OPRE 3320.502Vincent James

Haytham DabloukBruno Porto Maia

Feinan Ni

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Company & Division Wal-Mart Stores is an American multinational retail corporation that runs chains

of large discount department stores and warehouse stores. The company is the world's

second largest public corporation, according to the Fortune Global 500 list in 2013, the

biggest private employer in the world with over two million employees, and is the largest

retailer in the world (Wikipedia). Walmart is a family-owned business, controlled by the

Walton family, who own over 50 percent of Walmart.It is also one of the world's most

valuable companies. Today, Wal-Mart operates more than 11,000 retail units under 69

banners in 27 countries.

Executive Summary Wal-Mart is considered a success story without precedent. Founded by Sam

Walton in 1962 in Bentonville, Arkansas, Wal-Mart stores offered customers abroad

range of goods. In its first year, Wal-Mart Stores accumulated $700,000 in sales, which

increased to $5.4 million by 1974. In 1980, Wal-Mart became the youngest U.S. retail

company, and the only regional retailer to exceed $1 billion in net sales. In 2002, Wal-

Mart's revenue equaled 2.3% of U.S. gross domestic product. Wal-Mart's key strategy

lay in its Everyday Low Prices (EDLP) which it achieved through aggressive bargaining

with suppliers, its efficient distribution system and inventory control as well as its unique

culture. Wal-Marts superior processes in supply chain and IT have ensured that it was

able to provide the customers with 7 % lower prices than its competitors. Wal-Mart was

able to achieve a leadership status in the retail industry because of its efficient supply

chain management practices. Areas where Wal-Mart manages the supply chain:

Procurement & Distribution-

Wal-Mart procured goods directly from manufacturers, bypassing all

intermediaries. It was a tough price negotiator which will only purchased when it was

fully assure that the products bought were not available elsewhere at a lower price.

Logistic management-

• Cross- Docking system.

• Distribution centers were serviced by own Wal-Mart's trucks.

• Drivers had to report their hours of service every day.

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• Hiring only experienced drivers for trucks.

Distribution system-

• Barcode Technology.

• Establish long -term relationships

• Hand-Held computer system.

• Procured goods directly from manufacturers.

Vision/missionWal-Mart's advertised mission statement and its advertising slogan are the same:

"We save people money so they can live better (Walmart.com)" In addition to this

mission statement, the company looks to its founder, Sam Walton for a company

purpose: “If we work together, we’ll lower the cost of living for everyone…we’ll give the

world an opportunity to see what it’s like to save and have a better life.”

In order to fulfill its mission, Wal-Mart has developed some unique, policies,

principles, rules, processes and procedures, the sum total of which form the Wal-Mart

stores corporate culture:

• Open Door Policy - Managers' doors are open to employees at all levels

• Sundown Rule - Answering employee, customer, and supplier questions on the

same day the questions are received

• Grass Roots Process - Capturing suggestions and ideas from the sales floor and

front lines

• 3 Basic Beliefs & Values - Respect for the Individual, Service to our Customers,

Striving for Excellence

• 10-Foot Rule - Making eye contact, greeting, and offering help to customers who

come within 10 feet

• Servant Leadership - Leaders are in service to their team

• Wal-Mart Cheer - An actual structured chant that was created by founder Sam

Walton to lift morale every morning

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Company Structure

From its humble beginnings as a small discount retailer in Rogers, Ark., Wal-Mart

has opened thousands of stores in the United States and expanded internationally.

Through this model of expansion, which brings the right store formats to the

communities that need them, Wal-Mart is creating opportunities and bringing value to

customers and communities around the globe. Today, Wal-Mart operates more than

11,000 retail units under 69 banners in 27 countries. Wal-Mart employs 2.2 million

associates around the world — 1.4 million in the U.S. alone.

Locations at a glance

• Total retail units on Oct. 31, 2013 11,096

• Walmart U.S. 4,156

• Sam's Club 630

• Walmart International 6,310

Wal-Mart currently operate four primary store formats in the U.S., each custom tailored

to its neighborhood.

Walmart Supercenter-

Wal-Mart Supercenters offer a one-stop shopping experience for electronics,

apparel, toys and home furnishings with the added convenience of a grocery store with

fresh produce, bakery, deli and meat and dairy products. Most Supercenters are open

24 hours, and may also include specialty shops such as pharmacies, banks, hair and

nail salons, name-brand restaurants, vision centers or health clinics.

Walmart Discount Store-

Since Sam Walton opened his first discount store in Rogers, Ark., in 1962, Wal-

Mart have built hundreds across the U.S. Smaller than a Supercenter, discount stores

employ about 200 associates and offer electronics, apparel, toys, home furnishings,

health and beauty aids, hardware and more in about 106,000 square feet of open,

brightly lit space.

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Walmart Neighborhood Market-

Walmart Neighborhood Markets were designed in 1998 as a smaller-footprint

option for communities in need of a pharmacy, affordable groceries and merchandise.

Each one is approximately 38,000 square feet and employs up to 95 associates.

Walmart Express-

The Walmart Express format was created in 2011 to offer low prices, convenient

shopping, and Wal-Mart’s smallest footprint yet, an ideal format for urban and rural

areas that lack access to larger stores. Walmart Express stores are about 15,000

square feet and offer groceries, general merchandise and even pharmacies.

Sam’s Club-

First Sam's Club opened in 1983 to meet a growing need among customers who

wanted to buy merchandise in bulk. Since then, Sam's Club has grown rapidly, opening

more than 600 clubs in the U.S. and 100 clubs internationally.

Walmart became an international company in 1991, and it operates in 26

countries outside the United States. With more than 800,000 associates and over 6,000

stores internationally, Wal-Mart leverage its global resources to meet local needs.

Walmart International is currently the fastest growing part of Wal-Mart’s business and is

led by President & CEO Doug McMillon.

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Supply Chian Diagram

http://mi021.wordpress.com/2013/03/24/walmart-master-of-the-supply-chain/

Major Customers-End CustomersThe average US Wal-Mart customer's income is below the national average, and

analysts recently estimated that more than one-fifth of them lack a bank account, twice

the national rate(Jones 2011). In 2006, Wal-Mart expanded its US customer base, by

change to a new strategy that is designed to "reflect each of six demographic groups –

African-Americans, the affluent, empty-nesters, Hispanics, suburbanites and rural

residents."A new slogan unveiled after that: "Saving people money so they can live

better lives". This reflects the three main groups into which Wal-Mart categorizes its 200

million customers: "brand aspirationals","price-sensitive affluents" and "value-price

shoppers".

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Order processing• The order management and store replenishment of goods were 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

• In 1998, Wal-Mart installed a voice-based order filling (VOF) system in all its grocery

distribution centers

• Each person responsible for order picking was provided with a microphone/speaker

headset, connected to the portable (VOF) system that could be worn on waist belt

• They were guided by the voice to item locations in the distribution centers

Wal-Mart provides the product, as well as pricing and availability information, to

the customer. The customer transfers funds to Wal-Mart. Wal-Mart convey point-of-sales

data as well as replenishment order via trucks back to the store. Wal-Mart transfers

funds to the distributor after the replenishment. The distributor also provides pricing

information and sends delivery schedules to Wal-Mart. Similar information, material, and

fund flows take place across the entire supply chain. Wal-Mart trains employees on how

to problem solve and develops each employee to focus on pleasing the customer. The

slogan of "satisfaction guaranteed" is something that Wal-Mart says it takes seriously.

Wal-Mart says it trains employees to ask customers if they need assistance or tutorials

on how a particular product functions.

Wal-Mart’s Delivery system procedures-

1. Create walmart.com account

2. Check your address

3. Shop online

4. Reserve your delivery time

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ProcurementWal-Mart’s process of procurement consists of reducing its purchasing costs as

much as possible so that it can offer best price to its consumers. The company procures

goods directly from the manufacturers, bypassing all intermediaries.

Wal-Mart has distribution centers in many different geographical places in the

United States. Wal-Mart’s own warehouses provide about 80% of the inventory. Each

distribution center is split in different groups contingent on the quantity of goods

received. (Wohl, J., & Kellehe 2009).The inventory turnover rate is extremely high,

approximately once every week for the majority of the items. The goods to be used

internally in the US arrive in pallets and imported goods arrive in reusable boxes.

The distribution centers ensure steady flow and consistent flow of products.

Managing the center is economical with the large-scale use of modern technology such

as the bar code, hand held computer systems (Magic Wand) and now, RFID. Every

employee has access to the essential information regarding the inventory levels of all

the products in the center. They make two scans- one for identifying the pallet, and

other to identify the location from where the stock had to be collected. Bar codes &

RFID are employed to label different products, shelves and bins in the center. The hand

held computers direct employee to the location of the specific product. The quantity of

the product needed from the center is entered in the hand held computer, which

updates the information on the main central server. The computers also allowed the

packaging department to get accurate information such as storage, packaging and

shipping, thus saving considerable time in unnecessary paperwork. This also facilitates

supervisors in monitoring their employees closely in order to guide them and give

instructions.

This enables Wal-Mart to fulfill customer needs swiftly and enhance the level of

efficiency of distribution center management operations.

InventoryConsidering the quick expansion of Wal-Mart stores, it was vital to have an

incredibly good communication system. For this to happen, Wal-Mart set up its own

satellite communication system in 1983. This allowed the management to monitor each

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and every activity going on in a particular store at any point of time and analyze the

course of action to be taken depending on how the things panned out.

Wal-Mart ensures that unproductive inventory is reduced to the fullest extent

possible, by allowing the stores to manage their own stocks, thereby decreasing pack

sizes across many categories and timely price markdowns. Wal-Mart makes full use of

its IT infrastructure to make more inventories available in case of items that customers

wanted most, while decreasing overall inventory. By making use of Bar-coding & RFID

technologies, different processes like efficient picking, receiving and proper inventory

control of the products along with easy packing and counting of the inventories was

ensured.

Wal-Mart owns the “Massively Parallel Processor (MPP)”, the largest and most

complex computer system in private sector, which allows it to easily track movement of

goods and stock levels across all distribution centers and stores. As an emergency

backup, it has an extensive contingency plan in place as well. Employees use “Magic

Wand”, which is linked to in-store terminals through a Radio frequency network, to keep

track of the inventory in stores, deliveries and backup merchandise in stock at the

distribution centers. The order management and store replenishment of goods is fully

executed with the help of computers through Point of Sale (POS) system. Wal-Mart also

makes use of high-tech algorithm to forecast the quantities of each item to be delivered,

based on inventories in the store. A Centralized inventory database lets the personnel at

the store to discover the level of inventories and location of each product at a given

time. Additionally, it shows the location of the product like distribution center or transit on

the truck. When the goods are unloaded at the store, the inventory system is

immediately updated.

ManufacturingIts supply chain strategy has four key components: vendor partnerships, cross

docking and distribution management, technology, and integration. Walmart’s supply

chain begins with strategic sourcing to find products at the best price from suppliers who

are in a position to ensure they can meet demand. Walmart establishes strategic

partnerships with most of their vendors, offering them the potential for long-term and

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high volume purchases in exchange for the lowest possible prices. Suppliers then ship

product to Walmart’s distribution centers where the product is cross docked and then

delivered to Walmart stores. Cross docking, distribution management, and

transportation management keep inventory and transportation costs down, reducing

transportation time and eliminating inefficiencies. Technology plays a key role in

Walmart’s supply chain, serving as the foundation of their supply chain. Walmart has the

largest information technology infrastructure of any private company in the world. Its

state-of-the-art technology and network design allow Walmart to accurately forecast

demand, track and predict inventory levels, create highly efficient transportation routes,

and manage customer relationships and service response logistics

In terms of location, Wal-Mart has traditionally taken advantage of developing

countries’ lower labor costs to settle manufacturing plants there. However, they have

recently pledged to turn to the U.S. for their manufacturing needs once realizing it was

becoming more profitable doing so due to the rising wages in emerging economies such

as China. Wal-Mart guarantees this move wasn’t motivated by patriotism, and won't

purchase American goods if its means higher prices. Wal-Mart’s traditional “Every Day

Low Prices” policy will be kept intact thanks to its strategy of keeping manufacturing

costs low. Hampton Products International, a supplier of locks and door hardware to

retailers including Wal-Mart, decided to bring their manufacturing back home in 2008.

This move proved to be a successful one. Over the past six years, the price of

producing a door hardware part in China has risen 24 percent to $2.20 from $1.77,

because of the Chinese currency's appreciation and increased labor costs. Throw in

transport costs and U.S. tariffs, and that product, shipped to the United States today,

would cost about $2.53. By moving production back to the United States, Hampton can

make the part today for just $2.16, a nearly 15 percent saving even including the

amortized investment in its new American plant (Chandran 2010). In addition to

production costs, Wal-Mart can reduce its inventory costs if it orders locally since goods

spend less time in transit, and the short distance that products travel allows the retailer

to better stock its shelves as soon as consumer trends come and go.

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Logistics Facilities NetworkEvery year, Walmart moves millions of products from manufacturers to Walmart’s

distribution centers, and from distribution centers to the shelves in the stores. Wal-

Mart’s highly-automated distribution centers, which operate 24 hours a day and are

served by Wal-Mart’s truck fleet, are the foundation of its growth strategy and supply

network.

“The company’s hub-and-spoke distribution network utilizes a system of manufacturer

storage with customer pickup. No inventory is stored at Wal-Mart’s distribution centers.

Wal-Mart’s fleet of 6,500 dedicated trucks and over 50,000 trailers.” (SC Digests

editorial staff, 2011). They are used to pick up goods directly from manufacturers’

warehouses, thus eliminating intermediaries and increasing responsiveness.

• A regional distribution center can have up to 12 miles of conveyor belts, which can

move hundreds of thousands of cases through the facility each day.

• There are 9 disaster distribution centers, strategically located across the country and

stocked to provide rapid response to struggling communities in the event of a

natural disaster.

• Each distribution center is more than 1 million square feet in size, and uses more

than 5 miles of conveyor belts to keep products moving to our stores 24 hours a

day.

• Every distribution center supports 90 to 100 stores in a 200-mile radius.

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http://www.transportationfortomorrow.com

Transportation methods

Walmart’s distribution operation is one of the largest in the world. The main

method they are using to transport is by trucks. Walmart logistics has a fleet of 6,500

tractors, 55,000 trailers and more than 7,000 drivers (SC Digests editorial staff, 2011). It

ensures Walmart to move goods to and from distribution centers because of its private

fleet of trucks and skilled truck drivers. Walmart’s truck drivers fleet is one of the largest

and safest fleets, and every year they drive 700 million miles to make millions of

deliveries to its stores and clubs. Each driver averages around 100,000 miles annually,

that’s like driving around the world 4 times!

Together with the truck drivers, Walmart constantly working to ensure that it is

moving merchandise in responsible, sustainable ways. Drivers follow the most efficient

routes to their destinations, and work to minimize the number of empty miles they drive

(SC Digests editorial staff, 2011). This way, Walmart uses less fuel, drive fewer miles,

and maximizes the merchandise it delivers while minimizing its environmental impact.

Just last year, Walmart drivers logged 28 million fewer miles while transporting 65

million more cases. Those improvements avoided nearly 41,000 metric tons of carbon

emissions, which is the equivalent of taking 7,900 cars off the road.

Information systems

The Information Systems Department has around 3000 societies that work in the

David Glass Technology Center located in Bentonville, Arkansas. Wal-Mart’s IS

Department is very hierarchal. It includes a Business Analyst, Senior Business Analyst,

Manager, Senior Manager and levels below them. The department of the information

system is very structured and formal (Wilgum 2009). It is so structured that they track

the time spent on projects down to fifteen minute increments. Doing this keeps them on

track for budget and productivity metrics.

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Jane data center is the data center of Wal-Mart which has a capacity of 460

terabytes of data. Which is a huge capacity of data available in the internet. And it has

helped Wal-Mart become the biggest retailer in the world, and to the corporation's

growing secrecy since founder Sam Walton's death in 1992 (Walmart 2012). To the

power of data, Jane data center is considered a mysterious icon. It helped Wal-Mart to

become the biggest retailer in the world. When Wal-Mart constructed its primary data

center at corporate headquarters in 1989, it wasn't a secret, it was the largest poured

concrete structure in Arkansas at the time, and Walton himself ordered a third story.

According to the econometric society, Wal-Mart deals with the following data: Store

openings data which included the opening dates of Wal-Mart stores and Supercenters.

Also the data that Wal-Mart dealt with included distribution center opening which show

Opening dates of General Distribution Centers and Food Distribution Center. Moreover,

Wal-Mart dealt with Model Calculations data which include Gauss Programs and Gauss

Data sets that calculate sales, operating profits, and distribution miles for any given

configuration of Wal-Mart stores in any given year.

Universal bar code and RFID-

The universal bar code was established after Wal-Mart pushed the retail industry

, which made manufacturers adopt common labeling. The bar allowed retailers to

generate all kinds of information, creating a shift of power from manufacturers to

retailers. Also Wal-Mart became very good at using the information behind the bar code

and is considered a pioneer in developing sophisticated technology to track its inventory

and cut the fat out of its supply chain. No one has used the technology as efficiently as

Wal-Mart. The famous retail store Wal-Mart recently showed that it is investing more in

technology , dealing more with sales and production tracking. Wal-Mart now requires

its suppliers to provide microchips which will service radio frequency identification, or

RFID, which will greatly enhance the systems created by bar codes.

Transaction process system (TPS)-

This information system ordinarily automates routine and repetitive tasks that are

very important to the operation of Walmart. The input of TPS is raw data; the processing

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involves with the summarizing, recording, and merging the data and the output is in the

form of report (Wilgum 2009).One example of TPS is Point-of-Sale when you check-out

the product at Walmart, the cashier has to scan the product with the bar code that the

input of system; it has many benefits to Wal-Mart, they are:

– Ensure accurate pricing

– Improve efficiency

– Reduce Shrinkage

– Improve communications

Management information system (MIS)-

MIS is the system provides the actual performance report of Walmart that use in

middle management, which created based on the data from TPS.

Uniqueness Fewer Links-

Wal-Mart’s supply chain innovation began with the company removing a few of

the chain’s links. In the 1980s Wal-Mart began working directly with manufacturers to

cut costs and more efficiently manage the supply chain. From 1993 to 2001, Wal-Mart

grew from doing $1 billion in business a week to $1 billion every 36 hours

(Johnbagamery 2012), growth that was attributed as much to supply chain management

as to customer service.

VMI-

Under a Wal-Mart’s supply chain initiative called VMI - vendor managed inventory

manufacturers became responsible for managing their products in Wal-Mart’s

warehouses. As a result, Wal-Mart could expect close to 100 percent order fulfillment on

merchandise.

Collaboration-

Wal-Mart implemented the first companywide use of Universal Product Code bar

codes, in which store level information was immediately collected and analyzed, and the

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company devised Retail Link, a mammoth Bentonville database. Through a global

satellite system, Retail Link is connected to analysts who forecast supplier demands to

the supplier network, which displays real-time sales data from cash registers and to

Wal-Mart’s distribution centers (Uni of San Francisco Online 2011). In recent years Wal-

Mart has used radio frequency identification tags (RFID), which use numerical codes

that can be scanned from a distance to track pallets of merchandise moving along the

supply chain. Even more recently the company has begun using smart tags, read by a

handheld scanner, that allow employees to quickly learn which items need to be

replaced so that shelves are consistently stocked and inventory is closely watched.

Competition

In North America, Wal-Mart's primary competition includes department stores like

Kmart, Target, ShopKo and Meijer, Competitors of Wal-Mart's Sam's Club division are

Costco, and the smaller BJ's Wholesale Club chain operating mainly in the eastern US.

Wal-Mart's move into the grocery business in the late 1990s also set it against

major supermarket chains in both the United States and Canada. Some retail analysts

see regional grocery store chain WinCo Foods as serious competition for Walmart.

Several smaller retailers, primarily dollar stores, such as Family Dollar and Dollar

General, have been able to find a small niche market and compete successfully against

Wal-Mart for home consumer sales.In 2004, Wal-Mart responded by testing its own

dollar store concept, a subsection of some stores called "Pennies-n-Cents."

Current/Future Challenges

Online sales-

Walmart facing a new challenge is how to goose Wal-Mart’s online sales, which

account for about $5.15 billion, or 2 percent, of total annual sales, according to Kantar

Retail, a London-based consulting firm. More and more Wal-Mart customers are

shopping at Amazon (Carson 2010). The future of shopping is e-commerce market, as

the e-commerce market is getting crowded to enter. How to get market share from e-

commerce giants such as Amazon and Ebay is their biggest challenge.

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Going aboard-

Wal-Mart will continue to grow overseas. Sales outside the U.S. are about 25% of

the company's $408 billion in sales. But It was difficult for Walmart to expand their

territory. Wal-Mart pulled out of Germany in 2006 with a $1 billion loss. Germany has the

world's fifth-largest GDP. The same year, the world's largest retailer sold its South

Korean stores and left that market. Wal-Mart has also struggled in Japan for years(

Mclntyre 2010). In sum, the company's efforts to break into several of the world's largest

retail markets have been a failure. Still, the success in Canada, Mexico and Britain

shows there are significant business opportunities outside the U.S.How to expand

overseas is the ultimate challenge that Walmart have to face.

Recommendations for Potential Improvement

Based on the challenges Walmart will face or current facing, We suggest

Walmart to keep their low prices strategy to attract more lower class customers. At the

same time, continue to Conquering foreign markets, especially Asian-Pacific ones with

careful consideration of the strategies and approaches, because they’ve failed once.

Walmart also needs to keep improving their logistics since they are constantly delivering

from distribution center to local stores. That is a big part of their supply chain and they

could minimize cost by analyzing their strategy and look for different ways to transport

product.

Summary

Supply chain management is a complex process involving the intricacies of top of

the end management practices. Every successful company has its own ways to improve

their Supply chain process, Wal-Mart is no different. It has been working hard on

improving their supply chain process and done some remarkable works, and that is why

Walmart being the world 2nd largest retailer in term of sales.

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Walmart is doing well domestically. But they still need to make more efforts to

approach towards enhancing their associates and building relationship, so that it helps

the company to further expand globally. Improvement of their supply chain process

always calls necessarily. Continuous improvements and learning, emphasizing on

different strategy will not only make them successful domestically but also globally.

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