Walmart has one of the largest and most efficient supply chain networks in the world. It simplified its supply chain by eliminating unnecessary middlemen and implementing cross-docking so products flow directly from manufacturers to stores within 48 hours. Walmart also heavily invests in inventory management technology to track sales and replenish stores quickly. This allows it to keep inventory levels low while maintaining high product availability.

1. WAL-MART: SUPPLY CHAIN
MANAGEMENT
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2. BACKGROUND
 Types of industry: one stop shopping center
 Founder: Sam Walton
 Year of establishment: 1962
 First store: Rogers in Arkansas

3.  The US-based Wal-Mart ranked first in the global
Fortune 500 list in the financial year 2001-02
earning revenues of 219.81 billion.
 Wal-Mart is the largest retailing company in the world.
 The company is much bigger than its competitors in
the US - Sears Roebuck, K-Mart, JC Penney and
Nordstrom combined.

4. THE TRADITIONAL SUPPLY CHAIN INCLUDES
INEFFICIENT AND UNNECESSARY STEPS
Select
Tag/
Label
Ship
Pack
Ship
Select PackReceive
Ship
Manufacturer
(Supplier)
Retailer
Shipper
Wholesaler
Receive PackSelect Storage
Storage
Sell
Order
Individual StoreDistribution Warehouse
Order
Order
Order
Make

5. WAL-MART SIMPLIFIED ITS SUPPLY CHAIN
Ship Receive
Select
Ship
Manufacturer
(Supplier)
Retailer
Shipper
Wholesaler
Receive PackSelect Storage Sell
Individual StoreDistribution Center
Tag/
Label
PackMake
WAL-MART: BUSINESS PROCESS
Cross-docking in distribution centers results in product flow
from inbound to outbound shipping docks within 48 hours.
Deliver within
72 hours of
order
POS
Order
<48 hours<48 hours

6. 6
CROSS-DOCKING
 To make its distribution process more
efficient, Wal-Mart also made use of a
logistics technique called “cross-docking.”
 In this system, the finished goods were
directly picked up from the manufacturing
plant, sorted out and then directly supplied
to the customers.

7. 7
INVENTORY MANAGEMENT
 Wal-Mart invested heavily in IT and
communication systems to effectively track
sales and merchandise inventories in stores
across the country.
 With the rapid expansion, it was essential to
have a good communication system.
 Hence, Wal-Mart set up its own satellite
communication system in 1983.

8. 8
INVENTORY MANAGEMENT…
 Wal-Mart was able to reduce unproductive
inventory by allowing stores to manage their
own stocks, reducing pack sizes across
many product categories, and timely price
markdowns.
 Instead of cutting the inventory across the
board, Wal-Mart made full use of its IT
capabilities to make more inventories
available in the case of items that
customers wanted most, while reducing
the overall inventory levels.

9. 9
INVENTORY MANAGEMENT…
 Employees at the stores had the “Magic
Wand,” a hand-held computer which was
linked to in-store terminals through a radio
frequency network.
 These helped them to keep track of the
inventory in stores, deliveries, and backup
merchandise in stock at the distribution
centers.

10. 10
INVENTORY MANAGEMENT…
 The order management and store
replenishment of goods are entirely
executed with the help of computers
through the Point-of-Sales (POS) system.
 Through this system, it was possible to
monitor and track the sales and
merchandise stock levels on the store
shelves.

11. 11
INVENTORY MANAGEMENT…
(QUICK REPLENISHMENT)
 Since the floor area of any Wal-Mart store
varied between 40,000 to 200,000 square
feet, movement of goods within the store
was an important part of logistics
operations.
 Wal-Mart made significant investments in IT
to quickly locate and replenish goods at the
stores.

12. 12
INVENTORY MANAGEMENT…
(RETAIL LINK SYSTEM)
 In 1991, Wal-Mart had invested
approximately $4 billion to build a retail link
system.
 More than 10,000 Wal-Mart retail suppliers
used the retail link system to monitor the
sales of their goods at stores and replenish
inventories.
 Details of daily transactions (~10 million per
day) were processed through this system.

13. 13
INVENTORY MANAGEMENT…
(RETAIL LINK SYSTEM)
 Retail Link connected Wal-Mart’s EDI network with
an extranet, accessible to Wal-Mart’s thousands of
suppliers.
 The suppliers could find out how their product was
performing vis-a-vis competitors’ products in a
particular product category.

14. WAL-MART INVESTS HEAVILY IN INFORMATION TECHNOLOGY
(CONT.)
 Various Quick-Response (QR) systems (retail-link) to allow direct store-to-
supplier ordering: “continuous replenishment”
Wal-Mart
Supplier
POS Data
Store
Vendor-managed QR
Supplier Store
Wal-Mart-managed
QR
Order
Wal-Mart
Supplier Store
Warehouse Just-in-Time
System
Distribution
Center
Distribution
Center
WAL-MART: BUSINESS PROCESS
POS Data

15. 15
RFID TECHNOLOGY
(RADIO FREQUENCY IDENTIFICATION)
 In efforts to implement new technologies to
reduce costs and increase the efficiency, in July
2003, Wal-Mart asked its top 100 suppliers to be
RFID compliant by January, 2005.
 Wal-Mart planned to replace bar-code
technology with RFID technology.
 The company believed that this replacement
would reduce its supply chain management costs
and enhance efficiency.

16. 16
RFID TECHNOLOGY
(RADIO FREQUENCY IDENTIFICATION)
 Because of the implementation of RFID,
employees were no longer required to
physically scan the bar codes of goods
entering the stores and distribution centers,
saving labor cost and time.
 Wal-Mart expected that RFID would reduce
the instances of stock-outs at the stores.

17. 17
RFID TECHNOLOGY
(RADIO FREQUENCY IDENTIFICATION)
 Although Wal-Mart was optimistic about the
benefits of RFID, analysts felt that it would
impose a heavy burden on its suppliers.
 To make themselves RFID compliant, the
suppliers needed to incur an estimated $20
Million.
 Of this, an estimated %50 would be spent
on integrating the system and making
modifications in the supply chain software.

18. THE BENEFITS REAPED
 Better Stakeholder Relationships
 Strengthening relationships with customers, suppliers and employees
by passing on the savings on cost to them and thereby adding value.
 Benefits of own transportation system
 Low transportation costs (3% against competitors’ 5%)
 Faster delivery to stores (with in 48 hours) and faster replenishment
than competitors (4 times)
 Benefits of pricing strategy
 Low pricing with day-to-day variations coupled with higher discounts
than competitors
 Good bargaining power because of purchasing huge quantities
 Good revenues in terms of higher and consistent sales volumes

19. THE BENEFITS REAPED (CONTD.)
 Benefits of efficient supply chain
 Reduction in lead time
 Faster inventory turnover
 Accurate forecasting of inventory levels
 Increased warehouse space
 Reduction in safety stock
 Better working capital utilization

20. SAVING PEOPLE MONEY SO THEY CAN LIVE BETTER
 Each week, more than 200 million customers and
members visit 10,700 stores under 69 banners in
27 countries and e-commerce websites in 10
countries.
 With fiscal year 2013 sales of approximately $466
billion was made, Walmart employs 2.2 million
associates worldwide.