Supply Chain of Wal-mart

Supply Chain of Wal-mart
Members:
Chan Man Ching
Chan Mong Tik
Chui Wai Ka
Lam Fei Fei
Man Ka Yu

Agenda
Background Information of Wal-mart
Supply chain of Wal-mart
Flow chat of the supply chain
Technology used in various stage of SC
Impact of Wal-mart
Wal-mart Background Wal-mart Supply Chain Impact of Wal-mart

Background of Wal-mart ~Well known retailer with heavy investment in IT
Types of industry: one stop shopping center
Founder: Sam Walton
Year of establishment: 1962
First store: in Arkansas
Sam Walton

No. of stores: 5311 units globally Wal-Mart has expanded its business to 10 countries: U.S., Mexico, Brazil, Argentina,Germany,Puerto Rico,U.K. , South Korea, Canada and China.

Rapid growth of Wal-mart
Revenues: $315,654,000, 000 in 2005
Stock value from Aug 1972 to May 2006:
Sourced from finance.yahoo.com

How well is Wal-mart doing? 5.98 4.58% 8.22% 52.62B 338,000 Target Corp 11.54 3.92 7.47 Inventory Turnover 1.93% 1.75% 3.60% Profit Margin 2.79% 3.83% 5.93% Operating Margin 55.68B 49.12B 312.65B Revenue 05' 60,500 1,330,001 1,800,000 No. of Employees Costco Sears Holdings Wal-mart

Why can Wal-mart be so successful?
Supply chain plays an important role
Supply chain:
a method of collaborating horizontally – among suppliers, retailers, and customers to create value

Wal-mart Supply Chain Flow Chat Manufacturer Manufacturer Manufacturer Retail Store Retail Store Retail Store Point of sale terminal Satellite system Bar code, RFID Radio, headphone Distribution center Company Headquarter

Distribution Center
108 centers in USA
Place that various goods are gathered, sorted and delivered to different store
About 80% of merchandises shipped from centers
24 hours operation

Manufacturer 1 Manufacturer 2 Manufacturer 3 Retail store 1 Retail store 2 Retail store 3 Manufacturer 3

Trucks outside Wal-mart
Past----written instructions
Now----radio and headphone
English ? Spanish? English ? Spanish?

Trucks outside Wal-mart
Use both hands
Keep contact with the headquarter
Behind or ahead the expectation
Adjust to any sudden changes
Benefit: Cost

Minilift Trucks
Inside distribution centers
equipped with headphone
Computer give direction to driver in voice
What merchandises to transport
Where the merchandises should be carried to
Which truck the merchandises be loaded
Report progress, ahead or behind schedule
Benefit: productivity and efficiency

Bar Code System
Standardized bar code system
applied by every supplier
Helps facilitating large scale operation
Pallets passed through conveyor belt are scanned automatically
Product codes are transferred to centralized computer system

Bar Code System
Matching with the computer database and generate useful information
What it is. What quantity it is. Which packing compartment and truck to go. Which store to go
Processes take place simultaneously
Save time and labour sorting merchandises
Smooth logistic processes

RFID
Radio Frequency Identification System
Use radio waves to identify objects
Tags with microchip and antenna built in
Store data (type, quantity, manufacturer, expired date…)
Generate HF signal to transfer data
Allow Wal-mart to keep track of pallets at various stage of supply chain

RFID
Sensors in the distribution center detect and receive information from chips
Locate where the pallet is and the condition of it
temperature
Humidity
Automatic senser – avoid scanning codes one by one

RFID Gen1 and Gen2 Additional functions ( Better security, programmable…)
Basic function
Cost drops to US$0.15 within near future Costly (up to $200 per chip in early stage) Improve reception (Work with various materials)
Difficult to penetrate through liquid and metals
UHF signals
HF signal Generation 2 Generation 1

RFID
Further improve logistics efficiency
Save time identifying merchandises
Convenience in checking inventory
Information pre-stored in the chips = convenience of data processing

Point-of-sale terminals
Invested in 1983
Simultaneously rang up sales and tracked inventory deductions for rapid re-supply.
Electronic scanning of Uniform Product Codes (UPC)
- to price-mark merchandise
- to ensure accurate pricing
Self-labeling system
The merchandise replenishment process

Large-scale satellite system
Installed in 1987
to improve communication between stores
Link all of the stores to headquarter, giving Wal-Mart’s central computer system real-time inventory data.
Allow sales data to be collected and analyzed daily, and enable managers to adjust immediately.
Daily information of individual store can be compared.

CPFR Program
A C ollaborative P lanning, F orecasting, and R eplenishment program.
Just-in-time inventory program began.
Advantage:
To reduce carrying costs.
Less excess inventory.
Cost of goods is estimated to be 5 to 10 percent less.

Tailored-made store management
Wal-Mart merchandise is tailored to individual markets and individual stores.
Store managers choose which products to display and allocate shelf space.
A store devote only 10% of its square footage to inventory.
Wal-Mart’s culture stress the key role of associates.
Information and ideas are shared at individual stores.

Suppliers = Partners
As Wal-Mart grew, its relationships with some suppliers evolved into partnerships
Sharing information electronically to improve performance.
How do they share information?

Information sharing
Open its databases
Retail Link private extranet system:
- to see exactly how its products are selling and when it might need to up its production
- to give more than 2000 suppliers computer access to point-of-sale data
Advantages:
- Gain more information about the customers.
- Shelves will always be stocked with the right items at the right time.

Electronic data interchange (EDI)
Enabled an estimated 3600 suppliers (about 90% of Wal-Mart’s dollar volume) to receive orders and interact with Wal-Mart electronically.
Later expanded to include forecasting, planning, replenishing, and shipping applications.

Vendor-managed inventory systems
to replenish stocks
Wal-Mart transmitted sales data, orders of products, delivery plan and reports of warehouse inventory status to them daily
to plan inventory levels, generate purchase orders, and ship exactly what was needed
both benefited from reduced inventory costs and increased sales

Business planning packets
Each Wal-Mart department developed computerized, annual strategic business planning packets for its suppliers
including:
department’s sales, profitability, and inventory targets, macroeconomic and market trends, and Wal-Mart’s overall business focus
Wal-Mart’s expectations on them
Suppliers’ recommendations

How Wal-mart affects suppliers
Domestic Suppliers:
Wal-mart imported 18 billion worth of goods from 5,000 Chinese suppliers in 2004
Ranked as China’s 8 biggest trading partner ahead of Russia, Australia and Canada
Used power to squeeze domestic suppliers’ profit

Wal-mart Defense :
If all of supplier were squeezed dry
 Wal-mart no suppliers
Suppliers found ways to survive
 do better at what they did before

Wal-mart not only selling foreign imported goods, also encourage the use of domestic American products
“ Buy American Program “
Retained over 1.7 billion in retail purchases that produced offshore.

How Wal-mart affects dometic workers
Domestic workers :
Face keen competition from overseas markets,
offshore manufacturing
Close down of factories
Loss of jobs
Competition with Wal-mart
Competitors cut labor’s health care benefits and wages

Wal-mart Defense:
Insist not responsible for the off-shoring of manufacturing
Example :
Sanyo ( TV sets producers ) planned to close the plant and move Mexico and Asia.
Wal-mart buys the TV sets from Sanyo if they don’t move
Eventually stay in US

Destructive Creation
Shrinking of manufacturing and labor intensive sectors
Technical changes substitute unskilled labor
Create new jobs and expansion in services and technology sector
Estimation : 225,000 job loss by outsourcing in the next 15 years < 1.5% of the job available in 2002

Unemployment is a structural problem ,rather than a cyclical problem
Mismatch of job skills with the market demand
Unskilled labors cannot match with increasing skilled labor demand
Not loss of job , but cannot find a job matches with their skills

How Wal-mart affects economy
Reallocation of capital and technology to the foreign markets
Less to employ domestic workers and invest in local economy
Decline in labor productivity and real incomes of the country

How Wal-mart affects economy
may not necessarily imply a decrease in real income and productivity
For example,
Globalization and lower technology cost,
Lead to higher American productivity growth
 added $230 billion extra GDP between 1995 and 2002
Equivalent to extra 0.3% points of growth a year

Wal-mart
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Supply Chain of Wal-mart

by TheSupplychainniche on May 24, 2010

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