Case Study:

Wal-Mart Stores “Every Day Low Prices”

In China

INTB 5000
Webster University
1
Webster University
2
 Wal-Mart Stores “Every Day Low Prices” In China
FACTS:
 First opened in Shenzhen on August 12, 1996
 As of December 2007
 94 stores in 51 cities
 Employs 43,000+ associates
 Serves around 5 million customers per week
 Transition from rural US to metro/urban in China
 Competitive analysis a core value of the company
 Shopping 1,500 items and price matching them through “Special Buy” Analysis
 Major pressure from the Chinese regional governments to centralize in high growth
regions
 About-face by Chinese govt. on Shanghai is of interest
 Has major implications on Wal-Mart’s ability to provide infrastructure for stores
 Supply Chain Challenges Abound
 Tier 1 cities include Beijing – Tianjin, Shanghai, Guangzhou
 Tier 2 cities include Chengdu, Nanjing, Chongqing, & Wuhan
 Tier 3 cities include Changzho, Jinhua, Mianyang

Webster University
3
 Wal-Mart Stores “Every Day Low Prices” In China

7,058 Units
1.9 Million Associates
UK 23 offices sourcing from 70 countries
340 Units
Canada
292 Units
Japan
393 Units
US China
4,103 Units 86 Units
Mexico Puerto Rico
54 Units Trust-Mart
943 Units
101 Units
Central America India
433 Units Brazil JV –Aug 2007
297 Units

Argentina
16 Units
Webster University
4
Wal-Mart Stores “Every Day Low Prices” In China

Webster University
5
Wal-Mart Stores “Every Day Low Prices” In China
China Sales
In billion US dollars

$400
$344
$350
$312
$300 $285
$256
$250 $230

$200
$150
$100
$50
$0
FY03 FY04 FY05 FY06 FY07

Webster University
6
Wal-Mart Stores “Every Day Low Prices” In China

Webster University
7
Wal-Mart Stores “Every Day Low Prices” In China

Webster University
8
Wal-Mart Stores “Every Day Low Prices” In China

Webster University
9
Wal-Mart Stores “Every Day Low Prices” In China

Webster University
10
Wal-Mart Stores “Every Day Low Prices” In China

Opinions
Customer focus is critical even in new markets
Price leadership will work in other nations besides the US
Supplier partnership deserves heavy investment
Supply chain management is what this country needs
Technology enablement is key
EDI = Electronic Data Interchange
VMI = Vendor Managed Inventory
Satellite Links = For Real-time Updates
Corporate Social Responsibility
 Environmental Sustainability
 Food & Product Safety
 Community Involvement

Webster University
11
 Wal-Mart China Five Forces Model
Bargaining
Power
of Suppliers
• U.S. Product Manufacturers
• Foreign Manufacturers
• Local Government Restrictions
• Tariffs
•Slow Growth Initiatives
• Foreign General Merchandisers or
Potential Discounters
• Established Chinese Retailers
New Entrants •Asian Conglomerates with lower cost structures
Competitive Rivalry
Rivals: Carrefour, Tesco
Bargaining
and many other smaller
shops Power of Buyers
• Diversity of ethnic and economic
backgrounds
• Consumers in Metropolitan
Substitute Areas with high per capita
income
Products
• Cultural bias for a specific
and Services condition of products, delivering
in a unique supply chain, is key to
• Small, Village Shops these consumers
•Regional Chains
• Home grown (literally)
• Global chains establishing new stores
 Analysis: Wal-Mart Stores “Every Day Low Prices” In China
Value of goods procured from China
USD billions

**

25-30* 2.6*

1.5*
2.0
CAGR
CAGR 26%
15 33% 1.6
CAGR
1.3 20%
12
10.3
0.5

2000 01 02 03 2007 2001 02 03 2004 2000 2006

Over 300 employees in the Procurement centers in Aims at consolidating volume
Shenzhen global 10 different cities of China at country level to drive
procurement center 25% of 2003 volume (approx. cost savings, while
18-20% of 2003 volume USD0.5 bn) sourced direct, simultaneously capturing
(approx. USD2.5 bn) sourced with growth of 30% per year country-specific
direct advantages; e.g., in fleece
fabric from Taiwan

* Target value Webster University

** Including all categories; global sourcing in non-food categories would be approximately >80% of the total 13
Analysis: Wal-Mart Stores “Every Day Low Prices” In China

Webster University
14
Analysis: Wal-Mart Stores “Every Day Low Prices” In China

Webster University
15
Analysis: Wal-Mart Stores “Every Day Low Prices” In China

Source: Adapted from Garrison Wieland for “Wal-Mart’s Supply Chain,”

Harvard Business Review 70(2; March–April 1992), pp. 60–71.
Webster University
16
 Warehouse and
Distribution Center
Management System

Webster University
17
 Analysis: Wal-Mart RFID Plan

Base In transit Regional Walmart Walmart,

Manufacturing Sam’s Club
Product Distribution and
AiO & Malaysia Completion Neighborhood
Personal Flextronics Center Market Stores
Printers

AiO & Shanghai Memphis

Personal Calcomp Memphis
Menlo Walmart
Printers Flex
DC1
Sanger,
Scanners Shenzhen Texas
& Mentor Media
Cameras
Walmart
DC2
Bangkok
AIO Cleburn,
Venture Texas

Toner Hong Kong

Canon
Walmart
Toner/ Guadalajara DC3 De-
Personal
Tokyo Flex Soto, Texas
Canon
Laserjet
Guadalajara Supply Site
Personal LJ Canon China Jabill
Tag Site
Virginia
InkJet
Various Sonoco Delivery Site
Supplies
Webster University
18
 Analysis: Value Chain Analysis
Identifying Resources and Capabilities That Can Add Value

Firm Infrastructure

Support
Human Resource Management
Activities
Technological Development
Procurement

Service
Operations

Outbound

Marketing
Logistics
Inbound

& Sales
Logistics

Webster University
Primary Activities 19
 Wal-Mart Value Chain Analysis, China Specific
Firm Inferior fixtures standardization, Trucks, Average store size 84,000
Infrastructure square feat
Non-unionized, Full autonomy to associates, Decentralized,
Activities

Human Resource
Support

Management profit sharing program, Job rotation, Stock purchase plan

Technology UPC at POS, EDI, Information system, VMI ,Cross ducking , Satellite
Development system, CPFR
Procurement Maintain long-term relationship, No single supplier accounting for
more than 2.4%, Selective suppliers ( P&G & GE), NO nonsense policy

VMI Six days a Two step Everyday ECR

Margin
system week(9~21) hub and low price Satisfactio
Retail link Monday spoke Always n
low
EDI (12:30~17:30) guarantee
price,
CPFR distributing always policy
system Self Quick
service response
Cash and (QR)
carry
Save
money,
live better
credit card,
Primary Inbound Outbound Layaway
Marketing After Sales
Operations
Activities Logistics Logistics plan
& Sales Service

Webster University
20
 Recommendation Framework:
Wal-Mart Stores “Every Day Low Prices” In China

Webster University
21
 Recommendation: Increase the Accuracy and Velocity
of the Chinese Supply Chain With Heavy Investment
in IT (RFID)

 With “slap and ship” you just spend money – use

the information
 pallet logical build process reduced from minutes
to seconds
 Improvements in transfer of pallet/case-level
inventory between manufacturing and distribution
center sites
 Operational benefits from improvements in
outbound processes
 Automated identification at key stages of the
assembly production line to gain manufacturing
efficiencies
 Master data management influences the NPDI
process
 Global deployment not easy

Webster University
22
Webster University
23
Webster University
24
 Recommendation:
Better Collaborative Planning & Forecasting Processes are Needed Seller

Once
FRONT END AGREEMENT
Collaborative
Planning
Qtr.
JOINT BUSINESS PLAN

CREATE SALES FORECAST

Collaborative
Wk, Mo

IDENTIFY EXCEPTIONS
Forecasting
RESOLVE EXCEPTIONS

Collaborative
CREATE ORDER FORECAST
Replenishment
Wk, Mo

IDENTIFY EXCEPTIONS

RESOLVE EXCEPTIONS

GENERATE ORDER
Buyer Webster University
25
 Recommendation: Buy Trust-Mart

黑龙江

吉林
新疆 辽宁
宁夏
内蒙古
北京
河北
青海 山西
山东

西藏 陕西
河南 江苏

四川
河北

湖南 江西
贵州 福建

云南
广西 广东

Webster University
26
Recommendation: Invest heavily in the 3K to 20K sq. ft. store segment and
make analytics and supply chain performance real-time

Webster University
27
MAGAZINE

ASDA
LIVING

mini
Webster University bompreco
˜ 28