Wal Mart Value Chain Analysis by Sandro

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Wal Mart Value Chain Analysis by Sandro

  1. 1. Sandro Olivieri
  2. 2. <ul><li>Traditional </li></ul><ul><ul><li>Manufacture -> Wholesaler -> Retailer -> Customer </li></ul></ul><ul><li>Wal-Mart </li></ul><ul><ul><li>Manufacturer ->Wal-Mart -> Customer </li></ul></ul>
  3. 3. <ul><li>Strategic distribution center locations </li></ul><ul><ul><li>At the end of 1985, Wal-Mart was able to operate 859 stores with only 5 distribution centers – the locations of these centers were chosen to: </li></ul></ul><ul><ul><ul><li>Maximize potential for bulk purchases from manufacturers </li></ul></ul></ul><ul><ul><ul><li>Ensure full truck-loads coming into the centers </li></ul></ul></ul><ul><li>Strategic store locations </li></ul><ul><ul><li>Store locations were exploited to ensure full truckloads on returns to distribution centers by having return trucks stop at multiple stores and pick up return merchandise </li></ul></ul><ul><li>This allowed Wal-Mart to cut our the Wholesalers, reduce costs, and provide “always lower prices, always.” to its customers. </li></ul>
  4. 5. <ul><li>The “hub” of Wal-Mart’s hub-and-spoke distribution system was fueled by cross-docking </li></ul><ul><li>Goods came by full truckloads into the centers from various vendors </li></ul><ul><li>Goods were transferred from vendor trucks and put in Wal-Mart trucks according to store need (as indicated by integrated inventory system)‏ </li></ul>
  5. 6. <ul><li>Wal-Mart </li></ul><ul><ul><li>Advanced distribution system eliminated the need to make purchases from an entity that “had it all” </li></ul></ul><ul><ul><li>Wal-Mart creates the same value of wholesalers, but at a much lower cost. </li></ul></ul><ul><ul><ul><li>This translates to lower prices for the customer </li></ul></ul></ul><ul><li>Suppliers </li></ul><ul><ul><li>Selling directly to Wal-Mart was equivalent to selling to a wholesaler with a warehouse, but at much higher volumes </li></ul></ul><ul><ul><li>Suppliers don’t get more of the pie, the pie gets bigger. </li></ul></ul>
  6. 7. Customer Wal-Mart Supplier $2.54 $.27 $6.59 $.60 Assumption was made on suppliers’ margin
  7. 8. Excludes profits from License fees and other income $0.27 - Profit $1.12 – Payroll Expense $0.23 – Advertising Expense $0.22 – Rental Expense $0.76 – Miscellaneous Expense $.32 – Operating Expenses

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