Supply Chain Management of Wal-Mart

Supply Chain Management

Company Profile

Walmart

Type Public

Traded as NYSE: WMTDow Jones Industrial Average Component

Industry RetailingFounded 1962Founder(s) Sam WaltonHeadquarters Bentonville, Arkansas, United StatesNumber of locations 8,970 (2011)

Area served Worldwide

Company HistoryWal-Mart Stores, Inc. branded as Walmart since 2008 and Wal-Mart before then, is an American public multinational corporation that runs chains of large discount department stores and warehouse stores. The company is the world's 18th largest public corporation, according to the Forbes Global 2000 list, and the largest public corporation when ranked by revenue. It is also the biggest private employer in the world with over 2 million employees, and is the largest retailer in the world.

The company was founded by Sam Walton in 1962, incorporated on October 31, 1969, and publicly traded on the New York Stock Exchange in 1972. It is headquartered in Bentonville, Arkansas. Walmart is also the largest grocery retailer in the United States. In 2009, it generated 51% of its US$258 billion sales in the U.S. from grocery business. It also owns and operates the Sam's Club retail warehouses in North America.

Walmart has 8,500 stores in 15 countries, under 55 different names. The company operates under its own name in the United States, including the 50 states and Puerto Rico. It operates in Mexico as Walmex, in the United Kingdom as Asda, in Japan as Seiyu, and in India as Best Price. It has wholly owned operations in Argentina, Brazil, and Canada. Walmart's investments outside North America have had mixed results: its operations in the United Kingdom, South America and China are highly successful, whereas ventures in Germany and South Korea were unsuccessful.

U.S. Retail Units 4,363

Wal-Mart discount stores 804Supercenters 2,766Neighborhood Market 182Market side 4Supermercado 2Sam’s Club 605

Wal-Mart International Retail Units 4,068

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http://en.wikipedia.org/wiki/United_States

http://en.wikipedia.org/wiki/Bentonville,_Arkansas

http://en.wikipedia.org/wiki/Sam_Walton

http://en.wikipedia.org/wiki/Retailing

http://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average

http://www.nyse.com/about/listed/quickquote.html?ticker=wmt

http://en.wikipedia.org/wiki/New_York_Stock_Exchange

http://en.wikipedia.org/wiki/Public_company

http://en.wikipedia.org/wiki/Types_of_business_entity


Incorporation and GrowthThe company was incorporated as Wal-Mart Stores, Inc. on October 31, 1969. In 1970, it opened its home office and first distribution center in Bentonville, Arkansas. It had 38 stores operating with 1,500 employees and sales of $44.2 million. It began trading stock as a publicly held company on October 1, 1970, and was soon listed on the New York Stock Exchange. The first stock split occurred in May 1971 at a market price of $47. By this time, Wal-Mart was operating in five states: Arkansas, Kansas, Louisiana, Missouri, and Oklahoma; it entered Tennessee in 1973 and Kentucky and Mississippi in 1974. As it moved into Texas in 1975, there were 125 stores with 7,500 employees and total sales of $340.3 million. Wal-Mart opened its first Texas store in Mount Pleasant on November 11, 1975.

In the 1980s, Walmart continued to grow rapidly, and by its 25th anniversary in 1987 there were 1,198 stores with sales of $15.9 billion and 200,000 associates. This year also marked the completion of the company's satellite network, a $24 million investment linking all operating units of the company with its Bentonville office via two-way voice and data transmission and one-way video communication. At the time, it was the largest private satellite network, allowing the corporate office to track inventory and sales and to instantly communicate to stores. In 1988, Sam Walton stepped down as CEO and was replaced by David Glass. Walton remained as Chairman of the Board, and the company also rearranged other people in senior positions.

In 1988, the first Walmart Supercenter opened in Washington, Missouri. Thanks to its superstores, it surpassed Toys "R" Us in toy sales in the late 1990s. The company also opened overseas stores, entering South America in 1995 with stores in Argentina and Brazil; and Europe in 1999, buying Asdain the UK for $10 billion.

In 1998, Walmart introduced the "Neighborhood Market" concept with three stores in Arkansas. By 2005, estimates indicate that the company controlled about 20% of the retail grocery and consumables business.

In 2000, H. Lee Scott became President and CEO, and Wal-Mart’s sales increased to $165 billion. In 2002, it was listed for the first time as America's largest corporation on the Fortune 500 list, with revenues of $219.8 billion and profits of $6.7 billion. It has remained there every year, except for 2006.

In 2005, Walmart had $312.4 billion in sales, more than 6,200 facilities around the world—including 3,800 stores in the United States and 2,800 elsewhere, employing more than 1.6 million "associates" worldwide. Its U.S. presence grew so rapidly that only small pockets of the country remained further than 60 miles (100 km) from the nearest Wal-Mart.

As Walmart grew rapidly into the world's largest corporation, many critics worried about the effect of its stores on local communities, particularly small towns with many "mom and pop" stores. There have been several studies on the economic impact of Walmart on small towns and local businesses, jobs, and taxpayers. In one, Kenneth Stone, a Professor of Economics at Iowa State University, found that some small towns can lose almost half of their retail trade within ten years of a Wal-Mart store opening. However, in another study, he compared the changes to what small town shops had faced in the past — including the development of the railroads, the advent of the Sears Roebuck catalog, as well as the arrival of shopping malls — and concluded that shop owners who adapt to changes in

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the retail market can thrive after Wal-Mart arrives. A later study in collaboration with Mississippi State University showed that there are "both positive and negative impacts on existing stores in the area where the new supercenter locates.

In the aftermath of Hurricane Katrina in September 2005, Walmart was able to use its logistical efficiency in organizing a rapid response to the disaster, donating $20 million in cash, 1,500 truckloads of free merchandise, food for 100,000 meals, as well as the promise of a job for every one of its displaced workers. An independent study by Steven Horwitz of St. Lawrence University found that Walmart, The Home Depot and Lowe's made use of their local knowledge about supply chains, infrastructure, decision makers and other resources to provide emergency supplies and reopen stores well before FEMA began its response. While the company was overall lauded for its quick response – amidst the criticisms of the Federal Emergency Management Agency – several critics were nonetheless quick to point out that there still remain issues with the company's labor relations.

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Operating Divisions

Walmart's operations are organized into three divisions: Walmart Stores U.S., Sam's Club, and Walmart International. The company does business in nine different retail formats: supercenters, food and drugs, general merchandise stores, bodegas (small markets), cash and carry stores, membership warehouse clubs, apparel stores, soft discount stores and restaurants.

Walmart Stores U.S.Walmart Stores U.S. is the company's largest division, accounting for $258 billion, or 63.8% of total sales for financial year 2010. It consists of three retail formats that have become commonplace in the United States: Discount Stores, Supercenters, and Walmart Markets. The retail department stores sell a variety of mostly non-grocery products, though emphasis has now shifted towards supercenters, which include more grocery items. This division also includes Walmart's online retailer, walmart.com.

In September 2006, Walmart announced a pilot program to sell generic drugs at just $4 per prescription. The pilot program was launched at stores in the Tampa, Florida area, and expanded to all stores in Florida by January 2007. While the average price of generics is $29 per prescription, compared to $102 for name-brand drugs, Walmart maintains that it is not selling at a loss, or providing as an act of charity – instead, they are using the same mechanisms of mass distribution that it uses to bring lower prices to other products. While it's little known outside of the drug industry, many of Walmart's low cost generics are imported from India and made by drug makers in that country including Ranbaxy and Cipla.

On February 6, 2007, the company launched a "beta" version of a movie download service, which sold about 3,000 films and television episodes from all major studios and television networks. The service was discontinued on December 21, 2007, due to low sales.

Walmart SupercenterWalmart Supercenters are hypermarkets with size varying from 98,000 to 261,000 square feet (9,104.5 to 24,247.7 m2), with an average of about 197,000 square feet (18,301.9 m2). These stock everything a Walmart discount store does, and also include a full-service supermarket, including meat and poultry, baked goods, delicatessen, frozen foods, dairy products, garden produce, and fresh seafood. Many Wal-Mart Supercenters also have a garden center, pet shop, pharmacy, Tire & Lube Express, optical center, one-hour photo processing lab, portrait studio, and numerous alcove shops, such as cellular phone stores, hair and nail salons, video rental stores, local bank branches (newer locations have Woodforest National Bank branches), and fast food outlets — usually Subway, but sometimes Dunkin' Donuts, McDonald's or Blimpie. Some also sell gasoline distributed by Murphy Oil Corporation (whose Walmart stations are branded as "Murphy USA"), Sunoco, Inc. ("Optima"), or Tesoro Corporation ("Mirastar").

The first Supercenter opened in 1988, in Washington, Missouri. A similar concept, Hypermart USA, opened in Garland, Texas a year earlier. All of the Hypermart USA stores were later closed or converted into Supercenters.

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As of April 2011, there were 2,913 Wal-Mart Supercenters in the United States. The largest Supercenter in the United States, covering 260,000 square feet (24,154.8 m2) and two floors, is located in Crossgates Commons in Albany, New York.

The "Supercenter" portion of the name on these stores has been phased out, simply referring to these stores as "Walmart," since the company introduced the new Walmart logo in 2008.

Walmart MarketWalmart Market is a chain of grocery stores that average about 42,000 square feet. They are used to fill the gap between discount store and supercenters, offering a variety of products, which include full lines of groceries, pharmaceuticals, health and beauty aids, photo developing services, and a limited selection of general merchandise.

The first Walmart Market opened in 1998, in Bentonville, Arkansas. As of April 2011, there are 184 Walmart Markets in the United States.

Supermercado de WalmartWalmart opened "Supermercado de Walmart" locations to appeal to Hispanic communities in the United States. The first one, a 39,000 square feet store in the Spring Branch area of Houston, opened on Wednesday April 29, 2009. The store was a conversion of an existing Walmart. Walmart also planned to open "Mas Club," a warehouse retail operation patterned after Sam's Club.

MarketsideMarketside is a chain of four grocery stores, all in the state of Arizona. The stores opened in October 2008 and are said to be less than half the size of a conventional supermarket. The Marketside branding is also used for some groceries found in Walmart.

Walmart ExpressWalmart Express is a smaller discount store, with a range of services, from simple grocery shopping, to check cashing, and even gasoline service. The concept is focused on small towns that are not able to support a larger store, and in large cities where physical space is at a premium.

Wal-Mart plans to build 15 to 20 Walmart Express stores, focusing on Arkansas, North Carolina and Chicago, by the end of its fiscal year in January 2012.

"This is about access to breadth of assortment", says Walmart's Anthony Hucker, vice president of strategy and business development.

So far, Walmart Express has opened in Gentry, AK, Prairie Grove, AK, and Chicago, IL.

Sam's ClubSam's Club is a chain of warehouse clubs which sell groceries and general merchandise, often in large quantities. Sam's Club stores are "membership" stores and most customers buy annual memberships. However, non-members can make purchases either by buying a one-day membership or paying a surcharge based on the price of the purchase.Some locations also sell gasoline. The first Sam's Club opened in 1983 in Midwest City, Oklahoma under the name "Sam's Wholesale Club".

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Sam's has found a niche market in recent years as a supplier to small businesses. All Sam's Club stores are open early hours exclusively for business members and their old slogan was "We're in Business for Small Business." Their current slogan is "Savings Made Simple" as Sam's Club attempts to attract a more diverse member base. In March 2009, the company announced that it plans to enter the electronic medical records business by offering a software package to physicians in small practices for $25,000. Wal-Mart is partnering with Dell and eClinicalWorks.com in this new venture.

Sam's Club's sales during 2010 were $47 billion, or 11.5% of Walmart's total sales. As of April 2011, there were 609 Sam's Clubs in the United States. Walmart also operates more than 100 international Sam's Clubs in Brazil, China, Mexico, and Puerto Rico.

Walmart InternationalWalmart's international operations currently comprise 4,263 stores and 660,000 workers in 15 countries outside the United States. There are wholly owned operations in Argentina, Brazil, Canada,and the UK. With 2.1 million employees worldwide, the company is the largest private employer in the US and Mexico, and one of the largest in Canada. In the financial year 2010, Walmart's international division sales were $100 billion, or 24.7% of total sales.

Walmart has operated in Canada since its acquisition of 122 stores comprising the Woolco division of Woolworth Canada, Inc in 1994. As of July 2010, it operates over 300 locations (including 100 Supercentres) and employs 82,000 Canadians, with a local home office in Mississauga, Ontario. Walmart Canada's first three Supercentres opened on November 8, 2006, in Hamilton, London, and Aurora, Ontario. The 100th Canadian Supercentre opened on July 10, 2010, in Victoria, BC. In 2010, Walmart Canada Bank was introduced in Canada with the launch of the Walmart Rewards MasterCard.

VuduIn February 2010, the company agreed to buy Vudu, a Silicon Valley start-up whose three-year-old online movie service is being built into an increasing number of televisions and Blu-ray players. Terms of the acquisition were not disclosed, but a person briefed on the deal said the price for the company, which raised $60 million in capital, was over $100 million. It is the third most popular online movie service, with a market share of 5.3 percent.

Private label brandsAbout 40% of products sold in Walmart are private label store brands, or products offered by Walmart and produced through contracts with manufacturers. Walmart began offering private label brands in 1991 with the launch of Sam's Choice, a brand of drinks produced by Cott Beverages exclusively for Walmart. Sam's Choice quickly became popular, and by 1993 was the third most popular beverage brand in the United States. Other Walmart brands include Great Value and Equate in the US and Canada, and Smart Price in Britain. A 2006 study talked of "the magnitude of mind-share Wal-Mart appears to hold in shoppers' minds when it comes to awareness of private label brands and retailers.

EntertainmentIn 2010, the company teamed with Procter & Gamble to produce Secrets of the Mountain and The Jensen Project, two-hour family movies which featured the characters using Walmart and Procter &

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Gamble branded products. The Jensen Project also featured a preview of a product to be released in several months in Walmart stores A third movie, A Walk in My Shoes, will air later in 2010 and a fourth is in production. Walmart's director of brand marketing also serves as co-chair of the Association of National Advertisers's Alliance for Family Entertainment.

Company Sales Territory Wal-Mart Stores, Inc. serves customers and members more than 200 million times per week at 8,400 retail units under 55 different banners in 15 countries.

Total AssociatesUnited States – more than 1.4 million

Internationally -- 664,000

Total Associates -- more than 2 million worldwide

Net Sales For the fourth quarter FY 2010, $112.8 billion, a 4.6 percent increase over the same period last year.

FYE 1/31/10: $405.0 billion, a 1 percent increase over the previous year

Community Involvement In 2009, Wal-Mart Stores, Inc. and its Foundation gave $467 million in cash and in-kind donations. Internationally, Wal-Mart gave $45 million in cash and in-kind gifts to charitable organizations, bringing total 2009 giving to $512 million.

International Data Sheet - March 2010Wal-Mart International Units 4,068 total units

Market Entry Retail Units DateMexico 1,472 November 1991

Canada 317 November 1994

Brazil 436 May 1995

Argentina 44 August 1995

China (*) 283 August 1996

United Kingdom 371 July 1999

Japan 371 March 2002

Costa Rica 170 September 2005

El Salvador 77 September 2005

Guatemala 164 September 2005

Honduras 55 September 2005

Nicaragua 55 September 2005

Chile 253 January 2009

India 1 May 2009

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Sales Territory Wal-Mart Stores, Inc. or “Wal-Mart” serves customers and members more than 200 million times per week at more than 8,400 retail units under 55 different banners in 15 countries, including the United States. Wal-Mart employs more than 2.1 million associates worldwide.

Total International Associates: 664,000

Total International Fourth quarter International net sales were $29.6 billion, an increase of 19.5 percent from last year. The increase in International net sales includes our Chilean operations (acquired in January 2009) and a $1.9 billion positive impact from currency exchange rate fluctuations. On a constant currency basis, International net sales were up 11.9 percent to $27.7 billion from last year’s fourth quarter results of $24.8 billion.

Reported International operating income for the fourth quarter included a currency exchange rate benefit of $122 million. Reported International operating income for the year ended Jan. 31, 2010 was reduced by $540 million for the effect of currency exchange rate fluctuations. On a constant currency basis, International operating income increased 18.7 percent and 12.8 percent, respectively, for the fourth quarter and full fiscal year 2010, compared to the corresponding periods in fiscal year 2009.

International net sales for fiscal year 2010 were $100.1 billion, an increase of 1.3 percent from last year. On a constant currency basis, International net sales increased 11.2 percent to $109.9 billion in fiscal year 2010, compared to $98.8 billion in fiscal year 2009. Wal-Mart International ended fiscal year 2010 with more than $100 billion in net sales, with strong double-digit sales growth in the fourth quarter. Many countries delivered strong comparable sales performance and gained market share. On a constant currency basis, fourth quarter operating income for Wal-Mart International grew faster than sales.

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Literature Review

The movement of a product or a service from supplier to customer takes place with the help of organizations, people, technology and resources. According to Terry. Harrison “a supply chain is a network of facilities and distribution options that perform the functions of procurement of materials, transformation of materials into intermediate and finished products and the distribution of the finished products to customers”. Supply chain finds its place in both services as well and manufacturing industry. Supply chain can also be explained as the association of the retailers, distributors, transporters and suppliers who come together and share the process of sale, delivery and production of a particular product or service.

Supply chain management is an efficient way of managing the above mentioned activities. According to Jessie Chinami Supply chain management can be defined as “an oversight of materials, information and finances as they move in a process from supplier to manufacturer to wholesaler to retailer and finally to the consumer”. The basic aim of supply chain management is coordinating and integrating the flow which takes place within and among companies. The basic three types of supply chain management flows are:

The product flow The information flow The finances flow

The product flow deals with the goods and services that are subjected to movement from a supplier to a customer and vice-versa. The information flow manages the upgrading as well as management relating to the status of the delivery process while the financial flow manages all the finances related to the delivery process.

A schematic diagram of the Supply chain management process is as shown. The various processes in Supply chain management are:

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Supply chain strategy Logistics Product lifecycle management Procurement Asset management Enterprise applications Supply chain planning

The decisions associated with supply chain management cover both the long-term and short-term. Strategic decisions deal with corporate policies, and look at overall design and supply chain structure. Operational decisions are those dealing with every day activities and problems of an organization. These decisions must take into account the strategic decisions already in place. Therefore, an organization must structure the supply chain through long-term analysis and at the same time focus on the day-to-day activities.

Furthermore, market demands, customer service, transport considerations, and pricing constraints all must be understood in order to structure the supply chain effectively. These are all factors, which change constantly and sometimes unexpectedly, and an organization must realize this fact and be prepared to structure the supply chain accordingly. Structuring the supply chain requires an understanding of the demand patterns, service level requirements, distance considerations, cost elements and other related factors. It is easy to see that these factors are highly variable in nature and this variability needs to be considered during the supply chain analysis process. Moreover, the interplay of these complex considerations could have a significant bearing on the outcome of the supply chain analysis process.

Cross DockingCross Docking is a method of handling goods. This happens when vendor and the company work together. This is the method of supplying the product in the right time and the said quantity. This cut down a lot of time. This also changed Wal-Mart’s way of looking things. This transitioned Wal-Mart from being a centralized management to almost decentralized system took a major turn in focus of pull strategy than a pull strategy.

Cross-docking is one of the techniques used by Wal-Mart. It means there is no unnecessary storage or little storage in between the loading and unloading of goods so that customer can enjoy the quality of the goods by first hand. Wal-Mart have logistics infrastructure which is very fast transportation system wherein the distribution centers are being serviced. Wal-Mart assured that their drivers are capable of doing their jobs accordingly and do not cause unnecessary delays that can hamper the efficiency of the distribution operations. To deliver it on time, the coordinators give information to the driver the expected time of arrival or delivery of the goods.

Point Of SaleInformation sharing is one of the most important things when it comes to SCM. P&G with its Pampers requested Wal-Mart to share its point of sale so that it could predict its demand more or less and work on the information to bring in efficiency. When Wal-Mart shared this information P&G could plan in advance and it with its efficient supply chain management could supply pampers to Wal-Mart on time.

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Wal-Mart did not want to dedicate lot of space to pamper in its warehouse of shop store either. Instead the supply was taken care by P& G. This led the initiation of working with the vendors and coming out with huge efficiency by maintaining lower inventory and satisfying demand without stock outs. Thus point of sale sharing would be a key element for any company for its further scope of improvement and also when there is further scope of improvement there is a role for Supply chain management.

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Managing the Supply Chain

Procurement and Distribution Wal-Mart always emphasized the need to reduce its purchasing costs and offer the best price to its customers. The company procured goods directly from manufacturers, bypassing all intermediaries. Wal-Mart was a tough negotiator on prices and finalized a purchase deal only when it was fully confident that the products being bought were not available elsewhere at a lower price. Wal-Mart spent a significant amount of time meeting vendors and understanding their cost structure. By making the process transparent, the retailer could be certain that the manufacturers were doing their best to cut down costs. Once satisfied, Wal-Mart believed in establishing a long-term relationship with the vendor. In its attempt to drive hard bargains, Wal-Mart did not even spare big manufacturers like Procter & Gamble (P&G). However, the company, generally, preferred local and regional vendors and suppliers.

In 1998, Wal-Mart had over 40 distribution centers located at different geographical locations in the US. Over 80,000 items were stocked in these centers. Wal-Mart’s own warehouses directly supplied 85 percent of the inventory, as compared to 50-65 percent for competitors. According to rough estimates, Wal-Mart was able to provide replenishments within two days (on an average) against at least five days for competitors. Shipping costs for Wal-Mart worked out to be roughly 3 percent as against 5 percent for competitors. Each distribution center was divided into different sections on the basis of the quantity of goods received and was managed the same way for both cases and transport goods. The inventory turnover rate was very high, about once every two weeks for most of the items. Goods meant for distribution within the US usually arrived in pallets, while imported goods arrived in re-usable boxes or cases. In some cases, suppliers delivered goods such as automotive and drug products directly to the stores. About 85% of the goods which were available at the stores passed through the distribution centers. The distribution centers ensured a steady and consistent flow of products to support the supply function.

As Wal-Mart used sophisticated barcode technology and hand-held computer systems, managing the center became easier and more economical. Every employee had an access to real time information regarding the inventory levels of all the products in the center. They had to just make two scans – one to identify the pallet, and the other to identify the location from where the stock had to be picked up. Different barcodes were used to label different products, shelves and bins in a center. The hand-held computer guided an employee with regard to the location of a particular product from a particular bin or shelf in the center. When the computer verified the bin and picked up a product, the employee confirmed whether it was the right product or not. The quantity of the product required from the center was entered into the hand-held computer by the employee and then the computer updated the information on the main server. The hand-held computer also enabled the packaging department to get accurate information about the products to be packed. It displayed all information about the storage, packaging and shipping of a particular product thus, saving time on unnecessary paperwork. It also enabled the center supervisors to monitor their employees closely enabling them to give directions and even guide them even on the move. This enabled the company to satisfy customer needs quickly and improve the level of efficiency of the distribution center management operations. Each distribution center had facilities for maintaining personal hygiene such as shower bath and fitness centers. It also had provision for food, sleep and

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personal business. The distribution center could also be used for meetings and paperwork. The truck drivers of Wal-Mart sometimes availed these facilities.

Inventory ManagementWal-Mart had developed an ability to cater to the individual needs of its stores. Stores could choose from a number of delivery plans. For instance, there was an accelerated delivery system by which stores located within a certain distance of a geographical center could receive replenishment within a day. Wal-Mart invested heavily in IT and communications systems to effectively track sales and merchandise inventories in stores across the country. With the rapid expansion of Wal-Mart stores in the US, it was essential to have a good communication system. Hence, 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 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. Wal-Mart also networked its suppliers through computers. The company entered into collaboration with P&G for maintaining the inventory in its stores and built an automated reordering system, which linked all computers between P&G and its stores and other distribution centers. The computer system at Wal-Mart stores identified an item which was low in stock and sent a signal to P&G. The system then sent a re-supply order to the nearest P&G factory through a satellite communication system. P&G then delivered the item either to the Wal-Mart distribution center or directly to the concerned stores. This collaboration between Wal-Mart and P&G was a win-win proposition for both because Wal-Mart could monitor its stock levels in the stores constantly and also identify the items that were moving fast. P&G could also lower its costs and pass on some of the savings to Wal-Mart due to better coordination.

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. Wal-Mart also made use of the sophisticated algorithm system which enabled it to forecast the exact quantities of each item to be delivered, based on the inventories in each store. Since the data was accurate, even bulk items could be broken and supplied to the stores.

Wal-Mart also used a centralized inventory data system using which the personnel at the stores could find out the level of inventories and the location of each product at any given time. It also showed whether a product was being loaded in the distribution center or was in transit on a truck. Once the goods were unloaded at the store, the store was furnished with full stocks of inventories of a particular item and the inventory data system was immediately updated. Wal-Mart also made use of bar coding and radio frequency technology to manage its inventories. Using bar codes and fixed optical readers, the goods could be directed to the appropriate dock, from where they were loaded on to the trucks for shipment. Bar coding devices enabled efficient picking, receiving and proper inventory control of the appropriate goods. It also enabled easy order packing and physical counting

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of the inventories. In 1991, Wal-Mart had invested approximately $4 billion to build a retail link system.

More than 10,000 Wal-Mart retail suppliers used the retail link system to monitor the sales of their goods at stores and replenish inventories. The details of daily transactions, which approximately amounted to more than 10 million per day, were processed through this integrated system and were furnished to every Wal-Mart store by 4 a.m., the next day. In October 2001, Wal-Mart tied-up with Atlas Commerce for upgrading the system through the Internet enabled technologies. Wal-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. To provide back-up in case of a major breakdown or service interruption, the company had an extensive contingency plan. By making effective use of computers in all its company’s operations, Wal-Mart was successful in providing uninterrupted service to its customers, suppliers, stockholders and trading partners.

Logistics Management An important feature of Wal-Mart’s logistics infrastructure was its fast and responsive transportation system. The distribution centers were serviced by more than 3,500 company owned trucks. These dedicated truck fleets allowed the company to ship goods from the distribution centers to the stores within two days and replenish the store shelves twice a week. The truck fleet was the visible link between the stores and 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. Wal-Mart truck drivers generally moved the merchandise-loaded trailers from Wal-Mart distribution centers to the retail stores serviced by each distribution center.

These retail stores were considered as customers by the distribution centers. The drivers had to report their hours of service to a coordinator daily. The coordinator scheduled all dispatches depending on the available driving time and the estimated time for travel between the distribution centers and the retail stores. The coordinator informed the driver of his dispatches, either on the driver’s arrival at the distribution center or on his return to the distribution center from the retail store. The driver was usually expected to take a loaded truck trailer from the distribution center to the retail store and return back with an empty trailer. He had to dispatch a loaded truck trailer at the retail store and spend the night there. A driver had to bring the trailer at the dock of a store only at its scheduled unloading time, no matter when he arrived at the store. The drivers delivered the trailers in the afternoon and evening hours and they would be unloaded at the store at nights. There was a gap of two hours between unloading of each trailer. For instance, if a store received three trailers, the first one would be unloaded at midnight (12 AM), the second one would be unloaded at 2 AM and the third one at 4 AM. Although, the trailers were left unattended, they were secured by the drivers, until the store personnel took charge of them at night. Wal-Mart received more trailers than they had docks, due to their large volume of business. To make its distribution process more efficient, Wal-Mart also made use of a logistics technique known as ‘cross-docking.’ In this system, the finished goods were directly picked up from the manufacturing plant of a supplier, 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.

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In cross docking, requisitions received for different goods from a store were converted into purchase or procurement orders. These purchase orders were then forwarded to the manufacturers who conveyed their ability or inability to supply the goods within a particular period of time. In cases where the manufacturer agreed to supply the required goods within the specified time, the goods were directly forwarded 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.

To gain maximum out of cross-docking, Wal-Mart had to make fundamental changes in its approach to managerial control. Traditionally, decisions about merchandising, pricing and promotions had been highly centralized and were generally taken at the corporate level. The cross docking system, however, changed this practice. The system shifted the focus from “supply chain” to the “demand chain,” which meant that instead of the retailer ‘pushing’ products into the system; customers could ‘pull’ products, when and where they needed. This approach placed a premium on frequent, informal cooperation among stores, distribution centers and suppliers with far less centralized control than earlier.

Wal-Mart: A Leader in LogisticsSince the early days of our company, the ability to move product from place to place quickly and efficiently has been a key driver in Wal-Mart’s success. Today, technology, innovation and the commitment of our associates continue to drive Wal-Mart Logistics’ mission of providing Wal-Mart customers and Sam’s Club members an outstanding shopping experience that is not only uniquely tailored to their community, but saves them money so they can live better.

Quick FactsWal-Mart Logistics has approximately:

… 85,000 associates ... 147 distribution centers ... 51 transportation offices ... 7,200 tractors ... 53,000 trailers … 7,950 drivers

Wal-Mart’s distribution network began in a rented garage in the 1960s. We opened our first distribution center in 1970, as part of Wal-Mart’s current Home Office facility.

Logistics FactsWal-Mart’s private fleet is one of America’s safest fleets with 2.2 million miles per preventable accident. Collectively, Wal-Mart’s fleet drivers log approximately 800 million miles per year. The average Wal-Mart truck driver logs more than 100,000 miles annually – the equivalent of about four trips around the world! Wal-Mart distribution centers typically employ 500-1000 associates.

An average facility will serve 75-100 stores, many with a unique merchandise assortment for each specific store, within a 250 mile radius.A regional distribution center can have twelve miles of conveyor belts, which can move hundreds of thousands of cases through the center each day. Last year, we moved more than 5.5 billion cases of merchandise.

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A Wal-Mart grocery distribution center is equipped to house up to four million bananas at one time. Ice cream freezers at a grocery DC are cooled to -20 degrees Fahrenheit. By doing thing like reducing the number of “empty miles” our trucks drive and optimizing how merchandise is stacked in our trailers, Wal-Mart drivers logged 87 million fewer miles last year while transporting 161,000 more cases. This enabled the company to save 15 million gallons of diesel fuel. Wal-Mart’s truck fleet is working with the trucking industry and truck and trailer manufacturers to improve the fuel efficiency of our trucks. Since 2005, we’ve improved efficiency by more than percent, with more improvements to come. In 2009, Wal-Mart began testing new innovations designed to save fuel, including the introduction of hybrid tractors as well as those powered by liquid natural gas and by brown grease recycled from our in-store deli operations. Wal-Mart has nine disaster distribution centers strategically located across the country stocked with relief supplies needed to assist communities recover in the event of a disaster.Wal-Mart Logistics supports communities across the nation. In 2008, more than $60 million in cash and in-kind contributions were made to local charities on behalf of our distribution centers, transportation offices and other logistics facilities. Logistics associates registered approximately 140,000 volunteer hours in their local communities last year.

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The Wisdom of Wal-Mart’s Supply Chain Strategies

What can Wal-Mart teach manufacturing about global supply chains? Perhaps manufacturers would want to consider a best-in-market supply chain approach rather than best-in-class, to better meet customers' needs. Gary Maxwell, senior vice president of international supply chain for Wal-Mart Stores Inc., said a best-in-market approach requires thinking like a customer; complying with local and international laws, regulations, and customs; matching the maturity curve to the market; setting high expectations for low costs; and operating in a sustainable way. When it comes to serving customers, best-in-market supply chain management trumps world-class supply chains every time, he said. Maxwell delivered the advice during the keynote address at the 2009 Annual Global Conference of the Council of Supply Chain Management Professionals, which took place in late September in Chicago.

Adaptive GrowthWal-Mart, just shy of $100 billion in revenue last year, does business in 15 countries, with more than 7,900 stores and 228 distribution centers. These outlets include: Small, 1,000-square-foot Costa Rican convenience stores; Large, 200,000-square-foot U.S. super stores; Japanese Seiyu four-level premium-quality grocery/department stores; and United Kingdom-based ASDA Living, general merchandise stores that expanded from a grocery chain acquired 10 years ago.

Through such expansions, respect for individual’s remains, Maxwell says, with emphasis on customer service and continuous improvement. There was some question initially if the Wal-Mart culture would work in other countries, he admitted, but everywhere "people need love and respect. When they get respect, they can do extraordinary things." Adding sustainability-doing what's right by the environment-has been a natural extension of original company principles, Maxwell said. When Wal-Mart grows by acquisition, management of the acquired company often expresses excitement about the idea of Wal-Mart building stronger supply chains around their businesses, Maxwell explained.

Customer-Focused StructureStarting with the customer ensures development of systems that won't create an uncompetitive cost structure. The business needs to serve the customers' needs, education, customs, and tastes. It's wrong to start with the backend and discuss technology or automation first, he warned. Instead ask what customers expect, what are their experiences, and where do you want to take them? Ensure all laws and customs are followed, without bribes. Assess market maturity. Identify if the market is emerging (India-great education but challenging infrastructure), high-growth (Brazil), focused on asset-utilization (U.S., with concern for return on investment), or working on redefinition (Japan, which goes beyond third-party supply chain relationships into fourth and fifth parties); Learn customer expectations; Develop leaders within the organization, ensuring appropriate infrastructure, land, and labor costs; Look at asset allocations based on risks, laws, and regulations. For example, countries with regulations that limit the number of times workers can put their hands over their heads per day might be a strong candidate for automation; Design facilities to match customer-cost expectations, with options to upgrade later.

A small warehouse with rack and forklift might be best in class for many places in India. In Japan, $2 peaches, individually wrapped, two per clamshell package, refrigerated, meet local expectations.

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Wal-Mart's Misato, Japan, distribution center, has four floors (land costs are very expensive and labor equal to or greater than in the U.S.). It uses many technologies including conveying, automated sorting, and radio frequency identification (RFID). Automation needs to match what customers can support. Big Hairy Audacious Goals are good, Maxwell said, in reference to a phrase that recently entered business management vernacular. Wal-Mart goals, however audacious, are set from the bottom up. Doing so improves participants' abilities to meet and exceed expectations, Maxwell suggested.

Implementation strategies Maxwell spoke in favor of what he called the productivity loop: Lower costs, then lower prices, sell more units, increase profits, and repeat. Wal-Mart is working on accelerating the number of times it exercises that loop. Inventory optimization often is overlooked, Maxwell said. In a pyramid design, inventory policies are on top, achieved with collaboration and integration. Below that are forecasting and event planning. The pyramid base is made of supply chain fundamentals, such as lead times, performance metrics, and order constraints. Often supply chain implementations begin with an internal sales effort. Educating organizations about the power of supply chain management is part of what practitioners need to do, Maxwell said, to ensure capital for upgrades when they're needed. "You need to market the concepts within your organizations.

Information Technology and Wal-MartIn November 2003, Wal-Mart, the world's largest retailing company, held a meeting with its top 100 suppliers at its Bentonville headquarters. The meeting was held to discuss the course of action for implementing the Radio Frequency Identification (RFID) technology by the company's suppliers. Earlier, 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 (SCM) costs and enhance supply chain efficiency. Commenting on the importance of RFID for Wal-Mart, Tom Williams (Williams), a Wal-Mart spokesman said, "We follow what the stores sell, and orders are customized for the stores. For us, tracking inventory is extremely important. RFID is a chance to move to a more advanced system...in our distribution centers. It's somewhat akin to moving from tapping out telegraph signals to moving to the Internet. What we see at the base of all this information is efficiency; moving product more efficiently. That translates into lower costs."Analysts were appreciative of Wal-Mart's move to implement RFID on a large scale for managing its supply chain. They expected that by using RFID, the company could save $8.35 billion per year, primarily in labor costs. Expressing the reason for Wal-Mart's move to force its suppliers to adopt the latest SCM technologies, Ananth Raman, a Harvard Business School professor said, they give suppliers a choice. Shape up or pay the price. It's a lot of money that a supplier can lose. There's a lot of inefficiency that exists in the supply chain."

Analysts appreciated Wal-Mart for setting a benchmark for all the companies operating in the retailing industry to employ the best practices in SCM. Wal-Mart had established state-of-the art SCM systems, using the most advanced communication technologies to link its retail stores, distribution centers, headquarters and all its suppliers. Over the decades, Wal-Mart had always been the first mover in the retailing industry to embrace new technologies for managing the supply chain processes. At the same time, Wal-Mart helped its suppliers adapt to the new SCM technologies, so that both the parties derived benefits.

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As the goods flow from the company to the customers, information flows from customers to the company. This is a very valuable source for SCM. Wal-Mart recognized this and invested heavily in Information Technology. In 1983 Wal-Mart set up its own Satellite Communication System. This helped them manage a lot of things better with the information that they received. This helped to manage inventory, study the demand and also networked suppliers through computers. Retail link has emerged into an internet based Supply chain management system by 1990’s. Supply chain management that had evolved was expected to cover Collaborative planning, Forecasting and replacement (CPFR). CPFR was considered insufficient and discarded at its outset. But Wal-Mart worked closely with its key suppliers and retail chains to start a internet based system to determine a product-wise demand system. The only stumble block Wal-Mart had was the initial investment and time constraints.

Wal-Mart differed from its competitor giants by their avid use of technological advancements in a bid to improve their Supply chain management. By 2002 Wal-Mart introduced Web based EDI where all the transactions between business partners were routed through the internet. Web based EDI that Wal-mart implemented was also security free. In July 2003 Wal-Mart started using RFID (Radio frequency Identification). This introduction meant a shift from tried and tested bar code technology with RFID technology. Use of RFID has avoided the physical scanning of the bar codes thus signifying the technology advances of Supply chain management.

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Objectives

Understand the importance of an efficient distribution and logistics management system in not only reducing the costs for a retailing company but also in creating value for the customersUnderstand how IT/Internet could be effectively used to enhance the efficiency of the supply chain thereby by reducing costs

Get insights into some of the latest supply chain management technologies including CPFR and RFID and their applications in the retailing industry.

Key Discussion and Analysis

Supply chain management is now an imperative part of any organizations strategic plans. Supply chain management’s ability to adapt quickly to customers demands, uncertainty in demands, and globalization in market place, creating longer supply chains and shorter product life cycle & advanced technology has created a pool for its success apart from providing a dimension for long term-relationships. Supply chain management though a new introduction in business is fast catching up with the evolution of material management and purchasing. Companies have also overlooked their strategic role which revolved around raw material and finished goods inventory to working in tandem with suppliers and customers. Better and efficient technological advancements have reduced the gap between suppliers and customers despite their existence in the global market. (Ryerson, 2007)

Supply chain management is designed to improve customer service, balance costs and service, uniform costing and provide a competitive advantage to organizations in supply chain. Suppliers expect manufacturers to obligate themselves to purchase large quantities so as to imprint long production runs and lower production runs and lower production costs. On the other hand if customer demand is fewer manufacturers restores to inventory. Supply chain management brings on integration between different blocks of process and is displayed as one whole lot. (Guyer, 2001)

The last 20 years have seen considerable improvements in the accounting of Supply chain management. Wal-Mart as discussed in the literature review reflects how Supply chain management has catapulted them to the top. Wal-Mart’s key to success is its legendary use of Supply chain management with technology apart from traditional elements like Inventory, Logistics management etc.

The benefits reaped by Wal-Mart through Supply chain management are:

Strengthened relationship with the customers, vendors and employees Each and every small opportunity was sensed in pursuit of bringing a efficient SCM Helped to capitalize on cost cutting resulting in efficiency Saving on cost was passed on to customers that added value Saved a huge amount in transportation cost Provided higher discounts to customer Resulted in higher sales volume and revenues

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Arriving at a rational and Supply chain management

Apart from this Wal-Mart’s ability to order inventory on demand enabled them to meet customer demand. Wal-Mart observed that today’s fads and fashions were the obsolete inventories for days to come.

Thus Wal-Mart’s SCM not only increased efficiency but also increased customer service that resulted in customer satisfaction. This brought in reducing stocks and increased its responsiveness in distribution through the bar codes and radio frequency technologies. It cut cost by cross docking which resulted in decreasing space in warehouses and manual labor cost to a huge extent. (Guyer, 2001)

The benefits of an efficient supply chain management includes reduction in lead time, faster inventory turnover, accurate forecasting of inventory levels, increased warehouse space, reduction in safety stock and better working capital utilization. It also helped reduce the dependency on the distribution center management personnel resulting in minimization of training costs and errors. The stock-out of goods and the subsequent loss arising out of it was completely eliminated. Wal-Mart’s supply chain management practices resulted in increased efficiency in operations and better customer service. It eliminated old stocks and maintained quality of goods. Bar coding and radio frequency technologies enabled accurate distribution of goods. Cross-docking also helped Wal-Mart to reduce inventory storage costs. It also helped to cut down the labor and other handling costs involved in the loading and unloading of goods.

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Conclusion

Sam Walton claims that Wal-Mart’s vision had always been to increase sales through lowering the costs through organized distribution system with the help of the Information Technology. It is said that Wal-Mart’s extreme success could be attributed to its effective supply chain management (Chandran, 2003). Wal-Mart’s efficiency in supply chain management was due to two key factors namely automated distribution centre and the computerized inventory system. This brought in minimizing a lot of time the later not only reduced the checking out time but also recorded the transaction which is much needed to know envisage demand. Demand forecast is a constant issue which could be a threat when not handled properly. This is due to the fact that demand prediction is always inaccurate. Aggregation would be a remedy for this unpredictable demand. Inventory management is one of the important things that have gained importance these days.

Wal-Mart’s focus has always been to sell goods at a lower price to the customers. They ensured direct purchase form the companies bypassing the intermediaries. This by passing is one of the ways to reduce cost. Wal-Mart preferred small vendors to the big players however the vendor who provides the best price qualifies and gets the deal. This applies to the giants like P& G as well. Their practice these days had been choosing few vendors and they literally negotiate the best price the one that comes up with the best price qualifies. This does not blindly mean that they have been ruthless. Wal-Mart also works with the vendors for improving its supply chain efficiency.

Wal-Mart with its power distribution system made quite innovative changes like reducing paper work, reduced its lead time drastically, used bar codes to bill which recorded inventory levels and the access to the stock levels served as the valuable data for management. The movements of products are systematic and strategically aliened in a way that it reduces the most valuable time and cost and results in efficiency. Wal-Mart had a very effective rather responsive and flexible distribution system to transport goods from docks to stores. It educated the drives with the ethics and code of conduct which pictures their supply chain responsibility. Cross docking is one lethal weapon that was used by Wal-Mart in their SCM.

Supply chain management is here to stay and we are at the beginning of the spectrum. We still have a long way to go and miles to conquer before the entire industry, all players and all participants become supply chain enabled and get necessary tools to make informed decisions. Companies have a lot to gain from Supply chain management implementations. Individual companies will definitely gain tremendously but the benefits will move beyond the four walls of the company and everybody will gain. This will obviously have direct repercussions on the organization and thus add to their locked-in working capital. Supply chain management principles primarily focus on three things. Its tells that the company can compress its lead times and raise quality and accuracy at every stage, service will improve thus getting rid of costs out of business. Secondly organizations should take a process view rather than a functional view of the operation Third working across functional boundaries to integrate business processes in the future. Thus change in the supply chain can be focused on improving the characteristics of supply in the context of the goals that have been set for changing the service objectives.

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References

Guyer, P. (2001). The future of supply chain management. Logic tools .

Ryerson. (2007). Fundamentals of supply chain management. Mc-graw - Hill pvt Ltd.

Walmart. (2010). Retrieved April 20, 2010, from Wal-Mart Stores Inc. - About Us.: http://walmartstores.com/AboutUs/

Website:

Wal-Mart Fact Street- http://walmartstores.com/pressroom/FactSheets/Wal-Mart Logistics Fact Sheet- www.walmartstores.com“Cross docking delivers for retail”,- www.spscommerce.comThe wisdom of Wal-Mart's supply chain strategies,- http://walmartstores.com/pressroom/news/9482.aspxCompany Data Sheets,- http://walmartstores.com/pressroom/news/

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Supply Chain Management of Wal-Mart

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