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Walmartsupplychain

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  • Transcript

    • 1. Supply Chain Management
    • 2. WAL-MART TODAY• Founded by Sam Walton in Bentonville, Arkansas• Largest retailer with 6,500 stores worldwide and in all 50 states• Stocks more than 100,000 SKU’s• International Stores: Argentina, Brazil, Canada, Costa Rica, Nicaragua, Mexico, Puerto Rico, UK• 1.8 million employees worldwide• Serves more than 138 million customers each week• Became U.S. largest grocer in 2005
    • 3. Before there was Wal-Mart.......• Walton gained experience and knowledge through ownership of succesful Ben Franklin variety stores • Walton was able to selectively purchase merchandise in bulk from new suppliers and then transport these goods to his stores directly. • Realized new trend: discount retailing — based on driving high volumes of product through low-cost retail outlets — was sweeping the nation, he decided to open up large, warehouse-style stores in order to compete • Adopted merchandise assortment strategies of other retailers through observation
    • 4. Retail Strategy• EDLP = Every Day What are the Key Benefits Attracting Retailers to EDLP? Low Pricing 1. Supply chain benefits related to improved demand planning, better inventory management , reduced out of stocks and reduction in business • reduced bullwhip effect complexity. 2. Price leadership: building consumer confidence that your store will consistently provide the best value. Not necessarily on every item sold, • allowed for minimum advertising but certainly on the total basket • channeled savings from advertising back into price reductions• Price Rollback Campaigns • funded by suppliers • goal to increase product sales between 200 - 500 % • prices were 8% - 27% below competitors
    • 5. • Product lines include: • apparel, small appliances, housewares, electronics, hardware, grocery/produce• Competitors: • Sears, Target, Gap & Limited, Dillard, J.C. Penney, Kroger, Albertsons, Safeway, Costco
    • 6. Development of Initial Supply Chain• Stores were originally called Wal-Mart Discount City• Procurement efforts had to be made: began self distribution• Continuous growth from 1960-1980 • benefited from improved road infrastructure • Wal-Mart was able to react to legislation ( removal of resale price maintenance)
    • 7. Purchasing• Walton and management teams were responsible for own purchasing• Personal involvement eliminated middlemen (wholesaler/distributor)• Buyers worked one on one with suppliers to ensure proper purchasing orders • Purchasing offices located in: • Arkansas • Began to source products globally in China
    • 8. Private Label • International purchasing offices worked directly with private label • PL products were first developed in the 1980’s • In 2005 PL sales accounted for 20% of sales • Benefits: • Offered higher margins for the company • Cheaper prices for customers
    • 9. Buyer / Supplier Roles & Relationships• Buyers convened each quarter to exchange buying notes and tips (important topics of review were the supplier’s out-of-stock rate and inventory levels at Wal-Mart, indications of how well replenishment was being handled. Suppliers were provided with targets for out-of- stock rates and inventory levels.)• Buyers reviewed new merchandise• Gathered field intelligence through store visits and tours• Assisted sales associates stock and sell, providing product knowledge• Insist on single invoice prices• Don’t pay for cooperative advertising, discounting or distribution• Negotiated medium- to long term supply chain strategies
    • 10. Power & Control“Wal-Mart dictates that its suppliers...accept payment entirely on Wal-Mart’s terms...share information allthe way back to the purchasing of raw materials. Wal-Mart controls with whom its suppliers speak, howand where they can sell their goods and even encourages them to support Wal-Mart in its political fights.Wal-Mart all but dictates to suppliers where to manufacture their products, ass ell as how to design thoseproducts and what materials and ingredients to use in those products.”• Globally, Wal-Mart has approximately 90,000 suppliers • Major suppliers include Kraft, Nestle, P &G, Unilever • not uncommon for suppliers to have dozens of employees on the Wal-Mart account
    • 11. Distribution • Store openings were driven by distribution strategy • Gained economies of scale by saturating areas within a 1 day drive of distribution center • “Hub & Spoke” Design • Strategy led to masshttp://www.youtube.com/watch?v=GI7R37rp8xY expansion throughout the nation
    • 12. Store Locations• Located in low-rent, suburban areas• Competitors chose to locate in prime, suburban areas • thinly spread
    • 13. Store-Level Operations• Stores are simply furnished and constructed using standard materials• Light and temperature settings for all U.S. stores were controlled from Bentonville• Each department is allocated to specific SKU’s• Each store catered to the demographic of the community• Utilized “category captains” to provide input on shelf space allocation
    • 14. Logistics• 75,000-person logistic division• Included largest private truck fleet of any firm: 7,800 drivers• 114 U.S distribution centres Product was picked up at the suppliers’ warehouse by Wal-Mart’s in-house trucking division and was then shipped to Wal-Mart’s distribution centres. Shipments were generally cross-docked, or directly transferred, from • contained mix of products including general inbound to outbound trailers without extra storage. To ensure that cases moved efficiently through the distribution centres, Wal-Mart worked with merchandise, food and soft goods (Clothing) suppliers to standardize case sizes and labeling. The average distance from distribution centre to stores was approximately 130 miles. Each of these • Processes over 5 billion cases a year through its distribution centres was profiled in a store-friendly way, with similar products stacked together. Merchandise purchased directly from factories entire network in offshore locations such as China or India was processed at coastal distribution centres before shipment to U.S. stores.
    • 15. • Continuous revenue obtained through “back-haul”• Fleets served as for-hire carriers when trucks were empty• Transports generated $1billion annually• Trucking employees are non-unionized and in-house • Allowed Wal-Mart to implement and improve delivery procedures • Uniformed operating standards ensured that miscommunication was minimized
    • 16. Information Sharing• Wal-Mart distribution centres had close to real time information sharing• Allowed for merchandise to be pushed to stores automatically• Store level information systems allowed manufactures to be aware of individual purchases• Associates could input order to override impending orders• Meetings were held weekly among staff to share day/week/month sales• Satellite network provided means to broadcast video messages to the stores
    • 17. Information Sharing Cont.• In the mid-1980’s Wal-Mart invested in a central database, store-level-point of sale systems, and a satellite network• Also implemented chain-wide UPC barcode system• Store level information could be collected and analyzed instantaneously• Combined sales data with external information enabled the company to improve accuracy of purchasing forecasts
    • 18. Retail Link • Introduced data system that tracked sales over time • Gave suppliers access to real-time sales data on the products they supplied • Supplied individual stock- keeping items at the store level • Competitors utilized similar system, Retail Interface
    • 19. CPFR• CPFR- collaborative planning, forecasting and replenishment• shared critical information on promotions, daily sales, & inventory levels• 1) Strategy and Planning:  This activity establishes the ground rules for the collaborative relationship. It determines the product mix and placement and develops event plans for the period.• 2) Demand and Supply Management:     This activity estimates consumer demand and order and shipment requirements over the planning horizon.• 3) Execution: In this activity, orders are placed, shipments are placed and delivered, products are received and stocked, sales transaction are recorded and payments are made.• 4) Analysis:  In this activity, planning and execution are monitored for exceptions, results are aggregated and key performance metrics are calculated. The insight thereof is shared between the partners and plans are adjusted for improving results.
    • 20. VMI• VMI- vendor managed DUAL BENEFITS 1. Data entry errors are reduced due to inventory (continuous computer to computer communications. replenishment) 2. Speed of the processing is also improved. 3. Both parties are interested in giving better• A means of optimizing Supply Chain service to the end customer. performance in which the manufacturer is 4.Having the correct item in stock when the responsible for maintaining the distributor’s inventory levels. The manufacturer has access end customer needs it, benefits all parties to the distributor’s inventory data and is involved. responsible for generating purchase orders. 5. A true partnership is formed between the Manufacturer and the Distributor. They work • suppliers were required to manage closer together and strengthen their ties. inventory levels at distribution centers 6. Stabilize the timing of Purchase Orders - • began with P&G diapers POs are now generated on a predefined basis. • in many situations suppliers owned the inventory on the shelf up to the point of checkout
    • 21. Human Resources• Made store visits to implement best practices• Encouraged associates to contribute new, innovative ideas• Non-union:• didn’t deal with labor agreements• could drive labor costs down• made operational changes quickly and efficiently• became target of politicians and Commercial Workers Union due to size
    • 22. “We REMIX could have done nothing and been fine from a logistics standpoint ... but as you continue to increase your sales per square foot, you’ve got to do things differently to make those stores more productive.” CIO, Rollin Ford • Initiated in Fall 2005 • Problem: Increase in grocery products resulted in delays in shelf restocking • Goal of Remix: Reduce % of out-of-stock merchandise at stores by redesigning its network of distribution centres • Plan of Action: • revise original model of distribution centres • fast moving items would be shipped from “high velocity” food distribution centres • these centres were smaller, had temperature controls, and had less automation
    • 23. RFID• Goal: Increase ability to track inventory > Increase in-stock rates at store level• Con: Costly for suppliers to implement (tags cost 17 cents each)• Pros:• 1. Increase stock visibility as stock moved in trucks, centres, and in store• 2. Track promotion effectiveness• 3. Enable the company to cut out-of- stock sale losses and overstock expenses
    • 24. RFID Implementation • RFID readers were placed in several parts of the stores: dock, backroom, door from stock room to sales flor, and in box crusing area • RESULT: Stores with RFID implementation showed net improvements of 16 per cent fewer out-of-stocks on RFID tagged products
    • 25. Continuous Improvement• Internal goal to reduce inventory growth rate to half of its sales growth rate • 2006: Reported sales increase of 9.5% from the previous year / Inventory grew at 8.2% • 2005: Reported sales increase by 11.3%, while inventory grew 11.8%• Result: Improved, but fell short of goal
    • 26. International Markets• Successes:• Largest retailer with strong profits in Mexico & Canada• 2006: Purchased stock in Central American Holding Company, gaining control over 375 supermarkets in Central America• Failures:• Loss of market presence in UK• Sold 16 South Korean stores to local chain• German losses equalling over $1billion
    • 27. Will Wal-Mart Survive?• August 2006, Wal- Mart posted first profit decline• Competitors are catching up • Target & Costco

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