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Post-Graduate Programme in Management(PGPM: 2011-13) Section: CTerm: IV (13 Jun – 1 Sep, 2012)
Management Development Institute - Gurgaon
Supply Chain Management
Case 04
Wal-Mart’s Supply Chain
ID Name
1 11P171 Suryansh Kapoor2 11P207 Naved Siraj3 11P208 Nayan Jain4 11P210 Paritosh Baisoya5 11P231 Sumit Chandra6 11P237 Vikram Agarwal7 11P239 Vishesh Garg
SCMCase
Presentation
Presentation Date: July 12, 2012
Walmart Supply Chain - Video
Introduction
• Founded by Sam Walton in 1962• In 2012 it is the largest retailer in the world• It has 8,500 stores in 15 countries, under 55 different names• Service 100 million customers on weekly basis
“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” - Captain V L Beatty
Walmart Supply Chain Practices
Procurement & Distribution Management
Logistics Management
Inventory Management
Procurement & Distribution Management• Procurement of goods directly from manufacturers
bypassing all intermediaries• Tough Negotiator on prices, ensures 100% process
transparency• Believed in establishing long term relationship with the
vendor• Ensure product is not available elsewhere at even lower
prices• Proffered local and regional vendors & suppliers• Own warehouse supplied 85% of inventory compared to
50 -65% of competitors • Provides replenishments in 2 days compared to 5 days
for competitors • Shipping cost 3% of total cost compared to 5% for
competitors• Each distribution centre had provision of food, sleep,
bath & personal business• Barcode, RFID, hand held computer systems
Distribution Network
250 mile radius
Walmart’s Centralized Hub-and-Spoke System of Warehouses and
Distribution Centers
Hub and Spoke System
• One of the first retailing companies in the world to centralize its distribution system, pioneering the retail hub-and-spoke system.
• Under the system, goods were centrally ordered, assembled at a massive warehouse, known as ‘distribution center’ (hub), from where they were dispatched to the individual stores (spoke).
EDI for ProcurementEDI : Electronic Data Interchange
• The computer systems of Wal-Mart were connected to those of its suppliers.
• EDI enabled the suppliers to download purchase orders along with store-to-store sales information relating to their products sold.
• On receiving information about the sales of various products, the suppliers shipped the required goods to Wal-Mart’s distribution centers.
RFID
• Automated Data collection based on an electronics – not a barcode
• Tag can be imbedded in the product or stuck on the exterior case or pallet
• Reader instead of a barcode scanner• Allows fully automated data collection with the use of
portals• Can read many ID tags at a time
Advantages of using RFID
• Reduce the possibility of inventory shrinkage and out-of-stock situation.
• Improve fulfillment rates.• Improve the customer service.• Reduce inventory and labor cost.• Eliminate many manual process and improve the
operation efficiency
RFID : Radio Frequency Identification
Logistics Management
• Fast & responsive transportation system• Ships goods within 2 days, 3500 company owned trucks,
replenishes store shelves twice every week • Hired only experienced drivers who had driven more
than 300,000 accident free miles with no major violation• Private Fleet Handbook , maintained strict vigil over
drivers• Cross Docking , supply chain – demand chain , push - pull
Supply Chain
Demand Chain
Push
Pull
Cross Docking
Finished goods were directly picked up from the manufacturing plant, sorted out and then directly supplied to the customers (virtually eliminating the role of the distribution centers and stores)
Advantages of cross docking• Reduces operating costs, inventory levels• Increases throughput• Helps in increase of sales space• Eliminates unnecessary handling and storage of product• Reduces product damages and product obsolescence
CPFR
• By implementing CPFR, Wal-Mart began a just-in-time delivery program that reduced costs for both the retailer and its suppliers
• Process for two or more companies in a supply chain to synchronize their demand forecasts into a single plan to meet customer demand
• Parties electronically exchange– past sales trend– point-of-sale data on-hand
inventory– scheduled promotions & forecasts
CPFR : Collaborative Planning, Forecasting and Replenishment
CRP - Continuous replenishment program, DRP- Distribution Requirements Planning
Inventory Management
• RFID, Hand held computer system• Own satellite communication
system,• Automated reordering system• Point of sale system• Sophisticated algorithm system• Centralized inventory data system• Retail link system• Internet enabled technologies
Use of RFID technology and hand-held computer systems
Hand Held computer guides an employee with regard to the location of a particular product from a particular place in the shop
Walmart IT systems
WAL-MART SECRET DATA CENTRE(Set up in 1983)
• 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• Merchandising Artificial Intelligence System:
– To adjust vendor merchandise assortments based on the need of each particular store
– State-of-the-art satellite communication network which supports data, voice, and video
Nature of benefits Derived
Sustainable competitive advantage
• Everyday low price• High volume purchase• Overall cost saving• Improved customer
service• Stock management
Self dependence
• Low transportation cost
• Reduction in lead time• Increased warehouse
space• Accurate forecasting• Better working capital
utilization• Faster inventory
turnover• Reduction in safety
stock
Strong customer relationship
• Lowest prices• High throughput
products• Pull strategy• Higher frequency of
replenishment
THANK YOU