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Walmart Supply chain management

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Walmart Supply chain management

  1. 1. Wal-Mart’sSCM system practicesMIS Case Study15 March 2013
  2. 2. Walmart Walmart, an American multinational retail corporation that runs chains of large department and warehouse stores Established 1962, Arkansan-USA Sam Walton- Founder & Mike duke- current CEO Successful due to its IT usage in SCM
  3. 3. Introduction to case 1990 –Superseded ‘K-Mart’ rival retail chain as one of the largest retailing chain in US 1991- Superseded ‘Sears Roebuck & Company’ and became the largest retailing chain in US In November 2003, Wal-Mart, world’s largest retailer, planned to replace bar code technology with RFID. Objective: To enhance supply chain efficiency Expected they could save $8.35 million per year primarily in labor costs
  4. 4. Background Note Wal-Mart  known for innovative business practices One of the first retailing companies to centralize distribution system. Always among the front runners in employing IT to manage its supply chain processes.
  5. 5. Using IT in supply chainmanagement Using EDI for procurement- EDI saved time and made procurement efficient.- Using the bar code scanners, an analysis of daily, weekly, monthly sales data helped the store manager determine what products were selling and at what quantity.- Accordingly, the store manager would place orders in the manufacturing division. EDI=Electronic Data Interchange
  6. 6. Using IT in supply chainmanagement In 1977, Wal-Mart set up a computer terminal network (CTN) to establish a communication link between its stores and the company headquarters Real time business operations In 1978, Wal-Mart set up its first fully automated distribution center
  7. 7. Using EDI for procurement Wal-Mart placed orders for huge quantities of goods with its suppliers Cost of sales worked out to be 2-3 %(very low from industry average) Information of product, manufacturer, price was recorded on computer system That information was passed to centralized data warehouse
  8. 8. Using EDI at Wal-Mart Analysis of daily, weekly, monthly sales data helped store manager to determine which products were sold in which quantities So that they can place purchase order Edi also helped suppliers Right merchandize at the right time, and have it at right place at right price
  9. 9. Using IT in supply chainmanagementUsing voice based technologies: Enhancing warehouse and logistics management Wal-Mart could replenish stock at any of its 1525 stores in US within 24 hours Cross-docking It enabled the company to receive goods and dispatch them to stores in lees than a day How it works at distribution centers?
  10. 10. Using IT in supply chainmanagement It installed voice based order filling(VOF) system in all distribution centers Is consisted portable Voice Recognition Talkman Terminals(VRTT) and radio module on company’s wireless LAN It eliminated mis-picks and product labeling costs since VOF didn’t require paper lists labor
  11. 11. How to quickly locate &replenish goods? Store ready displays called PDQ(pretty darn quick) displays Time saved per employees were not much but aggregate time saved was quite good
  12. 12. GPS GPS system in communication in trucks Any truck can be located Drivers could activate system by voice and interact with staff
  13. 13. Using IT in supply chainmanagementThe Retail Link system- Supporting Inventory Management Retail link connected EDI network to extranet ,accessible to all suppliers Provided suppliers historical sales data of 24 months, allowed them to track invoice, can make demand forecast Suppliers could also study competitors products demand
  14. 14. Using the Internet in Supply chainManagement CPFR (Collaborative Planning Forecasting Replenishment) Real time bases to determine product wise demand forecast Wal-Mart shared past data, customer data, demographic data, stock positions Both forecasted demand individually and then co- operated Reduced inventory cost Product availability across supply chain
  15. 15.  As a result lead time was cut to 11 days from 21 days On-hand inventory was reduced by two weeks Sales grew by $8.5 millions in six months Later on it was implemented to other stores By 1990’s, about 90% of suppliers were doing business through Retail Link
  16. 16. Barriers to CPFR Lack of discipline to execute primary phases Promotions and new items events are not jointly planned Ineffective replenishment in response to demand fluctuations Trading partners focus on traditional supply chain steps Scalability and critical mass
  17. 17. Recent Supply ChainInitiatives 2001- Global Procurement Division[Shenzhen, China  Exchange of sales and inventory data  Best deal procurement from any part of world Strategy Employed  Identify generic products  Enhance product quality  reduce cost by collaborating 2001- copy paper – increased sales [ 46% in UK, 94% in Federal Republic of Germany, 38% in Canada, 25% in US]
  18. 18. Recent Supply ChainInitiatives October 2002- Asked suppliers to replace VAN-EDI to Web based EDI  Direct online communication between trading partners  No transaction costs  Highly secured Saved millions[ VAN-EDI cost $200 Billion]  No licensing fees July 2003 – Asked suppliers to place RFID tags on goods, packed in pallets and crates VAN-EDI = Value Added Network-EDI RFID = Radio Frequency Identification
  19. 19. Benefits from RFID Drastic decrease in Stock out situations From $400 million to $1.2 billion for P&G Lesser labor requirements Almost $6.34 billion yearly Decrease in merchandise thefts Almost $2 billion Real time tracking of consumption patterns Would help enhance JIT Inventory management system Decrease in stock levels by around 25%[IBM] Total savings expected to be 8.34 billion per year
  20. 20. Problems An estimated cost of $20 million to suppliers 50% of this is integration of system with software and modification in soft wares Not a proven technology Not compatible with liquids and metal packaging
  21. 21. THANK YOU -Neel Patel [AM 1012] -Sagar Morakhia [AM 0912] -Prajita Chowdhary [AM 0212] -Krutik Patel [AM 1412]

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