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Wal mart’s supply chain presantation

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  • 1. WAL-MART‟S SUPPLYCHAINA BUSINESS SUCCESSPREPARED BY BILGEN KENAR
  • 2. Wal-Mart is the World‟s LargestRetailer Company
  • 3. 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.‟‟
  • 4. 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.
  • 5.  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.
  • 6.  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…
  • 7. 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.
  • 8. 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.
  • 9. 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
  • 10.  This phenomenal growth of Wal-Mart isattributed to its continued focus on customerneeds and reducing cost through efficientsupply chain management practices.
  • 11. Five different flows in themarketing channel for Wal-MartCompany 1. Physical Flow 2. Title Flow 3. Payment FlowSuppliersWarehouse PlantWarehousesDealersCustomersSuppliers Plant CustomersSuppliers Plant DealersCustomers
  • 12. Five different flows in themarketing channel for Wal-MartCompany… 4. Information Flow 5. Promotion FlowSuppliersWarehouses PlantWarehouses DealersCustomersSuppliersPlant DealersCustomers
  • 13. 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).
  • 14. 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.
  • 15. 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.
  • 16. 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.
  • 17. 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.
  • 18. 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‟‟
  • 19. 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.
  • 20. 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.
  • 21. 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.
  • 22. 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.
  • 23. 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.
  • 24. 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.
  • 25. 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.
  • 26. 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.
  • 27. 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.
  • 28. 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.
  • 29. 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.
  • 30. 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.
  • 31. 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.
  • 32. 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.
  • 33. 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).
  • 34. 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.
  • 35. 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.
  • 36. 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.
  • 37. VAN EDI vs. Web-EDI
  • 38. 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.
  • 39. 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.
  • 40. 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
  • 41. End of PresentationThank you for your time 

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