Sam Walton founded Walmart in 1962 and opened his first store in Arkansas. Through the 1970s and 1980s, Walmart expanded across the US, growing to hundreds of stores and becoming the largest retailer. Walton believed Walmart's success came from replacing inventory with information - collecting sales data to efficiently replenish stores.
This Presentation Explains about the Various Segments of the Retail Giant Walmart's Supply Chain. The CRM, SCM, SRM sections are discussed. We have also done a bit of additional research on the meat Supply at Walmart.
This Presentation Explains about the Various Segments of the Retail Giant Walmart's Supply Chain. The CRM, SCM, SRM sections are discussed. We have also done a bit of additional research on the meat Supply at Walmart.
Walmart* have done tremendous work on supply chain management. One of the
keys to Walmart’s effective logistical system is the flexibility that it has when
choosing suppliers.
When Walmart negotiates with suppliers and the suppliers know that Wal-Mart
will only pay the most competitive prices. This is because it is very easy for them
to find another supplier of that particular material with a lower price and very few
logistical problems
Another reason that Walmart's prices are so competitive is because they buy in
such large quantities that transportation from one end of the supply chain to
another is not as costly for additional units. Here they focus on bulk and get profit
out of it
This aspect of the logistical system does not come from skill or expertise it simply
comes from the sheer size of the company, but this is still a factor.
Walmart buys so many supplies from different places throughout the world, that
they have the luxury of using bigger trucks and using less fuel to go back and forth.
Also if by chance they have to use shipping services to transport material from one
location to another, Walmart will give them so much business that they will get
huge discounts.
Prepared By Dharmik
This presentation was prepared in United world School of Business by our group of PGDM (1st year). This presentation is about the MIS-Management Information System in Walmart.
Walmart* have done tremendous work on supply chain management. One of the
keys to Walmart’s effective logistical system is the flexibility that it has when
choosing suppliers.
When Walmart negotiates with suppliers and the suppliers know that Wal-Mart
will only pay the most competitive prices. This is because it is very easy for them
to find another supplier of that particular material with a lower price and very few
logistical problems
Another reason that Walmart's prices are so competitive is because they buy in
such large quantities that transportation from one end of the supply chain to
another is not as costly for additional units. Here they focus on bulk and get profit
out of it
This aspect of the logistical system does not come from skill or expertise it simply
comes from the sheer size of the company, but this is still a factor.
Walmart buys so many supplies from different places throughout the world, that
they have the luxury of using bigger trucks and using less fuel to go back and forth.
Also if by chance they have to use shipping services to transport material from one
location to another, Walmart will give them so much business that they will get
huge discounts.
Prepared By Dharmik
This presentation was prepared in United world School of Business by our group of PGDM (1st year). This presentation is about the MIS-Management Information System in Walmart.
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2003, ICFAI Center for Management Research. All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system, used in a spreadsheet, or transmitted in any form or by any means – electronic or mechanical, without
permission.
To order copies, call 0091-40-2343-0462/63/64 or write to ICFAI Center for Management Research, Plot # 49, Nagarjuna
Hills, Hyderabad 500 082, India or email [email protected] Website: www.icmrindia.org
This case was written by P. Mohan Chandran, under the direction of Vivek Gupta, ICFAI Center for Management
Research (ICMR). It is intended to be used as a basis for class discussion rather than to illustrate either effective or
ineffective handling of a management situation.
The case was compiled from published sources.
WAL-MART'S SUPPLY CHAIN
MANAGEMENT PRACTICES
OPER - 020
D
o
N
ot
C
op
y
This case was written by P. Mohan Chandran, under the direction of Vivek Gupta, ICFAI Center for Management
Research (ICMR).
2003, ICFAI Center for Management Research. All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system, used in a spreadsheet, or transmitted in any form or by any means – electronic or mechanical, without
permission.
To order copies, call 0091-40-2343-0462/63/64 or write to ICFAI Center for Management Research, Plot # 49, Nagarjuna
Hills, Hyderabad 500 082, India or email [email protected] Website: www.icmrindia.org
OPER/020
WAL-MART'S SUPPLY CHAIN MANAGEMENT PRACTICES
“When you start to collapse the supply chain, accuracy in execution becomes critical. Any lack of
accurate information and processes creates costly bottlenecks in the flow of goods and materials.”
-- Bruce Richmond, Global head, Andersen Consulting.
INTRODUCTION
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 (Refer Table I). Wal-Mart was the largest retailing company in
the world. The company was much bigger than its competitors in the US – Sears Roebuck, K-
Mart, JC Penney and Nordstrom combined (Refer Exhibit I). In 2002, Wal-Mart operated more
than 3,500 discount stores, Sam’s Clubs and Supercenters in the US and more than 1,170 stores in
all major countries across the world. The company also sold products on the Internet through its
website, walmart.com.
TABLE I
GLOBAL FORTUNE 500 LIST (2002)
Rank Company Revenues (in $ millions)
1 Wal-Mart Stores 219,812.0
2 Exxon Mobil 191,581.0
3 General Motors 177,260.0
4 Ford Motor 162,412.0
5 Enron 138,718.0
Source: www.fortune.com
Wal-Mart was one of the largest private sector employers in the world, with employee strength of
approximately 1.28 million. The company’s founder, Sam Walton (Walton) ha.
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Sustainability has become an increasingly critical topic as the world recognizes the need to protect our planet and its resources for future generations. Sustainability means meeting our current needs without compromising the ability of future generations to meet theirs. It involves long-term planning and consideration of the consequences of our actions. The goal is to create strategies that ensure the long-term viability of People, Planet, and Profit.
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LEARNING OBJECTIVES
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4. Sustainability Implementation & Best Practices
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walmart supply chain management
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. 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. 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. 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
7. Ranked first in the Global Fortune 500 list in
2001-2002 financial year
8. 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.
9. 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
10.
11. 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
12. 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.
13. 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.
14. 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.
17. 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.
18. Able replenish stores within 48 hrs against 5 days for
competitors.
Shipping cost of walmart3% against 5% for competitors
Higher profits
Shorter lead time
19. 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.
20. 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.
21. 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
22. 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
23. Processes take place simultaneously
Save time and labor sorting merchandises
Smooth logistic processes
24. 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
25. Locate where the pallet is and the condition of it
temperature
Humidity
Automatic sensor – avoid scanning codes one by one
27. 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.
28. 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
30. 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.
31. 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.
32. 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.
33. 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.
34. 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.