WalWal-Marts Supply Chain

A Business Success

WalWal-Mart is the Worlds Largest Retail Company

Ranked first in the Global Fortune 500 list in 2001-2002 financial year 2001-

History of Wal-Mart Wal

The companys founder is Sam Walton. He was born in 1918 at Oklahoma. In 1940, he worked for the famous 1940, retailer, J C Penney.

History of Wal-Mart Wal-Mart

 Walton

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

He purchased a store franchise in Arkansas. Offering significant discounts on prices, he became successful and acquired a second store in 3 years.
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History of Wal-Mart Wal-Mart



By 1969, Walton had established 18 Wal1969, WalMart stores. By late 1970s, the retail chain had 1970s, established a pharmacy and an auto service center. In 1980s, Wal-Mart continued to grow due 1980s, Walto huge customer demands in small towns.
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History of Wal-Mart Wal-Mart



WalWal-Mart was offering low prices, customer satisfaction guaranteed, and hours that were realistic for the way people wanted to shop.
Open all night, for university students

 By

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

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History of Wal-Mart Wal-Mart



WalWal-Mart suffered a setback in 1992, 1992, when Walton died. But it continued its growth in the 1990s, 1990s, focusing on overseas stores.
1992, Mexico (joint venture with Cifra) 1992, 1994, Canada (acquired 122 Woolco stores 1994, from Woolworth) 1997, Germany (acquired 21 store of 1997, Wertkauf) Korea, Brazil, and so on.
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The Diffusion of Wal-Mart Wal-

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History of Wal-Mart Wal-Mart



This phenomenal growth of WalWalMart is attributed to its continued focus on customer needs and reducing cost through efficient supply chain management practices. practices.

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Hub and Spoke System



In the early 1970s, Wal-Mart became one 1970s, Walof the first retailing companies in the world to centralize its distribution system, pioneering the retail hub-and-spoke hub-andsystem. Under the system, goods were centrally ordered, assembled at a massive warehouse, known as distribution center (hub), from where they were dispatched hub), to the individual stores (spoke). (spoke).
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Hub and Spoke System System

 The

hub and spoke system enabled WalWal-Mart to achieve significant cost advantages by the centralized purchasing of goods in huge quantities.. quantities..
and distributing them through its own logistics infrastructure to the retail stores spread across the U.S.

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WalWal-Marts Procurement
 Wal-Mart Wal-

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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WalWal-Marts Procurement Procurement

 Wal-Mart Wal-

finalizes a purchase deal only when it is fully confident that the products being bought is not available else where at a lower price. price.

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WalWal-Marts Procurement Procurement

 Wal-Mart Wal-

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.
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Using EDI for Procurement



The computer systems of Wal-Mart were Walconnected to those of its suppliers. EDI enabled the suppliers to download purchase orders along with store-to-store store-tosales information relating to their products sold. On receiving information about the sales of various products, the suppliers shipped the required goods to Wal-Marts Waldistribution centers.
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WalWal-Mart and China

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Logistics Management
 An

important feature of Wal-Marts Wallogistics infrastructure was its fast and responsive transportation system.

 The

distribution centers were serviced by more than 3500 company owned trucks.
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Logistics Management Management

 Wal-Mart Wal-

believed that it needed drivers who were committed and dedicated to customer service. company hired only experienced drivers who had driven more than 300, 300,000 accident-free miles, with no accidentmajor traffic violation.
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 The

CrossCross-docking


To make its distribution process more efficient, Wal-Mart also made use of a Wallogistics technique called cross-docking. crossIn this system, the finished goods were directly picked up from the manufacturing plant, sorted out and then directly supplied to the customers.

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CrossCross-docking


The system reduced the handling and storage of finished goods, virtually eliminating the role of the distribution centers and stores. The manufacturer directly forwarded the goods to a place called the staging area. The goods were packed here according to the orders received from different stores and then directly sent to the respective customers.
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Inventory Management


WalWal-Mart invested heavily in IT and communication systems to effectively track sales and merchandise inventories in stores across the country. With the rapid expansion, it was essential to have a good communication system. Hence, Wal-Mart set up its own satellite Walcommunication system in 1983. 1983.
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Inventory Management Management



WalWal-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 Walcapabilities to make more inventories available in the case of items that customers wanted most, while reducing most, the overall inventory levels.
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Inventory Management Management



Employees at the stores had the Magic Wand, a hand-held computer which handwas linked to in-store terminals through a inradio frequency network. These helped them to keep track of the inventory in stores, deliveries, and backup merchandise in stock at the distribution centers.
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Inventory Management Management



The order management and store replenishment of goods were entirely executed with the help of computers through the Point-of-Sales (POS) system. Point-ofThrough this system, it was possible to monitor and track the sales and merchandise stock levels on the store shelves.
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VoiceVoice-based Order Filling (VOF)



In 1998, Wal-Mart installed a voice-based 1998, Walvoiceorder 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.
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VoiceVoice-based Order Filling (VOF) (VOF)



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.) By installing the VOF system, Wal-Mart Waleliminated mispicks and product labeling costs since the system did not require paper lists and labels to be affixed on the goods.
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Inventory Management (quick replenishment)



Since the floor area of any Wal-Mart store Walvaried between 40,000 to 200,000 square 40, 200, feet, movement of goods within the store was an important part of logistics operations. WalWal-Mart made significant investments in IT to quickly locate and replenish goods at the stores.
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Inventory Management (pretty darn quick displays)



The company asked its suppliers to ship goods in store-ready displays called pretty storedarn quick (PDQ) displays. Goods were packed in PDQ displays that arrived at the stores ready to be boarded on the racks. WalWal-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.
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Inventory Management Management (retail link system) system)



In 1991, Wal-Mart had invested 1991, Walapproximately $4 billion to build a retail $4 link system. system. More than 10,000 Wal-Mart retail 10, Walsuppliers used the retail link system to monitor the sales of their goods at stores and replenish inventories. Details of daily transactions (~10 million (~10 per day) were processed through this system.
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Inventory Management Management (retail link system) system)

 Retail

Link connected Wal-Marts EDI Walnetwork with an extranet, accessible to Wal-Marts thousands of suppliers. Walsuppliers could find out how their product was performing vis-avisvis competitors products in a particular product category.
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 The

Inventory Management Management (retail link system) system)



WalWal-Mart owned the largest and most sophisticated computer system in the private sector. The company used Massively Parallel Processor (MPP) computer system to track the movement of goods and stock levels. All information related to sales and inventories was passed on through an advanced satellite communication system.
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CPFR
 By

the mid 1990s, Retail Link had 1990s, emerged into an Internet-enabled InternetSCM system whose functions were not confined to inventory management alone, but also covered collaborative planning, forecasting and replenishment (CPFR).

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CPFR


In CPFR, Wal-Mart worked together with CPFR, Walits key suppliers on a real-time basis by realusing the Internet to jointly determine productproduct-wise demand forecast. CPFR is defined as a business practice for business partners to share forecasts and results data through the Internet, in Internet, order to reduce inventory costs while at the same time, enhancing product availability across the supply chain.
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CPFR: Hard to implement



Though CPFR was a promising supply chain initiative aimed at a mutually beneficial collaboration between Wal-Mart Waland its suppliers, its actual implementation required huge investments in time and money. A few suppliers with whom Wal-Mart tried Walto implement CPFR complained that a significant amount of time had to be spent on developing forecasts and analyzing sales data.
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VAN EDI vs Web-EDI Web

In October 2002, Wal-Mart asked its 2002, Wal14, 14,000 suppliers to switch over from the existing Value Added Networks (VAN) EDI to web enabled EDI. VANs route and manage EDI messages for their customers. By implementing web-EDI, Wal-Mart can webWalsave millions of dollars in the form of license fees to the private VANs.
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VAN EDI vs. Web-EDI Web-

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RFID Technology
(Radio Frequency Identification)


In efforts to implement new technologies to reduce costs and increase the efficiency, in July 2003, Wal-Mart asked its 2003, Waltop 100 suppliers to be RFID compliant by January, 2005. 2005. WalWal-Mart planned to replace bar-code bartechnology with RFID technology. The company believed that this replacement would reduce its supply chain management costs and enhance efficiency.
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RFID Technology
(Radio Frequency Identification)


Because of the implementation of RFID, employees were no longer required to physically scan the bar codes of goods entering the stores and distribution centers, saving labor cost and time. WalWal-Mart expected that RFID would reduce the instances of stock-outs at the stockstores.
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RFID Technology
(Radio Frequency Identification)


Although Wal-Mart was optimistic about Walthe 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 %50 on integrating the system and making modifications in the supply chain software.
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RFID Applications for Tracking Inventory

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