Wal-Mart pioneered supply chain management practices that enabled its rapid growth into the largest retailer worldwide. It achieved supply chain efficiencies through direct sourcing, continuous replenishment with suppliers, and logistics optimization. However, competitors have now adopted similar practices, and Wal-Mart faces challenges maintaining its competitive edge amid increasing international failures and slowing domestic growth.

1. Supply Chain Management

3. WAL-MART TODAY
• Founded by Sam Walton in Bentonville, Arkansas
• Largest retailer with 6,500 stores worldwide and in all
50 states
• Stocks more than 100,000 SKU’s
• International Stores: Argentina, Brazil, Canada, Costa
Rica, Nicaragua, Mexico, Puerto Rico, UK
• 1.8 million employees worldwide
• Serves more than 138 million customers each week
• Became U.S. largest grocer in 2005

4. Before there was Wal-Mart.......
• Walton gained experience and knowledge
through ownership of succesful Ben Franklin
variety stores
• Walton was able to selectively purchase
merchandise in bulk from new suppliers and
then transport these goods to his stores
directly.
• Realized new trend: discount retailing —
based on driving high volumes of product
through low-cost retail outlets — was sweeping
the nation, he decided to open up large,
warehouse-style stores in order to compete
• Adopted merchandise assortment strategies
of other retailers through observation

5. Retail Strategy
• EDLP = Every Day What are the Key Benefits Attracting Retailers to EDLP?
Low Pricing 1. Supply chain benefits related to improved demand planning, better
inventory management , reduced out of stocks and reduction in business
• reduced bullwhip effect
complexity.
2. Price leadership: building consumer confidence that your store will
consistently provide the best value. Not necessarily on every item sold,
• allowed for minimum advertising but certainly on the total basket
• channeled savings from advertising
back into price reductions
• Price Rollback Campaigns
• funded by suppliers
• goal to increase product sales
between 200 - 500 %
• prices were 8% - 27% below
competitors

6. • Product lines
include:
• apparel, small appliances,
housewares, electronics,
hardware, grocery/produce
• Competitors:
• Sears, Target, Gap & Limited,
Dillard, J.C. Penney, Kroger,
Albertsons, Safeway, Costco

7. Development of Initial
Supply Chain
• Stores were originally called Wal-Mart Discount City
• Procurement efforts had to be made: began self
distribution
• Continuous growth from 1960-1980
• benefited from improved road infrastructure
• Wal-Mart was able to react to legislation ( removal of
resale price maintenance)

9. Purchasing
• Walton and management teams were responsible
for own purchasing
• Personal involvement eliminated middlemen
(wholesaler/distributor)
• Buyers worked one on one with suppliers to
ensure proper purchasing orders
• Purchasing offices located in:
• Arkansas
• Began to source products globally in China

10. Private Label
• International purchasing offices
worked directly with private label
• PL products were first developed
in the 1980’s
• In 2005 PL sales accounted for
20% of sales
• Benefits:
• Offered higher margins for the company
• Cheaper prices for customers

11. Buyer / Supplier Roles
& Relationships
• Buyers convened each quarter to exchange buying
notes and tips (important topics of review were the supplier’s out-of-stock rate and
inventory levels at Wal-Mart, indications of how well replenishment was being handled. Suppliers were
provided with targets for out-of- stock rates and inventory levels.)
• Buyers reviewed new merchandise
• Gathered field intelligence through store visits and tours
• Assisted sales associates stock and sell, providing product
knowledge
• Insist on single invoice prices
• Don’t pay for cooperative advertising, discounting or
distribution
• Negotiated medium- to long term supply chain strategies

12. Power & Control
“Wal-Mart dictates that its suppliers...accept payment entirely on Wal-Mart’s terms...share information all
the way back to the purchasing of raw materials. Wal-Mart controls with whom its suppliers speak, how
and where they can sell their goods and even encourages them to support Wal-Mart in its political fights.
Wal-Mart all but dictates to suppliers where to manufacture their products, ass ell as how to design those
products and what materials and ingredients to use in those products.”
• Globally, Wal-Mart has approximately 90,000
suppliers
• Major suppliers include Kraft, Nestle, P &G, Unilever
• not uncommon for suppliers to have dozens of employees on the Wal-Mart account

13. Distribution
• Store openings were driven by
distribution strategy
• Gained economies of scale by
saturating areas within a 1 day
drive of distribution center
• “Hub & Spoke” Design
• Strategy led to mass
http://www.youtube.com/watch?v=GI7R37rp8xY expansion throughout the
nation

14. Store Locations
• Located in low-rent,
suburban areas
• Competitors chose to
locate in prime,
suburban areas
• thinly spread

15. Store-Level Operations
• Stores are simply furnished and constructed using standard materials
• Light and temperature settings for all U.S. stores were controlled from
Bentonville
• Each department is allocated to specific SKU’s
• Each store catered to the demographic of the community
• Utilized “category captains” to provide input on shelf space allocation

16. Logistics
• 75,000-person logistic
division
• Included largest private truck
fleet of any firm: 7,800
drivers
• 114 U.S distribution centres Product was picked up at the suppliers’ warehouse by Wal-Mart’s in-house
trucking division and was then shipped to Wal-Mart’s distribution centres.
Shipments were generally cross-docked, or directly transferred, from
• contained mix of products including general inbound to outbound trailers without extra storage. To ensure that cases
moved efficiently through the distribution centres, Wal-Mart worked with
merchandise, food and soft goods (Clothing) suppliers to standardize case sizes and labeling. The average distance from
distribution centre to stores was approximately 130 miles. Each of these
• Processes over 5 billion cases a year through its distribution centres was profiled in a store-friendly way, with similar
products stacked together. Merchandise purchased directly from factories
entire network in offshore locations such as China or India was processed at coastal
distribution centres before shipment to U.S. stores.

17. • Continuous revenue obtained through “back-haul”
• Fleets served as for-hire carriers when trucks were
empty
• Transports generated $1billion annually
• Trucking employees are non-unionized and in-house
• Allowed Wal-Mart to implement and improve delivery procedures
• Uniformed operating standards ensured that miscommunication was
minimized

18. Information Sharing
• Wal-Mart distribution centres had close
to real time information sharing
• Allowed for merchandise to be pushed
to stores automatically
• Store level information systems allowed
manufactures to be aware of individual
purchases
• Associates could input order to
override impending orders
• Meetings were held weekly among staff
to share day/week/month sales
• Satellite network provided means to
broadcast video messages to the stores

19. Information Sharing
Cont.
• In the mid-1980’s Wal-Mart invested in a central
database, store-level-point of sale systems, and a
satellite network
• Also implemented chain-wide UPC barcode
system
• Store level information could be collected and
analyzed instantaneously
• Combined sales data with external information
enabled the company to improve accuracy of
purchasing forecasts

20. Retail Link
• Introduced data system that
tracked sales over time
• Gave suppliers access to
real-time sales data on the
products they supplied
• Supplied individual stock-
keeping items at the store
level
• Competitors utilized similar
system, Retail Interface

21. CPFR
• CPFR- collaborative
planning, forecasting and
replenishment
• shared critical information on promotions, daily sales, & inventory
levels
• 1) Strategy and Planning: This activity establishes the ground rules for the
collaborative relationship. It determines the product mix and placement and develops
event plans for the period.
• 2) Demand and Supply Management: This activity estimates consumer
demand and order and shipment requirements over the planning horizon.
• 3) Execution: In this activity, orders are placed, shipments are placed and delivered,
products are received and stocked, sales transaction are recorded and payments are
made.
• 4) Analysis: In this activity, planning and execution are monitored for exceptions,
results are aggregated and key performance metrics are calculated. The insight thereof
is shared between the partners and plans are adjusted for improving results.

22. VMI
• VMI- vendor managed DUAL BENEFITS
1. Data entry errors are reduced due to
inventory (continuous computer to computer communications.
replenishment) 2. Speed of the processing is also improved.
3. Both parties are interested in giving better
• A means of optimizing Supply Chain service to the end customer.
performance in which the manufacturer is 4.Having the correct item in stock when the
responsible for maintaining the distributor’s
inventory levels. The manufacturer has access end customer needs it, benefits all parties
to the distributor’s inventory data and is involved.
responsible for generating purchase orders. 5. A true partnership is formed between the
Manufacturer and the Distributor. They work
• suppliers were required to manage
closer together and strengthen their ties.
inventory levels at distribution centers
6. Stabilize the timing of Purchase Orders -
• began with P&G diapers PO's are now generated on a predefined
basis.
• in many situations suppliers owned the
inventory on the shelf up to the point of
checkout

23. Human Resources
• Made store visits to implement best
practices
• Encouraged associates to contribute new,
innovative ideas
• Non-union:
• didn’t deal with labor agreements
• could drive labor costs down
• made operational changes quickly and efficiently
• became target of politicians and Commercial
Workers Union due to size

24. “We
REMIX
could have done nothing and been fine from a logistics standpoint ... but as you continue to increase your
sales per square foot, you’ve got to do things differently to make those stores more productive.”
CIO, Rollin Ford
• Initiated in Fall 2005
• Problem: Increase in grocery products resulted in delays in shelf restocking
• Goal of Remix: Reduce % of out-of-stock merchandise at stores by
redesigning its network of distribution centres
• Plan of Action:
• revise original model of distribution centres
• fast moving items would be shipped from “high velocity” food
distribution centres
• these centres were smaller, had temperature controls, and had less
automation

25. RFID
• Goal: Increase ability to track inventory > Increase
in-stock rates at store level
• Con: Costly for suppliers to implement
(tags cost 17 cents each)
• Pros:
• 1. Increase stock visibility as stock moved
in trucks, centres, and in store
• 2. Track promotion effectiveness
• 3. Enable the company to cut out-of-
stock sale losses and overstock expenses

26. RFID Implementation
• RFID readers were placed in
several parts of the stores:
dock, backroom, door from
stock room to sales flor, and
in box crusing area
• RESULT: Stores with RFID
implementation showed net
improvements of 16 per
cent fewer out-of-stocks on
RFID tagged products

27. Continuous
Improvement
• Internal goal to reduce inventory growth
rate to half of its sales growth rate
• 2006: Reported sales increase of 9.5% from the previous year /
Inventory grew at 8.2%
• 2005: Reported sales increase by 11.3%, while inventory grew 11.8%
• Result: Improved, but fell short of goal

28. International Markets
• Successes:
• Largest retailer with strong profits in Mexico & Canada
• 2006: Purchased stock in Central American Holding Company, gaining
control over 375 supermarkets in Central America
• Failures:
• Loss of market presence in UK
• Sold 16 South Korean stores to local chain
• German losses equalling over $1billion

29. Will Wal-Mart Survive?
• August 2006, Wal-
Mart posted first
profit decline
• Competitors are
catching up
• Target & Costco