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7/28/2019 Wal-Mart -Supply Chain Mgmt,,Nirvana
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Wal-Mart: Supply Chain
Management
Background Business Process Redesign:
Process, IT Implications: Process, IT
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Wal-Mart Is the Largest and Fastest Growing DiscountDepartment Store
2012 revenues totaled $ 447 billion:Increased 35% from previous year, whereas competitors growth rates averaged only 10%
Net income increased 25% to $16 billion
Operations include growing chain of stores, including discount department stores,wholesale clubs, food stores, wholesale distributor of books and pre-recordedmusic, and grocery distribution services
First discount department store chain to expand internationally
This phenomenal growth of Wal-Mart is attributed to its continued focus on customer
needs and reducing cost through efficient supply chain management practices.
.
Wal-Mart grows through volume and market share gains rather thanmargin expansions.
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Customer Demands
Critical Success Factors(CSF)
Satisfying Customer Demands Depends on Five CriticalSuccess Factors
Quick responsivenessto market changes
Low inventory Quick replenishment of
inventory Effective human
resource system Efficient distribution
system
The right products In stock Best value Service and quality
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Wal-Mart Fulfills the Customer-Satisfaction CriticalSuccess Factors
Customer demand pulls product through thesupply chain
Tracking product movement at individual storesby market traits (e.g., size, color)
Investment in IT ensures timely analysis of sales/customer/market information and trends
Formal and informal cooperation among stores,
distribution centers, and suppliers
Quick Responsivenessto Market Changes
Low Inventory
Quick Replenishment
Effective HR System
Efficient DistributionSystem
CSF
WAL-MART: BUSINESS PROCESS
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Wal-Mart Fulfills the Customer-Satisfaction CriticalSuccess Factors (cont.)
Direct high-level and long-term relationshipwith suppliers enabled by high information
sharing:- Some vendors directly manage distribution warehouse
inventory of their products
Efficient transportation system
Investment in IT (e.g., EDI, Quick Response,Radio frequency terminals)
CSF
WAL-MART: BUSINESS PROCESS
Quick Responsivenessto Market Changes
Low Inventory
Quick Replenishment
Effective HR System
Efficient DistributionSystem
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All employees are consideredassociates
Extensive training and support
Stock-ownership program
Profit-sharing
Employees are your biggest capital investment, so it makes sense tomaintain them their skills, their morale, and their participation.
CSF
Wal-Mart Fulfills the Customer-Satisfaction CriticalSuccess Factors (cont.)
WAL-MART: BUSINESS PROCESS
Quick Responsivenessto Market Changes
Low Inventory
Quick Replenishment
Effective HR System
Efficient DistributionSystem
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Highly automated distribution centers(e.g., laser-guided conveyor belts)
A fleet of 2,000 company-owned trucks
High leverage of supplier relationships:- Some suppliers ship goods sales floor
ready
CSF
Wal-Mart Fulfills the Customer-Satisfaction CriticalSuccess Factors (cont.)
WAL-MART: BUSINESS PROCESS
Quick Responsivenessto Market Changes
Low Inventory
Quick Replenishment
Effective HR System
Efficient DistributionSystem
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The Traditional Supply Chain Includes Inefficient andUnnecessary Steps
Select Tag/Label
Ship
Pack
Ship
Select PackReceive
Ship
Manufacturer(Supplier)
Retailer
Shipper
Wholesaler
Receive PackSelect Storage
Storage
Sell
Order
Individual StoreDistribution Warehouse
Order Order
Order
Make
WAL-MART: BUSINESS PROCESS
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Wal-Mart Simplified Its Supply Chain
Ship Receive
Select
Ship
Manufacturer(Supplier)
Retailer
Shipper
Wholesaler
Receive PackSelect Storage Sell
Individual StoreDistribution Center
Tag/Label PackMake
WAL-MART: BUSINESS PROCESS
Cross-docking in distribution centers results in product flow frominbound to outbound shipping docks within 48 hours.
Deliver within72 hoursof order
POSOrder
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Wal-Mart Invests Heavily in Information Technology
Inventory Tracking and Management System at distribution centers:Identifies every product and its location in the warehouse
Integrated with some 8.5 miles of laser-guided conveyor belts
Lasers read the bar code on every product box and route them to appropriate loading dock
Electronic Data Interchange (EDI):For electronic transmission of POS data, purchase orders, invoices, advance shipment notice,etc. between Wal-Mart headquarters, suppliers, distribution centers, and individual stores
Merchandising Artificial Intelligence System:
To adjust vendor merchandise assortments based on the need of each particular storeState-of-the-art satellite communication network which supports data, voice, and video
WAL-MART: BUSINESS PROCESS
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Wal-Mart Invests Heavily in Information Technology (cont.)
Various Quick-Response (QR) systems (retail-link) to allow direct store-to-supplier ordering: continuous replenishment
Wal-Mart
Supplier
POS Data
Store
Vendor-managed QR
Supplier Store
Wal-Mart-managed QR
Order
Wal-Mart
Supplier Store
Warehouse J ust-in-Time System
DistributionCenter
DistributionCenter
WAL-MART: BUSINESS PROCESS
POS Data
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Wal- Marts Inventory Management Improvements HaveResulted in Efficiencies Unmatched by the Competition
WAL-MART: IMPLICATIONS
Inventory-to-Sales Ratio
1:4.58
1:5.94
Sears Roebuck & Co.Wal-Mart
Wal-Mart stores replenish inventorytwice a week vs. industry standard of once every two weeks
Wal-Mart has lowest cost of operations in theretail area, aside from wholesale clubs
Selling and Operating Expenses of Sales
KMartWal-Mart
15%
28%
IT systems have improved Wal- Martsin-stock position and increased vendor responsiveness
Inventory in System (Days)
At Vendor
At Warehouse
In-Store
30
30
14
323
After NewSystem
Before NewSystem
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Hub and Spoke System
Wal-Mart -one of the first retailing companies inthe world.
Under the system, goods were centrally ordered,assembled at a massive warehouse, known asdistribution center (hub), from where they weredispatched to the individual stores (spoke).
Achieve significant cost advantages by thecentralized purchasing of goods in huge
quantities
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Wal- Marts Procurement
Reduce purchasing costs and offer the best price to thecustomer.
The company directly procured from manufacturers, bypassing all intermediaries.
Meeting vendors and understanding their cost structure.
Transparent process
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Using EDI for Procurement
The computer systems of Wal-Mart wereconnected to those of its suppliers.
EDI enabled the suppliers to download purchaseorders along with store-to-store sales informationrelating to their products sold.
On receiving information about the sales of various products, the suppliers shipped therequired goods to Wal- Mart s distribution centers.
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Logistics Management
Fast and responsive transportationsystem.
More than 3500 company owned trucks.
Experienced drivers who had driven more
than 300,000 accident-free miles, with nomajor traffic violation.
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Cross-docking
In this system, the finished goods were directlypicked up from the manufacturing plant, sortedout and then directly supplied to the customers.
reduced handling and storage of finished goods.
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Inventory Management
Reduce unproductive inventory
Made full use of its IT capabilities to make moreinventories available in the case of items thatcustomers wanted most
Employees at the stores had the Magic Wand, a hand-held computer which was linked to in-storeterminals through a radio frequency network
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The order management and storereplenishment of goods through the Point-of-Sales (POS) system.
Helps to monitor and track the sales and
merchandise stock levels on the storeshelves.
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Voice-based Order Filling (VOF)
Voice-based order filling (VOF) system in all itsgrocery distribution centers.
Each person responsible for order picking wasprovided with a microphone/speaker headset,connected to the portable (VOF) system that couldbe worn on waist belt.
They were guided by the voice to item locationsin the distribution centers.
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Inventory Management (quick replenishment)Floor area of 40,000 to 200,000 square feet,movement of goods within the store was an
important part of logistics operations.
EDI network with an extranet, accessible to Wal-Mart s thousands of suppliers.
Massively Parallel Processor (MPP) computersystem to track the movement of goods and stocklevels.All information was passed on through anadvanced satellite communication system
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VAN EDI vs. Web-EDI
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RFID Technology (Radio Frequency Identification)
Wal-Mart planned to replace bar-codetechnology with RFID technology.
employees need physically scan the barcodes of goods entering the stores anddistribution centers, saving labor cost andtime.
Wal-Mart expected that RFID would reduce theinstances of stock-outs at the stores.
WAL-MART: IMPLICATIONS
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Lessons Learned: The Road to Success Is Paved byTechnology and Better Use of People
Economiesof Sales:
Best Deals
StrongSupplier
Relationships
EffectiveIT Systems
EffectiveDistribution
Systems
EmpoweredEmployees
ReducedCost of Sale
In-DepthKnowledgeof Customer/
Market
StableLower
Prices
PredictableSale
Patterns
DecreasedChance of
Out-of-Stock
IncreasedSalesand
Profits
WAL-MART: IMPLICATIONS
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