"People think we got big by putting big stores in small towns. Really, we got big by replacing inventory with information."
Sam Walton, Founder of Wal-Mart
Type Discount department store/Public (NYSE: WMT) Founded Rogers, Arkansas, USA (1962) Headquarters Bentonville, Arkansas, USA Key people Sa Walton (1918–1992), Founder H. Lee Scott, CEO S. Robson Walton, Chairman Tom Schowe, CFO Industry Retail Products Discount stores, grocery stores, and hypermarkets Revenue US$351.1 billion (2007) Industry US$11.3 billion (2007) Products 1.9 million (2007) Website http://www.walmart.com
Production Storage Customer Material Flow and Storage Information Flow and Storage
Supply Chain : The sequence of organizations - their facilities, functions, and activities - that are involved in producing and delivering a product or service.
Sometimes referred to as value chains
Wal-Mart Supply Chain Source: Adapted from Garrison Wieland for “Wal-Mart’s Supply Chain,” Harvard Business Review 70(2; March–April 1992), pp. 60–71.
Shorter lead times
Greater customer loyalty
Wal-Mart gets benefited through Supply Chain
“ Everyday low price”
Effective use of logistics management
Effective inventory control
Bargaining power over suppliers
Global Expansion for new market opportunity
How Wal-Mart Manage the Supply Chain ?
Procurement and Distribution
Procurement and Distribution Management of Wal-Mart
Bull whip effect
Vendor managed inventory
Bull Whip Effect
Occurs when slight demand variability is magnified as information moves back upstream.
Bull Whip Effect
Vendor Managed Inventory
A means of optimizing Supply Chain performance in which the manufacturer is responsible for maintaining the distributors inventory levels. The manufacturer has access to the distributors inventory data and is responsible for generating purchase orders.
Manufacturers generate orders, not distributors or retailers Stocking information is accessed using EDI
A first step towards supply chain collaboration
Increased speed, reduced errors, and improved service
Hub and Spoke
Retail Link – real-time point-of-sales (POS) data transmission
Fleet of 7,000 trucks in US
Cross-docking means to take a finished good from the Manufacturing plant and deliver it directly to the customer with little or no handling in the process.
In purest form this is done directly, with minimal or no warehousing.
What makes Wal-Mart successful ?
Wal Marts Communication Network
Cross Docking relies on continuous communication between Wal Mart’s suppliers, distribution centers, and every point of sale system in each store.
This enables orders to flow in, get packaged and then shipped.
How does Wal-Mart do this?
Wal Mart operates their own satellite network.
Wal Mart’s satellite network sends the point of sale (POS) data directly to 4000 vendors
Inventory Management The primary purpose to buffer against any uncertainty that might exist in the supply chain. Since holding of inventories can cost anywhere between 20 to 40 percent of their value, their efficient management is critical in supply chain operations. These include deployment strategies (push versus pull), control policies --- the determination of the optimal levels of order quantities and reorder points, and setting safety stock levels, at each stocking location
Radio Frequency Identification
Automated Data collection based on an electronics – not a barcode
Tag can be imbedded in the product or stuck on the exterior case or pallet
Reader instead of a barcode scanner
Allows fully automated data collection with the use of portals
Can read many ID tags at a time
Bar code and point-of-sale
data creates an instantaneous computer record of a sale
Radio frequency identification (RFID)
technology can send product data from an item to a reader via radio waves
allows companies to communicate with suppliers, customers, shippers and other businesses around the world, instantaneously
Radio Frequency Identification cont…
How does RFID works ?
Information Technology: A Supply Chain Enabler
Information links all aspects of supply chain
replacement of physical business processes with electronic ones
Electronic data interchange (EDI)
a computer-to-computer exchange of business documents
Reduction of paperwork
Lead time and inventory reduction
Facilitation of just-in-time systems
Electronic transfer of funds
Improved control of operations
Reduction in clerical labor
Electronic Data Interchange
What we learned so far….
One of the keys to Wal-Mart's effective logistical system is the flexibility that it has when choosing suppliers. When Wal-Mart negotiates with suppliers and the suppliers know that Wal-Mart will only pay the most competitive prices. This is because it is very easy for them to find another supplier of that particular material with a lower price and very few logistical problems
Another reason that Wal-Mart's prices are so competitive is because they buy in such large quantities that transportation from one end of the supply chain to another is not as costly for additional units. This aspect of the logistical system does not come from skill or expertise it simply comes from the sheer size of the company, but this is still a factor. Wal-Mart buys so many supplies from different places throughout the world, that they have the luxury of using bigger trucks and using less fuel to go back and forth. Also if by chance they have to use shipping services to transport material from one location to another, Wal-Mart will give them so much business that they will get huge discounts
Sources www.wal-Mart.com www.altavista.com www.google.com Case Study of Retail