Walmart has highly efficient supply chain management that allows it to offer low prices. It uses various technologies and strategies like cross-docking, RFID, and direct sourcing to minimize costs. This includes operating a large network of distribution centers near stores for fast replenishment and avoiding storing inventory. Walmart also leverages its scale to negotiate lower prices from suppliers. As a result, it can pass cost savings on to customers through everyday low pricing.

1. Walmart SCM
Zhi Lin - Hossain Nazarat - Ulukman Mamytov
Kyoto University, IPROMAC GSM
Supply Chain Management
professor: GAUTAM RAY

2. “Supply chain management is moving the right items to the
right customer at the right time by the most efficient means,
no one does that better than Walmart.”
Army Col. Vernon L. Beatty, commanded the Defense Distribution Depot in Kuwait,
spent a year with Wal-Mart as part of the military’s Training With Industry program

3. Some Walmart facts
• Average profit - $1.8 million every hour
• 35 million people - every day, as much as the
population of Canada
• Worth $150 billion
• Top selling item in 2012 - the Banana
• 90% of Americans live within 15 minutes

4. About Walmart
1. The first Walmart in Rogers, Ark in 1962
2. One of the world's most valuable companies by
market value and is also the largest grocery
retailer in the U.S. In 2016.
3. Walmart International

5. Introduction
Walmart’s supply chain management
1) early years - removing a few of the chain’s links
2) 1980s - working directly with manufacturers to cut
costs
3) Vendor Managed Inventory (VMI) - manufacturers
became responsible for managing their products in
Walmart’s warehouses.
Walmart was able to expect close to 100% order
fulfilment on merchandise.

6. Inventory & transportation
The goals – to provide customers with the goods
they wanted whenever and wherever they
wanted them.
Significant system
1) Cross docking system
Means direct transfer of products from inbound or
outbound truck trailers without extra storage.

7. Inventory & transportation
Significant system
2) benefits of Cross docking system
It keeps inventory and transportation costs down,
reduces transportation time, and eliminates
inefficiencies.

8. Inventory & transportation
Applied technology
1) Universal Product Code bar codes
store level information was immediately collected and
analyzed, and the company then devised Retail Link, a
mammoth Bentonville database.
2) Radio frequency identification tags (RFID)
use numerical codes that can be scanned from a
distance to track pallets of merchandise moving along
the supply chain.
According to researchers at the University of Arkansas,
there was a 16% reduction in out-of-stocks since Wal-
Mart introduced RFID technology into its supply chain.

9. Inventory & transportation
Applied technology
3) smart tags
read by a handheld scanner, that allow employees to
quickly learn which items need to be replaced so that
shelves are consistently stocked and inventory is closely
watched.

10. The role of IT in Walmart’s
Supply Chain Management

11. EDI based Supply Chain System
In 1987, a 24 million dollar satellite communication system was
introduced, which developed a Electronic Data Interchange (EDI)
based supply chain management system in Walmart.
create just-in-time ordering with its key suppliers.

12. Inventory Management through IT system
• The Point of Sales (POS) system helped
to keep track of the inventory in stores,
deliveries and back up merchandise in
stock at DCs.
 possible to monitor and track the sales and
merchandise stock levels on the store
shelves
• A sophisticated algorithm system enabled it forecast the exact
quantities of each item to be delivered , based on the
inventories in each store.
 Since the data is correct, even bulk items could be supplied to the store.
• A centralized data system allowed it to find out the level of
inventories and the location of each product at any given time.

13. Retail Link System
• In 1991, Wal-Mart had invested $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.

14. Inventory Management through UPC
• The first companies to push for Universal Product Code bars
throughout all of their stores
• This allowed managers to
quickly perform inventory by
scanning the codes and storing
the information into a central
computer rather than hand
counting the pallets.
 It also allowed regional managers to quickly analyze the
inventory count of all of their stores at once, which allowed
them to create accurate forecasts quickly

15. Inventory Management through RFID
• Wal-Mart replaced bar-code technology with RFID technology to
reduce costs and increase the efficiency, in July 2003, and asked its
top 100 suppliers to be RFID compliant by January, 2005. The
company believed that this replacement would reduce its supply
chain management costs and enhance efficiency.
• 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
 Save labor cost and time and reduce the instances of stock-outs at the stores.

16. Advantages of implementing IT in
Supply Chain System
• Around 2% of all lost sales are due to the simple fact
a store has run out of an item, but 41% of lost sales
are due to inventory problems
• Gain $287 million per year by avoiding 10% lost sales
• Improved performance of stores by 63%
• Out-of-stock items are replenished 3 times faster
than before
• The out-of-stock items that have to be manually
filled has been cut by 10 percent.

17. The role of facilities in Walmart’s
Supply Chain Management

18. Walmart’s store
A variety format of stores in 50 states and Puerto Rico.
Walmart Supercenters offer a 24 hours one-stop
shopping experience by combining a grocery store
with fresh produce, bakery, deli and dairy products
with electronics, apparel, toys and home furnishings,
and also include specialty shops such as banks, hair
and nail salons, restaurants, or vision centers.
Smaller than a Supercenter, discount stores offer
electronics, apparel, toys, home furnishings, health
and beauty aids, hardware and more.
Walmart Neighborhood Markets offer fresh produce,
meat and dairy products, bakery and deli items,
household supplies, health and beauty aids and a
pharmacy.
Supercenter
Discount Store
Neighborhood Market

19. Distribution Center
A network of nearly 150 highly automated distribution centers
covering 120 million square feet and all within 130 miles of the stores
• 42 regional general merchandise distribution center
• 43 grocery distribution center
• 7 fashion distribution center
• 8 import distribution center
• 26 Sam’s club distribution center
• 26 specialty (sports, optical, pharmacy, returns, tire distribution center
General merchandise distribution center Grocery distribution center

20. Advantages of centralized DCs
• Over 80,000 items were stocked in Wal-Mart’s distribution centers
located at different geographical locations, which directly supplied
85 percent of the inventory, as compared to 50-65 percent for its
competitors.
 to provide replenishments within 2 days against at least 5 days for
competitors
 shipping costs worked out to be roughly 3 percent as against 5 percent
for competitors.
• Wal-Mart’s sophisticated hub-and-spoke distribution network uses
warehouses to service stores less than a day's truck drive away
remove middlemen, quickly replenish shelves and reduce costs
• At its distribution centers, scanning technology tracks merchandise
as it flows at 6 miles per hour on 12 miles of conveyor belts onto
trucks
Some items spend less than 45 minutes in warehouses

21. Sourcing in Walmart’s
Supply Chain Management

22. Sourcing
• Till 2010, relied on intermediaries for bulk of its global
sourcing activities, instead of buying it directly from the
offshore suppliers. Walmart bought hardly 20% of goods
directly from the suppliers. Also the mode of operation was
highly decentralized across all the 15 countries where it has its
stores.
• In 2010 declared the sourcing strategy to buy 80% of the
goods from the manufacturers directly from counterparts in
Bangladesh, China and other countries.
• Planned to make the global sourcing process more
centralized. By eliminating the middlemen in the transaction
and consolidating global procurement functions, avoiding the
5-15% markup introduced by them. This helped reduce the
cost leading to billions of dollars of savings

23. Sourcing
For this strategy
• Centralized the process by setting up four global
merchandising centers for general goods and clothing.
• Started purchasing fruits and vegetables on a global scale and
eliminated the import companies and the agents.
• Acquired Asda, the grocery chain in UK which had expertise in
direct sourcing, so Walmart leveraged this expertise across
the globe.
This strategy of direct sourcing not only helped Walmart reduce
the cost, but also helped in other supply chain activities by
improving the efficiency throughout the process. They could now
better manage and consolidate the incoming shipments and also
gained a better visibility through the entire product lifecycle.

24. Some of the sourcing strategies:
Strategic Vendor Partnerships
• Selection of suppliers, who could meet the demand and at the same time
offer the best price for the goods.
• Long-term strategic relationships with high volume purchases in exchange
for lowest possible prices.
• Communication and relationship networks with suppliers to improve the
material flow. Collaboration - the key to success.
Cross Docking
• Centered around a key inventory tactic called Cross docking.
• Transfers products directly from inbound trucks to outbound trucks.
• This saves the storage costs. Suppliers deliver products to Walmart’s
distribution centers, where those are cross docked and then delivered to
the Walmart stores.
• This process of cross docking lowers the inventory transportation costs
and eliminates inefficiencies. This results in savings for the company which
are then passed on to the customers in the form of competitive prices.

25. Pricing in Walmart’s
Supply Chain Management

26. Pricing Strategy
• Everyday low prices (EDLP) - prices on items at relatively low
compared to the everyday market price (maintaining customer
trust in pricing and customer loyalty)
• Additionally to their traditional Bricks-and-Mortar, Clicks and
bricks model - allows the customer to order products either
online or physically in one of their stores, also allowing them to
either pick-up their order directly at a local branch of the store
or get it delivered to their home
• “Price match guarantee“ it has challenged other competitors to
reduce their pricing (PMG: if a consumer brings in some sort of proof
that a competitor is offering the same product at a lower price, the business
will allow the consumer to purchase that product from them at that lower
price)

27. Why lowest prices?
• Huge sales volume, scope of operation and wide customer
base - selling almost everything, and being almost everywhere.
Multiple-store format that extends its market reach, and it sells
goods through four types of stores: discount stores, Walmart
Supercenters, Sam's Club warehouses (which sell bulk items), and
neighborhood markets.
90% of Americans live within 15 miles of a Walmart store. High
penetration in customers' lives and increase the probability of a
purchase.

28. Why lowest prices?
• SCM based on maximizing efficiency and reducing outlays
WalMart was a pioneer in getting detailed product information
electronically attached to products so that such information could
be relayed to its database and could inform its inventory
management system.
The goal - to master the art of knowing
• what it needed,
• how much was needed, and
• when it needed it.

29. Why lowest prices?
• Minimization of overhead and operational costs
Walmart saves money on everything, including the labor costs.
• Meager wages,
• Low-benefit healthcare plans,
• Executives fly coach and share hotel rooms with colleagues.
• Hourly workers put in overtime without pay.
• Each Walmart associate does the job of 1.5 to 1.75 employees
of a rival.
• Saving on heating and cooling of the buildings.

30. Why lowest prices?
• Leveraging of Its bargaining power to force suppliers to lower
prices (Porter’s five forces)
The Walmart Effect - as the biggest buyer Walmart is constantly
pushing its suppliers to cut prices.
Case: Lakewood Engineering & Manufacturing Company
In the early 1990s the cost of a 20-inch fan was $20. After Walmart pushed for
the lowering of the price, Lakewood automated its production process, which
resulted in the layoff of workers. It also put pressure on its own suppliers to
slash the prices of parts, and it opened a factory in China where workers earned
25 cents an hour. By 2003, the price of a fan in Walmart had dropped to $10.

31. Using Cross-Docking
• The cross docking strategy has helped Wal-Mart to streamline
the supply chain from origin point to the final point of sale and
it has reduced the handling cost, operating cost and drastically
reduce the inventory storage cost + fast delivery.

32. Thank you!
Zhi Lin - Hossain Nazarat - Ulukman Mamytov
Kyoto University, IPROMAC GSM
Supply Chain Management
professor: GAUTAM RAY