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WAL-MART‟S SUPPLYCHAINA BUSINESS SUCCESSPREPARED BY BILGEN KENAR
Wal-Mart is the World‟s LargestRetailer Company
Why Wal-Mart is the best retailercompany in the world?? 1.Supply Chain Technology 2.Because of their distrubution and logisticsystem 3.new „‟green „‟ logistic technologies 4.and Wal-Mart‟s Truck Drivers „‟We have the best truck drivers in the countryand they play a big part in our company‟ssuccess.‟‟
History of Wal-Mart The company‟s founder is Sam Walton He was born in 1918 at Oklahoma,in USA In 1940,he worked for the famous retailer,J CPenney.
Walton gave up the job and decided to set uphis own retail store.He purchased a storefranchise in Arkansas. Offering significant discounts on prices, hebecame successful and acquired a secondstore in 3 years. By 1969, Walton had established 18 Wal-Mart stores. By late 1970s, the retail chain hadestablished a pharmacy and an autoservice center.
In 1980s, Wal-Mart continued to grow dueto huge customer demands in smalltowns. Wal-Mart was offering low prices, customersatisfaction guaranteed, and hours that wererealistic for the way people wanted to shop. Open all night, for university students By 1984, there were 640 Wal-Mart stores inU.S and now nearly4000 stores in US…
It continued its growth in the 1990s, focusing onoverseas stores. 1992, Mexico (joint venture with Cifra) 1994, Canada (acquired 122 Woolco stores fromWoolworth) 1997, Germany (acquired 21 store of Wertkauf) Korea, Brazil, and so on.
3 important person for Wal-Mart 1.Sam Walton – owner-created core supplychain 2.David Glass- enhanced his growth strategythrough the use of technology! 3. Lee Scott –Green logistics ***,CorporateSocial Responsibility-CSR „‟Green‟‟ logistics ;means implementing asystem that can independently monitoroverseas suppliers to make sure they meetsocial and environmental standars.
According to the Supply Chain ManagementReview,Wal-Mart has three ambitious goals ; 1. To be supplied 100 percent by renewableenergy 2. to create zero waste 3. to sell products that sustain Wal-Mart‟sresources and the environment
This phenomenal growth of Wal-Mart isattributed to its continued focus on customerneeds and reducing cost through efficientsupply chain management practices.
Five different flows in themarketing channel for Wal-MartCompany 1. Physical Flow 2. Title Flow 3. Payment FlowSuppliersWarehouse PlantWarehousesDealersCustomersSuppliers Plant CustomersSuppliers Plant DealersCustomers
Five different flows in themarketing channel for Wal-MartCompany… 4. Information Flow 5. Promotion FlowSuppliersWarehouses PlantWarehouses DealersCustomersSuppliersPlant DealersCustomers
Hub and Spoke System In the early 1970s, Wal-Mart became oneof the first retailing companies in the worldto centralize its distributionsystem, pioneering the retail hub-and-spoke system. Under the system, goods were centrallyordered, assembled at a massivewarehouse, known as „distribution center‟(hub), from where they were dispatchedto the individual stores (spoke).
Hub and Spoke System.. The hub and spoke system enabled Wal-Martto achieve significant cost advantages by thecentralized purchasing of goods in hugequantities.. and distributing them through its own logisticsinfrastructure to the retail stores spread acrossthe U.S.
Wal-Mart Procurement Wal-Mart emphasized the need to reducepurchasing costs and offer the best price to thecustomer. The company directly procured frommanufacturers, by passing all intermediaries.
Wal-Mart Procurement … Wal-Mart finalizes a purchase deal only whenit is fully confident that the products beingbought is not available else where at a lowerprice. Wal-Mart spends a significant amount of timemeeting vendors and understanding their coststructure. By making the process transparent, the retailercan be certain that the manufacturers aredoing their best to cut down costs.
Using EDI for Procurement The computer systems of Wal-Mart wereconnected to those of its suppliers. EDI enabled the suppliers to downloadpurchase orders along with store-to-storesales information relating to their productssold. On receiving information about the salesof various products, the suppliers shippedthe required goods to Wal-Mart‟sdistribution centers.
Logistics Management An important feature of Wal-Mart‟s logisticsinfrastructure was its fast and responsivetransportation system. The distribution centers were serviced by morethan 3500 company owned trucks. Some steps ; from here to here,distrubitioncenters,and more distribution centers,logisticsteam and their „‟honorary Wal-Mart‟s drivers‟‟
Logistics Management… Wal-Mart believed that it needed drivers whowere committed and dedicated to customerservice. The company hired only experienced driverswho had driven more than 300,000 accident-free miles, with no major traffic violation.
Cross-docking To make its distribution process moreefficient, Wal-Mart also made use of alogistics technique called “cross-docking.” In this system, the finished goods weredirectly picked up from the manufacturingplant, sorted out and then directly suppliedto the customers.
Cross-docking The system reduced the handling andstorage of finished goods, virtuallyeliminating the role of the distributioncenters and stores. The manufacturer directly forwarded thegoods to a place called the “staging area.” The goods were packed here according tothe orders received from different storesand then directly sent to the respectivecustomers.
Inventory Management Wal-Mart invested heavily in IT andcommunication systems to effectivelytrack sales and merchandise inventoriesin stores across the country. With the rapid expansion, it was essentialto have a good communication system. Hence, Wal-Mart set up its own satellitecommunication system in 1983.
Inventory Management… Wal-Mart was able to reduce unproductiveinventory by allowing stores to managetheir own stocks, reducing pack sizesacross many product categories, andtimely price markdowns. Instead of cutting the inventory across theboard, Wal-Mart made full use of its ITcapabilities to make more inventoriesavailable in the case of items thatcustomers wanted most, while reducingthe overall inventory levels.
Inventory Management… Employees at the stores had the “MagicWand,” a hand-held computer which waslinked to in-store terminals through a radiofrequency network. These helped them to keep track of theinventory in stores, deliveries, and backupmerchandise in stock at the distributioncenters.
Inventory Management… The order management and storereplenishment of goods were entirelyexecuted with the help of computersthrough the Point-of-Sales (POS) system. Through this system, it was possible tomonitor and track the sales andmerchandise stock levels on the storeshelves.
Voice-based Order Filling (VOF) In 1998, Wal-Mart installed a voice-basedorder filling (VOF) system in all its grocerydistribution centers. Each person responsible for order pickingwas provided with a microphone/speakerheadset, connected to the portable (VOF)system that could be worn on waist belt. They were guided by the voice to itemlocations in the distribution centers.
Voice-based Order Filling(VOF)… The VOF system also verified quantitiespicked, and could respond to a variety ofrequests such as providing product detail(type, price, barcode number, etc.) By installing the VOF system, Wal-Marteliminated mispicks and product labelingcosts since the system did not requirepaper lists and labels to be affixed on thegoods.
Inventory Management…(quick replenishment) Since the floor area of any Wal-Mart storevaried between 40,000 to 200,000 squarefeet, movement of goods within the storewas an important part of logisticsoperations. Wal-Mart made significant investments inIT to quickly locate and replenish goodsat the stores.
Inventory Management…(pretty darn quick displays) The company asked its suppliers to shipgoods in store-ready displays called prettydarn quick (PDQ) displays. Goods were packed in PDQ displays thatarrived at the stores ready to be boarded onthe racks. Wal-Mart‟s employees could directly replacethe empty racks at the stores with fullypacked racks, instead of refilling each andevery item at the racks.
Inventory Management…(retail link system) In 1991, Wal-Mart had investedapproximately $4 billion to build a retaillink system. More than 10,000 Wal-Mart retailsuppliers used the retail link system tomonitor the sales of their goods at storesand replenish inventories. Details of daily transactions (~10 millionper day) were processed through thissystem.
Inventory Management…(retail link system) Retail Link connected Wal-Mart‟s EDI networkwith an extranet, accessible to Wal-Mart‟sthousands of suppliers. The suppliers could find out how their productwas performing vis-a-vis competitors‟ productsin a particular product category.
Inventory Management…(retail link system) Wal-Mart owned the largest and mostsophisticated computer system in theprivate sector. The company used Massively ParallelProcessor (MPP) computer system totrack the movement of goods and stocklevels. All information related to sales andinventories was passed on through anadvanced satellite communication system.
CPFR By the mid 1990s, Retail Link had emergedinto an Internet-enabled SCM system whosefunctions were not confined to inventorymanagement alone, but also coveredcollaborative planning, forecasting andreplenishment (CPFR).
CPFR In CPFR, Wal-Mart worked together with itskey suppliers on a real-time basis by usingthe Internet to jointly determine product-wisedemand forecast. CPFR is defined as a business practice forbusiness partners to share forecasts andresults data through the Internet, in order toreduce inventory costs while at the sametime, enhancing product availability acrossthe supply chain.
CPFR: Hard to implement Though CPFR was a promising supplychain initiative aimed at a mutuallybeneficial collaboration between Wal-Martand its suppliers, its actual implementationrequired huge investments in time andmoney. A few suppliers with whom Wal-Mart triedto implement CPFR complained that asignificant amount of time had to be spenton developing forecasts and analyzingsales data.
VAN EDI vs Web-EDI In October 2002, Wal-Mart asked its14,000 suppliers to switch over from theexisting Value Added Networks (VAN) EDIto web enabled EDI. VANs route and manage EDI messagesfor their customers. By implementing web-EDI, Wal-Mart cansave millions of dollars in the form oflicense fees to the private VANs.
RFID Technology(Radio Frequency Identification) In efforts to implement new technologiesto reduce costs and increase theefficiency, in July 2003, Wal-Mart asked itstop 100 suppliers to be RFID compliant byJanuary, 2005. Wal-Mart planned to replace bar-codetechnology with RFID technology. The company believed that thisreplacement would reduce its supply chainmanagement costs and enhanceefficiency.
RFID Technology(Radio Frequency Identification) Because of the implementation ofRFID, employees were no longer requiredto physically scan the bar codes of goodsentering the stores and distributioncenters, saving labor cost and time. Wal-Mart expected that RFID wouldreduce the instances of stock-outs at thestores.
RFID Technology(Radio Frequency Identification) Although Wal-Mart was optimistic aboutthe benefits of RFID, analysts felt that itwould impose a heavy burden on itssuppliers. To make themselves RFID compliant, thesuppliers needed to incur an estimated$20 Million. Of this, an estimated %50 would be spenton integrating the system and makingmodifications in the supply chain software