Walmart Supply Chain


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  • Japan is a small country with limited spaces, which has several implications for Walmart
  • Walmart Supply Chain

    1. 1. Wal-Mart Group No - 06 Karthik K. Sushil Chaudhari Sai Sandeep Sree Harsha Siddharth Padki Sheekant E.
    2. 2. What are the success factors for Wal-Mart in the US ? Purchasing Economies of scale Electronic hook-ups Less than 4% purchase volume Store Location Large discount stores in small rural area In bound logistic Saturation strategy Distribution center Satellite network system Human Resource Dedicated work force Offering for the employees Performance based promotion Marketing strategy Every day low prices Store Operation Cost advantage Sales per square feet Management information & control Excellent IT structure Benchmark information
    3. 3. Did the success factors work in other countries? YES  Mexico, Canada, Britain  Largest retailer in Mexico & Canada  Third largest in Britain NO  Japan, Korea, Germany, China, Indonesia, Brazil and Hong Kong  Withdrew from Germany
    4. 4. Did the success factors work in other countries? China Too much competition Income Disparity Local Protectionism Infrastructural Deficiency Distribution challenges Regulatory restrictions Lack of IT network Consumer behavior Many trips, little purchases Fresh means alive Shoplifting
    5. 5. Did the success factors work in other countries? Japan Challenges in implementing retail link system as suppliers lacked the technology Retailer supplier relationship traditionally personal – challenge switching to impersonal electronic system
    6. 6. Did the success factors work in other countries? Germany Existing competition Customers felt : extra services lead to higher prices Extending store hours – not allowed Cutting prices violated manufacturer’s price maintenance agreements High labour costs
    7. 7. Did the success factors work in other countries? South Korea Operated in buildings of six to eight floors within dense cities Unable to adjust its traditional model in different building structure Merchandise mix Location of stores far from the city
    8. 8. Detailed Analysis: Marginal success and failure in other countries Japan - (Failure) • Lack of storage room to store purchases - Small housings and apartment sizes, with high rent prices. • Several small purchases, compared to Walmart usual practice of centralized, big stores, with bulk purchasing to save costs. • High operating costs, especially because of the prices of rent and buildings in general - Average commercial land prices in Japan is 156,857 Yen (USD 2,017)/sqm. • Inability to apply original supply chain model Lots of stores, lots of supplies to be delivered, but no warehouse space. • Costly trash disposal procedure- Japanese environmental consciousness about waste disposal, added to their minimalist lifestyle, would discourage any bulk purchases from Walmart.
    9. 9. Germany - (Failure) • Failed to build good relationships with suppliers – With a 1.1% share only of the German market, the company found suppliers unwilling to tow the line. – Demanded access to suppliers’ premises to check their operations and the quality of the products. This did not go down too well with German suppliers and as a consequence Wal-Mart failed to build good relationships. • Wal-Mart's American buyers made classic errors in Germany such as stocking large number of US pillow cases which did not fit German Pillows.
    10. 10. Brazil - (Failure) • Customers had to travel several miles to reach the stores • High average stock out rate(40%) – suppliers unable to produce and supply to the requirements • warehouses located far away from stores – leading to stock out • Traffic problem – hindered on-time delivery • very huge product line – problem with stock maintenance • advertisement of stocked out products - strain on supply chain.
    11. 11. China – (Success) • Successful vendor relationships – No nonsense negotiator which lead to efficient purchasing – Partnership with suppliers & sharing information electronically which resulted in efficient communication. – Vendor managed inventory system which minimized inventory cost. • Hub & spoke distribution network, owned warehouses and cross-docking gave better control over their distribution network. • China sourcing at the scale of Chinese population which gave competitive advantage of its operation efficiency that enabled U.S. Wal-Mart to be low priced.
    12. 12. Can failures be attributed to poor retail strategies in these countries?
    13. 13. Germany Failure Flawed Entry by acquisition strategy • Acquired Spar – weakest German retailer • Run down stores, non lucrative location of stores in less well off inner city residential areas • Cost burden- Poor returns realized even after Wal-Mart acquisition High operating costs • Strict zoning and planning regulations posed challenges for organic growth • Due to comparatively small size of Wal-Mart, it could not enjoy significant price concessions or relaxations from suppliers • To fully exploit economies of scale in food retailing, min. annual turnover of around €7.7 billion is de rigeur –2.5x Wal-Mart Germany’s actual sales.
    14. 14. Germany Failure EDLP : Empty Promise • Existing German retailers like Aldi, Lidl, Rewe and Edeka matched all of Wal-Mart's price cuts • Aldi defended its position as Germany’s undisputed cost and price leader No excellent service • Wal-Mart's traditional US centered view of customer service not fully compatible with German sensibilities • 10 foot rule • “Greeter” and “Bagger” did not go down well with Germans as well • Restrictive shopping hour regulation
    15. 15. South Korea Failure Inefficient retail clustering • Several stores need to be in close proximity to enable sharing of merchandise, distribution networks • Wal-Mart Korea unable to capture logistically efficient locations • Most of Korean retailers already located stores in key areas and built a distribution systems to optimize merchandise mix and operations EDLP as customer value proposition • Wal-Mart's EDLP proposition lacked strategic fit to preferences of Koreans • Koreans are quality conscious and brand loyal. Will not switch to cheaper brands • Not compromise on service and quality for lower prices • Perceived Wal-Mart as cheap market place with warehouse style layout
    16. 16. South Korea Failure Failure to implement IT strategy • Wal-Mart's IT systems were at the core of its success linking vendor supply operations to Wal-Mart's distribution network • Information advantage lets Wal-Mart be the toughest negotiator • Korean vendors reluctant to have EDI system with Wal-Mart • As a result, Wal-Mart did not buyer power in Korea as it does in USA • Complete lack of control over Korea supply chain and procurement • If IT strategy was successful, • Wal-Mart could access supplier operational process and the costs, and negotiate the vendor prices.
    17. 17. South Korea Failure • Wal-Mart completely failed in developing an effective localization strategy for Korea market • It did not build a strong alliance with suppliers facilitating integrated supply chain • Consequently, it could not obtain ability to control logistics from sourcing to delivery • It also failed to understand the Korean customer taste and preferences
    18. 18. Russia Failure • Decided to enter the market through acquisition, not green-field development, • Missed out on a deal to acquire Kopeika, one of Russia's largest discount grocery chains. Some other reasons • Late entry • Land costs • Unsure about Store format
    19. 19. India ?? • Wal-Mart’s retreat comes amid slowing growth in India and the failure of officials to open and modernize the economy to attract foreign investment • Authorities investigation: whether Wal-Mart violated foreign-investment rules by giving Bharti an interest-free loan of $100 million that could later be converted into a controlling stake in the joint venture
    20. 20. Some other failures • Hong Kong: – entered in 1994 – Left after two years because of failure in merchandise selection and location • Indonesia – Entered in 1996 – Jakarta store was looted and torched in 97-98 riots