You are on page 1of 39

A Business Success



  

   

  
   
  
  
m

O
u
`
?evenues Profits
? nk Comp ny ($ millions) ($ millions)
1 W l-M rt Stores u u u
2 Exxon Mobil u    
3 Chevron 
  u
4 Gener l Electric 

  
5 B nk of Americ  u  

Corp.
6 ConocoPhillips   u
7 AT&T   
8 Ford Motor   


9 J.P. Morg n Ch se  

& Co.
h
10 Hewlett-P ck rd u
 
á _he comp ny·s founder is S m W lton.

á He w s born in 1918 t Okl hom .

á In 1940, he worked for the f mous ret iler, J C


Penney.

4
á W lton g ve up the job nd decided to set up
his own ret il store.

á He purch sed store fr nchise in Ark ns s.

á Offering signific nt discounts on prices, he


bec me successful nd cquired second store
in 3 ye rs.

ï
á By 1969, W lton h d est blished 18 W l-M rt
stores.

á By l te 19 0s, the ret il ch in h d est blished


ph rm cy nd n uto service center.

á In 1980s, W l-M rt continued to grow due to


huge customer dem nds in sm ll towns.

Ä
á W l-M rt w s offering low prices, customer
s tisf ction gu r nteed, nd hours th t were
re listic for the w y people w nted to shop.
Open ll night, for university students

á By 1984, there were 640 W l-M rt stores in U.S.

m
á W l-M rt suffered setb ck in 1992, when
W lton died.

á But it continued its growth in the 1990s,


focusing on overse s stores.
1992, Mexico (joint venture with Cifr )
1994, C n d ( cquired 122 Woolco stores from
Woolworth)
199 , Germ ny ( cquired 21 store of Wertk uf)
Kore , Br il, nd so on.

mm
á _his phenomen l growth of W l-M rt is
ttributed to its continued focus on customer
needs nd reducing cost through efficient
§  
 
  §.

m
mO
á In the e rly 19 0s, W l-M rt bec me one of the
first ret iling comp nies in the world to
centr lie its distribution system, pioneering
the ret il   § system.

á Under the system, goods were centr lly


ordered, ssembled t m ssive w rehouse,
known s ¶distribution center· ( ), from
where they were disp tched to the individu l
stores (§ ).

mu
á _he hub nd spoke system en bled W l-M rt
to chieve signific nt cost dv nt ges by the
centr lied  §  §  
    §..
nd distributing them through its   § §
 §    to the ret il stores spre d cross the
U.S.

m`
á W l-M rt emph sied the need to reduce
purch sing costs nd offer the best price to the
customer.

á _he comp ny    procured from


m nuf cturers, by p ssing ll intermedi ries.

mh
á W l-M rt fin lies purch se de l only when
it is fully confident th t the products being
bought §    §     
 .

m4
á W l-M rt spends signific nt mount of time
meeting vendors nd underst nding their cost
structure.

á By m king the process tr nsp rent, the ret iler


c n be cert in th t the m nuf cturers re doing
their best to cut down costs.


á _he computer systems of W l-M rt were
connected to those of its suppliers.

á ¢  en bled the suppliers to downlo d


purch se orders long with store-to-store s les
inform tion rel ting to their products sold.

á On receiving inform tion bout the s les of


v rious products, the suppliers shipped the
required goods to W l-M rt·s distribution
centers.


á An import nt fe ture of W l-M rt·s logistics
infr structure w s its f st nd responsive
tr nsport tion system.

á _he distribution centers were serviced by more


th n 3500 comp ny owned trucks.


á W l-M rt believed th t it needed drivers who
were committed nd dedic ted to customer
service.

á _he comp ny hired only experienced drivers


who h d driven more th n 300,000 ccident-
free miles, with no m jor tr ffic viol tion.

m
á _o m ke its distribution process more efficient,
W l-M rt lso m de use of logistics technique
c lled ´cross-docking.µ

á In this system, the finished goods were directly


picked up from the m nuf cturing pl nt,
sorted out nd then directly supplied to the
customers.


á _he system reduced the h ndling nd stor ge
of finished goods, virtu lly elimin ting the role
of the distribution centers nd stores.

á _he m nuf cturer directly forw rded the


goods to pl ce c lled the ´st ging re .µ

á _he goods were p cked here ccording to the


orders received from different stores nd then
directly sent to the respective customers.

O
á W l-M rt invested he vily in I_ nd
communic tion systems to effectively tr ck
s les nd merch ndise inventories in stores
cross the country.

á With the r pid exp nsion, it w s essenti l to


h ve good communic tion system.

á Hence, W l-M rt set up its own s tellite


communic tion system in 1983.

u
á W l-M rt w s ble to reduce unproductive
inventory by llowing stores to m n ge their
own stocks,    § § cross m ny
product c tegories, nd timely price
m rkdowns.

á Inste d of cutting the inventory cross the


bo rd, W l-M rt m de full use of its I_
c p bilities to m ke more inventories v il ble
in the c se of items th t  § 
§ 

§ , while reducing the over ll inventory
levels.

`
á Employees t the stores h d the ´M gic
W nd,µ   
  which w s
linked to in-store termin ls through r dio
frequency network.

á _hese helped them to keep tr ck of the


inventory in stores, deliveries, nd b ckup
merch ndise in stock t the distribution
centers.

h
á _he order m n gement nd store
replenishment of goods were entirely executed
with the help of computers through the Point-
of-S les (POS) system.

á _hrough this system, it w s possible to monitor


nd tr ck the s les nd merch ndise stock
levels on the store shelves.

4
á Since the floor re of ny W l-M rt store
v ried between 40,000 to 200,000 squ re feet,
movement of goods within the store w s n
import nt p rt of logistics oper tions.

á W l-M rt m de signific nt investments in I_ to


  loc te nd replenish goods t the
stores.


á _he comp ny sked its suppliers to ship goods
in store-re dy displ ys c lled pretty d rn quick
(PDQ) displ ys.

á Goods were p cked in PDQ displ ys th t


rrived t the stores re dy to be bo rded on the
r cks.

á W l-M rt·s employees could directly repl ce


the empty r cks t the stores with fully p cked
r cks, inste d of refilling e ch nd every item
t the r cks.

á In 1991, W l-M rt h d invested pproxim tely
$4 billion to build   §§
.

á More th n 10,000 W l-M rt ret il suppliers


used the ret il link system to monitor the s les
of their goods t stores nd replenish
inventories.

á Det ils of d ily tr ns ctions (~10 million per


d y) were processed through this system.

O
á ?et il Link connected W l-M rt·s EDI network
with n extr net, ccessible to W l-M rt·s
thous nds of suppliers.

á _he suppliers could find out how their product


w s performing vis- -vis competitors· products
in p rticul r product c tegory.

Om
á W l-M rt owned the l rgest nd most
sophistic ted computer system in the priv te
sector.

á _he comp ny used M ssively P r llel


Processor (MPP) computer system to tr ck the
movement of goods nd stock levels.

á All inform tion rel ted to s les nd inventories


w s p ssed on through n dv nced s tellite
communic tion system.

O
á By the mid 1990s, ?et il Link h d emerged into
n Internet-en bled SCM system whose
functions were not confined to inventory
m n gement lone, but lso covered
coll bor tive pl nning, forec sting nd
replenishment (CPF?).

OO
á In — , W l-M rt worked together with its
key suppliers on re l-time b sis by using the
Internet to jointly determine product-wise
dem nd forec st.

á —  is defined s business pr ctice for


business p rtners to sh re forec sts nd results
d t through the   , in order to reduce
inventory costs while t the s me time,
enh ncing product v il bility cross the
supply ch in.

Ou
á _hough CPF? w s promising supply ch in
initi tive imed t mutu lly benefici l
coll bor tion between W l-M rt nd its
suppliers, its ctu l implement tion required
huge investments in time nd money.

á A few suppliers with whom W l-M rt tried to


implement CPF? compl ined th t signific nt
mount of time h d to be spent on developing
forec sts nd n lying s les d t .

O`
á In efforts to implement new technologies to
reduce costs nd incre se the efficiency, in July
2003, W l-M rt sked its top 100 suppliers to
be ?FID compli nt by J nu ry, 2005.

á W l-M rt pl nned to repl ce b r-code


technology with ?FID technology.

á _he comp ny believed th t this repl cement


would reduce its supply ch in m n gement
costs nd enh nce efficiency.

Oh
á Bec use of the implement tion of ?FID,
employees were no longer required to
physic lly sc n the b r codes of goods entering
the stores nd distribution centers, s ving l bor
cost nd time.

á W l-M rt expected th t ?FID would reduce the


inst nces of stock-outs t the stores.

O4
á Although W l-M rt w s optimistic bout the
benefits of ?FID, n lysts felt th t it would
impose he vy burden on its suppliers.

á _o m ke themselves ?FID compli nt, the


suppliers needed to incur n estim ted $20
Million.

á Of this, n estim ted %50 would be spent on


integr ting the system nd m king
modific tions in the supply ch in softw re.


You might also like