Wal mart’s supply chain presantation

WAL-MART‟S SUPPLY
CHAIN
A BUSINESS SUCCESS
PREPARED BY BILGEN KENAR

Wal-Mart is the World‟s Largest
Retailer Company

Why Wal-Mart is the best retailer
company in the world??
 1.Supply Chain Technology
 2.Because of their distrubution and logistic
system
 3.new „‟green „‟ logistic technologies
 4.and Wal-Mart‟s Truck Drivers
 „‟We have the best truck drivers in the country
and they play a big part in our company‟s
success.‟‟

History of Wal-Mart
 The company‟s founder is Sam Walton
 He was born in 1918 at Oklahoma,in USA
 In 1940,he worked for the famous retailer,J C
Penney.

 Walton gave up the job and decided to set up
his own retail store.He purchased a store
franchise in Arkansas.
 Offering significant discounts on prices, he
became successful and acquired a second
store in 3 years.
 By 1969, Walton had established 18 Wal-
Mart stores.
 By late 1970s, the retail chain had
established a pharmacy and an auto
service center.

 In 1980s, Wal-Mart continued to grow due
to huge customer demands in small
towns.
 Wal-Mart was offering low prices, customer
satisfaction guaranteed, and hours that were
realistic for the way people wanted to shop.
 Open all night, for university students
 By 1984, there were 640 Wal-Mart stores in
U.S and now nearly4000 stores in US…

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.

3 important person for Wal-Mart
 1.Sam Walton – owner-created core supply
chain
 2.David Glass- enhanced his growth strategy
through the use of technology!
 3. Lee Scott –Green logistics ***,Corporate
Social Responsibility-CSR
 „‟Green‟‟ logistics ;means implementing a
system that can independently monitor
overseas suppliers to make sure they meet
social and environmental standars.

According to the Supply Chain Management
Review,Wal-Mart has three ambitious goals ;
 1. To be supplied 100 percent by renewable
energy
 2. to create zero waste
 3. to sell products that sustain Wal-Mart‟s
resources and the environment

 This phenomenal growth of Wal-Mart is
attributed to its continued focus on customer
needs and reducing cost through efficient
supply chain management practices.

Five different flows in the
marketing channel for Wal-Mart
Company
 1. Physical Flow
 2. Title Flow
 3. Payment Flow
Supplier
s
Warehouse Plant
Warehouse
s
Dealer
s
Customer
s
Suppliers Plant Customers
Suppliers Plant Dealers
Custome
rs

Five different flows in the
marketing channel for Wal-Mart
Company…
 4. Information Flow
 5. Promotion Flow
Supplier
s
Warehouse
s Plant
Warehouse
s Dealers
Custom
ers
Supplier
s
Plant Dealers
Customer
s

Hub and Spoke System
 In the early 1970s, Wal-Mart became one
of the first retailing companies in the world
to centralize its distribution
system, pioneering the retail hub-and-
spoke system.
 Under the system, goods were centrally
ordered, assembled at a massive
warehouse, known as „distribution center‟
(hub), from where they were dispatched
to the individual stores (spoke).

Hub and Spoke System..
 The hub and spoke system enabled Wal-Mart
to achieve significant cost advantages by the
centralized purchasing of goods in huge
quantities..
 and distributing them through its own logistics
infrastructure to the retail stores spread across
the U.S.

Wal-Mart Procurement
 Wal-Mart emphasized the need to reduce
purchasing costs and offer the best price to the
customer.
 The company directly procured from
manufacturers, by passing all intermediaries.

Wal-Mart Procurement …
 Wal-Mart finalizes a purchase deal only when
it is fully confident that the products being
bought is not available else where at a lower
price.
 Wal-Mart spends a significant amount of time
meeting vendors and understanding their cost
structure.
 By making the process transparent, the retailer
can be certain that the manufacturers are
doing their best to cut down costs.

Using EDI for Procurement
 The computer systems of Wal-Mart were
connected to those of its suppliers.
 EDI enabled the suppliers to download
purchase orders along with store-to-store
sales information relating to their products
sold.
 On receiving information about the sales
of various products, the suppliers shipped
the required goods to Wal-Mart‟s
distribution centers.

Logistics Management
 An important feature of Wal-Mart‟s logistics
infrastructure was its fast and responsive
transportation system.
 The distribution centers were serviced by more
than 3500 company owned trucks.
 Some steps ; from here to here,distrubition
centers,and more distribution centers,logistics
team and their „‟honorary Wal-Mart‟s drivers‟‟

Logistics Management…
 Wal-Mart believed that it needed drivers who
were committed and dedicated to customer
service.
 The company hired only experienced drivers
who had driven more than 300,000 accident-
free miles, with no major traffic violation.

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.

Cross-docking
 The system reduced the handling and
storage of finished goods, virtually
eliminating the role of the distribution
centers and stores.
 The manufacturer directly forwarded the
goods 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.

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.

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.

 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.

 The order management and store
replenishment of goods were 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.

Voice-based Order Filling (VOF)
 In 1998, Wal-Mart installed a voice-based
order filling (VOF) system in all its grocery
distribution centers.
 Each person responsible for order picking
was provided with a microphone/speaker
headset, connected to the portable (VOF)
system that could be worn on waist belt.
 They were guided by the voice to item
locations in the distribution centers.

Voice-based Order Filling
(VOF)…
 The VOF system also verified quantities
picked, and could respond to a variety of
requests such as providing product detail
(type, price, barcode number, etc.)
 By installing the VOF system, Wal-Mart
eliminated mispicks and product labeling
costs since the system did not require
paper lists and labels to be affixed on the
goods.

(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.

(pretty darn quick displays)
 The company asked its suppliers to ship
goods in store-ready displays called pretty
darn quick (PDQ) displays.
 Goods were packed in PDQ displays that
arrived at the stores ready to be boarded on
the racks.
 Wal-Mart‟s employees could directly replace
the empty racks at the stores with fully
packed racks, instead of refilling each and
every item at the racks.

(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.

 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.

 Wal-Mart owned the largest and most
sophisticated computer system in the
private sector.
 The company used Massively Parallel
Processor (MPP) computer system to
track the movement of goods and stock
levels.
 All information related to sales and
inventories was passed on through an
advanced satellite communication system.

CPFR
 By the mid 1990s, Retail Link had emerged
into an Internet-enabled SCM system whose
functions were not confined to inventory
management alone, but also covered
collaborative planning, forecasting and
replenishment (CPFR).

CPFR
 In CPFR, Wal-Mart worked together with its
key suppliers on a real-time basis by using
the Internet to jointly determine product-wise
demand forecast.
 CPFR is defined as a business practice for
business partners to share forecasts and
results data through the Internet, in order to
reduce inventory costs while at the same
time, enhancing product availability across
the supply chain.

CPFR: Hard to implement
 Though CPFR was a promising supply
chain initiative aimed at a mutually
beneficial collaboration between Wal-Mart
and its suppliers, its actual implementation
required huge investments in time and
money.
 A few suppliers with whom Wal-Mart tried
to implement CPFR complained that a
significant amount of time had to be spent
on developing forecasts and analyzing
sales data.

VAN EDI vs Web-EDI
 In October 2002, Wal-Mart asked its
14,000 suppliers to switch over from the
existing Value Added Networks (VAN) EDI
to web enabled EDI.
 VANs route and manage EDI messages
for their customers.
 By implementing web-EDI, Wal-Mart can
save millions of dollars in the form of
license fees to the private VANs.

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.

RFID Technology
 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.

RFID Technology
 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

End of Presentation
Thank you for your time 

Wal mart’s supply chain presantation

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