Wal-Mart Supply Chain OM

8/7/2019 Wal-Mart Supply Chain OM

1/39

1

A Business Success

Submitted By:

Saikat RoySaurabh JainSatyam KhandelwalSaswat PatraRashi Singh

Vidu Rastogi


2/39

2


3/39

3


4/39

4


5/39

5


6/39


7/39

The companys founder is Sam Walton.

He was born in 1918 at Oklahoma.

In 1940, he worked for the famous retailer, J CPenney.

7


8/39

Walton gave up the job and decided to set uphis own retail store.

He purchased a store franchise in Arkansas.

Offering significant discounts on prices, hebecame successful and acquired a second store

in 3 years.

8


9/39

By 1969, Walton had established 18 Wal-Martstores.

By late 19 0s, the retail chain had established apharmacy and an auto service center.

In 1980s, Wal-Mart continued to grow due tohuge customer demands in small towns.

9


10/39

Wal-Mart was offering low prices, customersatisfaction guaranteed, and hours that wererealistic for the way people wanted to shop.

Open all night, for university students

By 1984, there were 640 Wal-Mart stores in U.S.

10


11/39

Wal-Mart suffered a setback in 1992, whenWalton died.

But it continued its growth in the 1990s,focusing on overseas stores. 1992, Mexico (joint venture with Cifra)

1994, Canada (acquired 122 Woolco stores from

Woolworth) 199 , Germany (acquired 21 store of Wertkauf)

Korea, Brazil, and so on.

11


12/39

This phenomenal growth of Wal-Mart isattributed to its continued focus on customer

needs and reducing cost through efficientsupply chain management practices.

12


13/39

13


14/39

In the early 19 0s, Wal-Mart became one of thefirst retailing companies in the world tocentralize its distribution system, pioneering

the reta

il hub-and-spoke system.

Under the system, goods were centrallyordered, assembled at a massive warehouse,

knowna

s distribution center (hub), fromwhere they were dispatched to the individualstores (spoke).

14


15/39


16/39

Wal-Mart emphasized the need to reducepurchasing costs and offer the best price to thecustomer.

The company directly procured frommanufacturers, by passing all intermediaries.

16


17/39

Wal-Mart finalizes a purchase deal only whenit is fully confident that the products beingbought is not available else where at a lowerprice.

17


18/39

Wal-Mart spends a significant amount of timemeeting vendors and understanding their coststructure.

By making the process transparent, the retailercan be certain that the manufacturers are doingtheir best to cut down costs.

18


19/39

The computer systems of Wal-Mart wereconnected to those of its suppliers.

EDIena

bled the suppliers to downloa

dpurchase orders along with store-to-store salesinformation relating to their products sold.

On receiving information about the sales ofvarious products, the suppliers shipped therequired goods to Wal-Marts distributioncenters.

19


20/39

An important feature of Wal-Marts logisticsinfrastructure was its fast and responsivetransportation system.

The distribution centers were serviced by morethan 3500 company owned trucks.

20


21/39

Wal-Mart believed that it needed drivers whowere committed and dedicated to customerservice.

The company hired only experienced driverswho had driven more than 300,000 accident-free miles, with no major traffic violation.

21


22/39

To make its distribution process more efficient,Wal-Mart also made use of a logistics techniquecalled cross-docking.

In this system, the finished goods were directlypicked up from the manufacturing plant,sorted out and then directly supplied to thecustomers.

22


23/39

The system reduced the handling and storageof finished goods, virtually eliminating the roleof the distribution centers and stores.

The manufacturer directly forwarded thegoods to a place called the staging area.

The goods were packed here according to theorders received from different stores and thendirectly sent to the respective customers.

23


24/39

Wal-Mart invested heavily in ITandcommunication systems to effectively tracksales and merchandise inventories in storesa

cross the country.

With the rapid expansion, it was essential tohave a good communication system.

Hence, Wal-Mart set up its own satellitecommunication system in 1983.

24


25/39

Wal-Mart was able to reduce unproductiveinventory by allowing stores to manage theirown stocks, reducing pack sizes across manyproduct categories, and timely price

markdowns.

Instead of cutting the inventory across theboard, Wal-Mart made full use of its IT

ca

pa

bilities to ma

ke more inventoriesa

va

ila

blein the case of items that customers wantedmost, while reducing the overall inventorylevels.

25


26/39

Employees at the stores had the MagicWand, ahand-held computer which waslinked to in-store terminals through a radio

frequency network.

These helped them to keep track of theinventory in stores, deliveries, and backupmerchandise in stock at the distributioncenters.

26


27/39

The order management and storereplenishment of goods were entirely executedwith the help of computers through the Point-

of-Sales (POS) system.

Through this system, it was possible to monitorand track the sales and merchandise stocklevels on the store shelves.

27


28/39

Since the floor area of any Wal-Mart storevaried 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 toquickly locate and replenish goods at thestores.

28


29/39

The company asked its suppliers to ship goodsin store-ready displays called pretty darn quick(PDQ) displays.

Goods were packed in PDQ displays thatarrived at the stores ready to be boarded on theracks.

Wal-Marts employees could directly replacethe empty racks at the stores with fully packedracks, instead of refilling each and every itemat the racks.

29


30/39

In 1991, Wal-Mart had invested approximately$4 billion to build aretail link system.

More tha

n 10,000 Wa

l-Ma

rt reta

il suppliersused the retail link system to monitor the salesof their goods at stores and replenishinventories.

Details of daily transactions (~10 million perday) were processed through this system.

30


31/39

Retail Link connected Wal-Marts EDI networkwith an extranet, accessible to Wal-Martsthousands of suppliers.

The suppliers could find out how their productwas performing vis-a-vis competitors productsin a particular product category.

31


32/39

Wal-Mart owned the largest and mostsophisticated computer system in the privatesector.

The company used Massively ParallelProcessor (MPP) computer system to track themovement of goods and stock levels.

All information related to sales and inventorieswas passed on through an advanced satellitecommunication system.

32


33/39

By the mid 1990s, Retail Link had emerged intoan Internet-enabled SCM system whose

functions were not confined to inventorymanagement alone, but also coveredcollaborative planning, forecasting andreplenishment (CPFR).

33


34/39

In CPFR, Wal-Mart worked together with itskey suppliers on a real-time basis by using theInternet to jointly determine product-wise

dema

nd foreca

st.

CPFR is defined as a business practice forbusiness partners to share forecasts and results

da

ta

through theInternet, in order to reduceinventory costs while at the same time,

enhancing product availability across thesupply chain.

34


35/39

Though CPFR was a promising supply chaininitiative aimed at a mutually beneficialcollaboration between Wal-Mart and itssuppliers, its actual implementation required

huge investments in time and money.

A few suppliers with whom Wal-Mart tried toimplement CPFR complained that a significanta

mount of time ha

d to be spent on developingforecasts and analyzing sales data.

35


36/39

In efforts to implement new technologies toreduce costs and increase the efficiency, in July2003, Wal-Mart asked its top 100 suppliers tobe RFID compliant by January, 2005.

Wal-Mart planned to replace bar-codetechnology with RFID technology.

The company believed that this replacementwould reduce its supply chain managementcosts and enhance efficiency.

36


37/39

Because of the implementation of RFID,employees were no longer required tophysically scan the bar codes of goods entering

the stores and distribution centers, saving laborcost and time.

Wal-Mart expected that RFID would reduce theinstances of stock-outs at the stores.

37


38/39

Although Wal-Mart was optimistic about thebenefits of RFID, analysts felt that it wouldimpose a heavy burden on its suppliers.

To make themselves RFID compliant, thesuppliers needed to incur an estimated $20Million.

Of this, an estimated %50 would be spent onintegrating the system and makingmodifications in the supply chain software.

38


39/39

39

Documents

Wal-Mart Supply Chain OM