical changes substitute unskilled labor

Create new jobs and expansion in services and technology sector

Estimation : 225,000 job loss by outsourcing in the next 15 years < 1.5% of the job available in 2002

Unemployment is a structural problem ,rather than a cyclical problem

Mismatch of job skills with the market demand

Unskilled labors cannot match with increasing skilled labor demand

Not loss of job , but cannot find a job matches with their skills

Reallocation of capital and technology to the foreign markets

Less to employ domestic workers and invest in local economy

Decline in labor productivity and real incomes of the country

may not necessarily imply a decrease in real income and productivity

For example,

Globalization and lower technology cost,

Lead to higher American productivity growth

added $230 billion extra GDP between 1995 and 2002

Equivalent to extra 0.3% points of growth a year

Documents

Supply Chain of Wal-mart