Wal-Mart -Supply Chain Mgmt,,Nirvana

7/28/2019 Wal-Mart -Supply Chain Mgmt,,Nirvana

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Wal-Mart: Supply Chain

Management

Background Business Process Redesign:

Process, IT Implications: Process, IT



Wal-Mart Is the Largest and Fastest Growing DiscountDepartment Store

2012 revenues totaled $ 447 billion:Increased 35% from previous year, whereas competitors growth rates averaged only 10%

Net income increased 25% to $16 billion

Operations include growing chain of stores, including discount department stores,wholesale clubs, food stores, wholesale distributor of books and pre-recordedmusic, and grocery distribution services

First discount department store chain to expand internationally

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

needs and reducing cost through efficient supply chain management practices.

.

Wal-Mart grows through volume and market share gains rather thanmargin expansions.



Customer Demands

Critical Success Factors(CSF)

Satisfying Customer Demands Depends on Five CriticalSuccess Factors

Quick responsivenessto market changes

Low inventory Quick replenishment of

inventory Effective human

resource system Efficient distribution

system

The right products In stock Best value Service and quality



Wal-Mart Fulfills the Customer-Satisfaction CriticalSuccess Factors

Customer demand pulls product through thesupply chain

Tracking product movement at individual storesby market traits (e.g., size, color)

Investment in IT ensures timely analysis of sales/customer/market information and trends

Formal and informal cooperation among stores,

distribution centers, and suppliers

Quick Responsivenessto Market Changes

Low Inventory

Quick Replenishment

Effective HR System

Efficient DistributionSystem

CSF

WAL-MART: BUSINESS PROCESS


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Wal-Mart Fulfills the Customer-Satisfaction CriticalSuccess Factors (cont.)

Direct high-level and long-term relationshipwith suppliers enabled by high information

sharing:- Some vendors directly manage distribution warehouse

inventory of their products

Efficient transportation system

Investment in IT (e.g., EDI, Quick Response,Radio frequency terminals)

CSF



Low Inventory

Quick Replenishment

Effective HR System



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All employees are consideredassociates

Extensive training and support

Stock-ownership program

Profit-sharing

Employees are your biggest capital investment, so it makes sense tomaintain them their skills, their morale, and their participation.

CSF




Low Inventory

Quick Replenishment

Effective HR System



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Highly automated distribution centers(e.g., laser-guided conveyor belts)

A fleet of 2,000 company-owned trucks

High leverage of supplier relationships:- Some suppliers ship goods sales floor

ready

CSF




Low Inventory

Quick Replenishment

Effective HR System



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The Traditional Supply Chain Includes Inefficient andUnnecessary Steps

Select Tag/Label

Ship

Pack

Ship

Select PackReceive

Ship

Manufacturer(Supplier)

Retailer

Shipper

Wholesaler

Receive PackSelect Storage

Storage

Sell

Order

Individual StoreDistribution Warehouse

Order Order

Order

Make



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Wal-Mart Simplified Its Supply Chain

Ship Receive

Select

Ship

Manufacturer(Supplier)

Retailer

Shipper

Wholesaler

Receive PackSelect Storage Sell

Individual StoreDistribution Center

Tag/Label PackMake


Cross-docking in distribution centers results in product flow frominbound to outbound shipping docks within 48 hours.

Deliver within72 hoursof order

POSOrder


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Wal-Mart Invests Heavily in Information Technology

Inventory Tracking and Management System at distribution centers:Identifies every product and its location in the warehouse

Integrated with some 8.5 miles of laser-guided conveyor belts

Lasers read the bar code on every product box and route them to appropriate loading dock

Electronic Data Interchange (EDI):For electronic transmission of POS data, purchase orders, invoices, advance shipment notice,etc. between Wal-Mart headquarters, suppliers, distribution centers, and individual stores

Merchandising Artificial Intelligence System:

To adjust vendor merchandise assortments based on the need of each particular storeState-of-the-art satellite communication network which supports data, voice, and video



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Wal-Mart Invests Heavily in Information Technology (cont.)

Various Quick-Response (QR) systems (retail-link) to allow direct store-to-supplier ordering: continuous replenishment

Wal-Mart

Supplier

POS Data

Store

Vendor-managed QR

Supplier Store

Wal-Mart-managed QR

Order

Wal-Mart

Supplier Store

Warehouse J ust-in-Time System

DistributionCenter

DistributionCenter


POS Data


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Wal- Marts Inventory Management Improvements HaveResulted in Efficiencies Unmatched by the Competition

WAL-MART: IMPLICATIONS

Inventory-to-Sales Ratio

1:4.58

1:5.94

Sears Roebuck & Co.Wal-Mart

Wal-Mart stores replenish inventorytwice a week vs. industry standard of once every two weeks

Wal-Mart has lowest cost of operations in theretail area, aside from wholesale clubs

Selling and Operating Expenses of Sales

KMartWal-Mart

15%

28%

IT systems have improved Wal- Martsin-stock position and increased vendor responsiveness

Inventory in System (Days)

At Vendor

At Warehouse

In-Store

30

30

14

323

After NewSystem

Before NewSystem


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Hub and Spoke System

Wal-Mart -one of the first retailing companies inthe world.

Under the system, goods were centrally ordered,assembled at a massive warehouse, known asdistribution center (hub), from where they weredispatched to the individual stores (spoke).

Achieve significant cost advantages by thecentralized purchasing of goods in huge

quantities


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Wal- Marts Procurement

Reduce purchasing costs and offer the best price to thecustomer.

The company directly procured from manufacturers, bypassing all intermediaries.

Meeting vendors and understanding their cost structure.

Transparent process


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Using EDI for Procurement

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

EDI enabled the suppliers to download purchaseorders along with store-to-store sales informationrelating to their products sold.

On receiving information about the sales of various products, the suppliers shipped therequired goods to Wal- Mart s distribution centers.


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Logistics Management

Fast and responsive transportationsystem.

More than 3500 company owned trucks.

Experienced drivers who had driven more

than 300,000 accident-free miles, with nomajor traffic violation.


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Cross-docking

In this system, the finished goods were directlypicked up from the manufacturing plant, sortedout and then directly supplied to the customers.

reduced handling and storage of finished goods.


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Inventory Management

Reduce unproductive inventory

Made full use of its IT capabilities to make moreinventories available in the case of items thatcustomers wanted most

Employees at the stores had the Magic Wand, a hand-held computer which was linked to in-storeterminals through a radio frequency network


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The order management and storereplenishment of goods through the Point-of-Sales (POS) system.

Helps to monitor and track the sales and

merchandise stock levels on the storeshelves.


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Voice-based Order Filling (VOF)

Voice-based order filling (VOF) system in all itsgrocery distribution centers.

Each person responsible for order picking wasprovided with a microphone/speaker headset,connected to the portable (VOF) system that couldbe worn on waist belt.

They were guided by the voice to item locationsin the distribution centers.


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Inventory Management (quick replenishment)Floor area of 40,000 to 200,000 square feet,movement of goods within the store was an

important part of logistics operations.

EDI network with an extranet, accessible to Wal-Mart s thousands of suppliers.

Massively Parallel Processor (MPP) computersystem to track the movement of goods and stocklevels.All information was passed on through anadvanced satellite communication system


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VAN EDI vs. Web-EDI


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RFID Technology (Radio Frequency Identification)

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

employees need physically scan the barcodes of goods entering the stores anddistribution centers, saving labor cost andtime.

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



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Lessons Learned: The Road to Success Is Paved byTechnology and Better Use of People

Economiesof Sales:

Best Deals

StrongSupplier

Relationships

EffectiveIT Systems

EffectiveDistribution

Systems

EmpoweredEmployees

ReducedCost of Sale

In-DepthKnowledgeof Customer/

Market

StableLower

Prices

PredictableSale

Patterns

DecreasedChance of

Out-of-Stock

IncreasedSalesand

Profits



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Wal-Mart -Supply Chain Mgmt,,Nirvana

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