WAL-MART: SUPPLY CHAIN

MANAGEMENT

K.VARUN
123511
BACKGROUND
Types of industry: one stop shopping center
Founder: Sam Walton

Year of establishment: 1962

First store: Rogers in Arkansas

 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.
 THE TRADITIONAL SUPPLY CHAIN INCLUDES
INEFFICIENT AND UNNECESSARY STEPS
Retailer Distribution Warehouse Individual Store

Order Order
Order

Tag/
Receive Select Pack Select Storage Sell
Label

Storage

Wholesaler
Order

Receive Select Pack

Manufacturer
(Supplier)
Make Pack

Shipper
Ship Ship Ship
WAL-MART: BUSINESS PROCESS

WAL-MART SIMPLIFIED ITS SUPPLY CHAIN

Retailer Distribution Center Individual Store

POS
Order

Receive Select Pack Ship Receive Storage Sell

<48 hours <48 hours

Wholesaler

Deliver
within
72 hours of
Manufacturer order
(Supplier)
Tag/
Make Select Pack
Label

Shipper Ship

Cross-docking in distribution centers results in product

flow from inbound to outbound shipping docks within 48
hours.
CROSS-DOCKING
To make its distribution process more
efficient, Wal-Mart also made use of a
logistics technique called cross-docking.

Inthis system, the finished goods were

directly picked up from the manufacturing
plant, sorted out and then directly
supplied to the customers.

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INVENTORY MANAGEMENT
Wal-Mart invested heavily in IT and
communication systems to effectively
track sales and merchandise inventories
in stores across the country.

Withthe rapid expansion, it was essential

to have a good communication system.

Hence,
Wal-Mart set up its own satellite
communication system in 1983.

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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.

Insteadof 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.

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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.

Thesehelped them to keep track of the

inventory in stores, deliveries, and backup
merchandise in stock at the distribution
centers.

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INVENTORY MANAGEMENT
Theorder 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.

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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.

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INVENTORY MANAGEMENT
(RETAIL LINK SYSTEM)
In1991, Wal-Mart had invested
approximately $4 billion to build a retail
link system.

Morethan 10,000 Wal-Mart retail

suppliers used the retail link system to
monitor the sales of their goods at stores
and replenish inventories.

Detailsof daily transactions (~10 million

per day) were processed through this
system.
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INVENTORY MANAGEMENT
(RETAIL LINK SYSTEM)
Retail Link connected Wal-Marts EDI network
with an extranet, accessible to Wal-Marts
thousands of suppliers.

The suppliers could find out how their product

was performing vis-a-vis competitors products in
a particular product category.

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WAL-MART: BUSINESS PROCESS
WAL-MART INVESTS HEAVILY IN INFORMATION
TECHNOLOGY (CONT.)
Various Quick-Response (QR) systems (retail-link) to allow direct store-to-
supplier ordering: continuous replenishment
Vendor-managed QR
Distribution
Wal-Mart
Center

Supplier POS Data Store Order

Warehouse Just-in-Time Supplier Store

System
Distribution
Wal-Mart Wal-Mart-
Center
managed QR

POS Data
Supplier Store
RFID TECHNOLOGY
(RADIO FREQUENCY IDENTIFICATION)
Inefforts 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.
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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.

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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.

Tomake themselves RFID compliant, the

suppliers needed to incur an estimated
$20 Million.

Ofthis, an estimated %50 would be spent

on integrating the system and making
modifications in the supply chain
software.
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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
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
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.