walmart supply chain management


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walmart supply chain management

  1. 1. "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
  2. 2. Founder: Sam Walton Year of establishment: 1962 First store: Arkansas 1960s: •Sam Walton opens first discount store in Rogers, AK •24 stores in Arkansas with $24 million in sales •Two stores open outside of Arkansas in Missouri and Oklahoma •Wal-Mart is incorporated 1970s: •Home office and Distribution Center opens •Company is listed on the Hew York Stock Exchange •Acquires 16 Mohr-Value stores and Hutcheson Shoe Company •276 stores, 21,000 employees, and $1.248 billion in sales.
  3. 3. 1980s: •Sam Club opens and Largest distribution center opens to-date •Acquires Kuhn’s Big K, Grand Central Shoes, and Woolco stores •Forbes magazine ranks Wal-Mart #1 retailer for eight years straight •882 stores, 104,000 employees, and $8.4 billion in sales •Wal-Mart Satellite Network (largest private satellite communication in U.S. linking all facets of company operations) •Celebrates 25th anniversary Wal-Mart suffered a setback in 1992, when Walton died. But it continued its growth in the 1990s, focusing on overseas stores. 1992, Mexico (joint venture with Cifra) 1994, Canada (acquired 122 Woolco stores from Woolworth) 1997, Germany (acquired 21 store of Wertkauf) Korea, Brazil, and so on
  4. 4. 2000s: Owns 95.1% share in Seiyu stores, Japan •Joint-venture with Bharti Enterprises, India – est. Bharti Wal-Mart Private Limited •Opens stores in Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and South Korea •3,000th international stores opens in Sao Paulo, Brazil
  5. 5. Wal-mart Sears Holdings Target Corp Costco No. of Employee s 1,800,000 1,330,001 338,000 60,500 Revenue 05' 312.65B 49.12B 52.62B 55.68B Operating Margin 5.93% 3.83% 8.22% 2.79% Profit Margin 3.60% 1.75% 4.58% 1.93% Inventory Turnover 7.47 3.92 5.98 11.54
  6. 6. Ranked first in the Global Fortune 500 list in 2001-2002 financial year
  7. 7. In fiscal year 2012, Wal-Mart registered approximately $444 billion in sales, which is $20 billion more than Austria's GDP. If Wal-Mart were a country, it would be the 26th largest economy in the world. If Wal-Mart was an army, it would have the second largest military in the world, behind China. Wal-Mart is bigger than Home Depot, Kroger, Target, Sears, Costco, and K-Mart combined. One of every four dollars Americans spend on groceries is spent at Wal-mart.
  8. 8. competitor. WAL-MART STRATEGY & OPERATIONS STRUCTURE Enable everyday low prices and above average profitability by procuring, distributing, and selling products, when and where needed, at lower costs than any competitor. Operations Strategy Short Response Times Low Inventory Level Operations Structure Fast Transportation System Cross Docking Retail Link RFID
  9. 9. Wal-mart imported 18 billion worth of goods from 5,000 Chinese suppliers in 2004 Ranked as China’s 8 biggest trading partner ahead of Russia, Australia and Canada Used power to squeeze domestic suppliers’ profit Tough negotiator on prices Demand for bottom price from suppliers. Long term relationship with suppliers. Compliance of standard manual for suppliers
  10. 10. One day Sam Walton’s close friend, George Billingslay, asked him to join him on a canoe trip down the Spring River. He said he was bringing along an old friend named Lou Pritchett, who was a V.P. with P&G at the time, and who wanted to meet Walton and talk about some things relating to our two companies. So Walton went along, and it turned out to be the most productive float trip he ever took with George. During that time on the river, both decided that the entire relationship between vendor and retailer was at issue. Both focused on the end-user – the customer – but each did it independently of the other. No sharing of information, no planning together, no systems coordination. Two giant entities going our separate ways, oblivious to the excess costs created by this obsolete system. Within three months, both had created a P&G / Wal-Mart team to build a whole new kind of vendor relationship. P&G could monitor Wal-Mart’s sales and inventory data, and then use that information to make its own production and shipping plans more efficiently.
  11. 11. It is the responsibility of each supplier to ensure that it is at all times compliant with all relevant laws and regulations with respect to merchandise produced for or sold to Walmart. A supplier with production identified as non-compliant will be notified in writing of the violation(s) and will be assessed the following sanctions: FIRST STRIKE: All current and future orders with the supplier’ s factory will be cancelled. Non- compliant products in production or unshipped from the violating factory will be rejected. Violations will be recorded on a supplier’ s matrix for two years from the audit date.  SECOND STRIKE: A second instance of non-compliant production by the supplier within two (2) years of the initial violation will result in the cancellation of all current and future orders, and all non- compliant products in production or unshipped will be rejected for the violating factory. The supplier, at its own expense, will be required to undergo an unannounced Ethical Sourcing audit conducted by a Walmart approved third party audit firm.
  12. 12. THIRD STRIKE: If at any time Walmart, at its sole discretion, determines that a pattern and practice of non-compliance exists, Walmart will terminate its business relationship with a supplier. All current and future orders for the supplier in violation of this policy will be cancelled.
  13. 13. .
  14. 14. Walmart’s 158 distribution centers are hubs of activity for our business. Our distribution operation is one of the largest in the world. Regional distribution center can have up to 12 miles of conveyor belts, which can move hundreds of thousands of cases through the facility each day. There are 9 disaster distribution centers, strategically located across the country and stocked to provide rapid response to struggling communities in the event of a natural disaster. Each distribution center is more than 1 million square feet in size, and uses more than 5 miles of conveyor belts to keep products moving to our stores 24 hours a day. Every distribution center supports 90 to 100 stores in a 200- mile radius.
  15. 15.  Able replenish stores within 48 hrs against 5 days for competitors. Shipping cost of walmart3% against 5% for competitors Higher profits Shorter lead time
  16. 16. Each Distribution center divided into different section basis of quantity of goods received. Managed in both cases and palletized goods. High inventory turnover rate ,once in every two weeks. Goods meant for US in pallets and imported goods in reusable boxes and cases. Some cases vendors supplied directly to stores. 85% of goods passed distribution centers.
  17. 17. The distribution centers ensured steady flow & consistent flow of products. Large-scale use of sophisticated technology such as Bar code, hand held computer systems (Magic Wand) and now, RFID. Every employee had information regarding products at distribution center. They make 2 scans- one for identifying the pallet, and other to identify the location from where the stock had to be picked up. The hand held computers guide employee to the location of the specific product.
  18. 18. The quantity of the product required from the center is entered in the hand held computer, which updates the information on the main central server. The computers also enabled the packaging department to get accurate information such as storage, packaging & shipping
  19. 19. Standardized bar code system Applied by every supplier Helps facilitating large scale operation Pallets passed through conveyor belt are scanned automatically Product codes are transferred to centralized computer system Matching with the computer database and generate useful information What it is. What quantity it is. Which packing compartment and truck to go. Which store to go
  20. 20. Processes take place simultaneously Save time and labor sorting merchandises Smooth logistic processes
  21. 21. Radio Frequency Identification System Introduced in 2003 Use radio waves to identify objects Tags with microchip and antenna built in Store data (type, quantity, manufacturer, expired date…) Generate HF signal to transfer data Allow Wal-mart to keep track of pallets at various stage of supply chain Sensors in the distribution center detect and receive information from chips
  22. 22. Locate where the pallet is and the condition of it temperature Humidity Automatic sensor – avoid scanning codes one by one
  23. 23. .
  24. 24. Walmart is able to move goods to and from distribution centers because we maintain a private fleet of trucks and a skilled staff of truck drivers. Company hired experienced drivers having more than 300,000 accident free miles with no major traffic violation. Every year they drive 700 million miles to make millions of deliveries to our stores and clubs. Each driver averages around 100,000 miles annually—that’s like driving around the world 4 times! Drivers follow the most efficient routes to their destinations, and work to minimize the number of “empty miles” they drive.
  25. 25. Walmart Private Fleet driver Philip Null Walmart Private Fleet driver Philip Null is one of only 66 drivers to reach 3 million safe driving miles. As a reward for his service, he received a new tractor to drive throughout his career with Walmart
  26. 26. Manufacturer Manufacturer Distribution Center Company Headquarter Satellite System Retail Store Retail Store RIFD Cross -Docking
  27. 27. Wal-Mart truck drivers move merchandise loaded trailers from distribution Center to retail store serviced by each distribution center. Driver report to Coordinator who updates them about their schedule and other details. Driver arrives to store with loaded trailer. Brings trailer at the dock of store at a scheduled time. Trailers get unloaded at a gap of two hours. Driver spends the night at store and returns back to distribution center. Trailers are never left unattended.
  28. 28. Wal-Mart's Private Fleet Driver Handbook contained terms and conditions with regard to termination of the truck drivers. According to the Wal-Mart's Private Fleet Driver Handbook: Driver could be terminated from his job if he refused to deliver an assignment given to him. the drivers should exchange the truck trailers in a totally 'safe and responsible' manner, without damaging trailer or consignment. When a driver leaves an unloaded trailer in front of the Wal-Mart store he must ensure that no other person would gain access to the unloaded trailers. However these rules are subject to situation.
  29. 29. Other tan using its own fleet Wal-mart also used logistic technique called “Cross-docking”. In this system, finished goods are directly picked up from the manufacturing site of supplier, sorted out and directly supplied to the customers. This reduces handling and storage of finished products. Because of “cross-docking” the system shifted from “supply chain” to “demand chain” which meant, instead of retailers ‘pushing’ the products into the system, the customers could ‘pull’ the products, when & where they required.
  30. 30. Manufacturing Cross Docking – This procedure involves the receiving of purchased and inbound products that are required by manufacturing. The warehouse may receive the products and prepare sub-assemblies for the production orders. Distributor Cross Docking – This process consolidates inbound products from different vendors into a mixed product pallet, which is delivered to the customer when the final item is received. For example, computer parts distributors can source their components from various vendors and combine them into one shipment for the customer. Transportation Cross Docking – This operation combines shipments from a number of different carriers in the less-than-truckload (LTL) and small package industries to gain economies of scale. Retail Cross Docking – This process involves the receipt of products from multiple vendors and sorting onto outbound trucks for a number of retail stores. This method was used by Wal-Mart in the 1980's. They would procure two types of products, items they sell each day of the year, called staple stock, and large quantities products which is purchased once and sold by the stores and not usually stocked again. This second type of procurement is called direct freight and Wal-Mart minimize any warehouse costs with direct freight by using cross docking and keeping it in the warehouse for as little time as possible. Opportunistic Cross Docking – This can be used in any warehouse, transferring a product directly from the goods receiving dock to the outbound shipping dock to meet a known demand, i.e. a customer sales order.
  31. 31.  Requisitions received for different goods from a store were converted into purchase or procurement orders. Purchase orders were then forwarded to the manufacturers who conveyed their ability or inability to supply the goods within a particular period of time. If manufacturer agrees goods were directly forwarded to a place called the staging area. The goods were packed here according to the orders received from different stores and then directly sent to the respective customers. Wal-mart shifted the focus from “supply chain” to the “demand chain,” which meant that instead of the retailer ‘ pushing’ products into the system; customers could ‘ pull’ products, when and where they needed.
  32. 32. Inventory Management