3 Supply Chain of Walmart

8/8/2019 3 Supply Chain of Walmart

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Supply Chain of WalSupply Chain of Wal--martmart

Members:Members:Chan Man ChingChan Man Ching

Chan Mong TikChan Mong Tik

Chui Wai KaChui Wai Ka

Lam Fei FeiLam Fei Fei

Man Ka YuMan Ka Yu


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AgendaAgenda

Background Information of WalBackground Information of Wal--martmart

Supply chain of WalSupply chain of Wal--martmart Flow chat of the supply chainFlow chat of the supply chain

Technology used in various stage of SCTechnology used in various stage of SC

Impact of WalImpact of Wal--martmart

Wal-martBackground

Wal-martSupply Chain

Impact ofWal-mart


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Background of WalBackground of Wal--martmart~Well known retailer with heavy investment in IT~Well known retailer with heavy investment in IT

Types of industry: one stop shopping centerTypes of industry: one stop shopping center

Founder: Sam WaltonFounder: Sam WaltonYear of establishment: 1962Year of establishment: 1962

First store: in ArkansasFirst store: in Arkansas

Sam WaltonSam Walton


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No. of stores: 5311 units globallyNo. of stores: 5311 units globally

Wal-Mart has expanded its business to 10 countries: U.S., Mexico, Brazil,Argentina,Germany,Puerto Rico,U.K. , South Korea, Canada and China.


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Rapid growth of WalRapid growth of Wal--martmart

Revenues: $315,654,000, 000 in 2005Revenues: $315,654,000, 000 in 2005

Stock value from Aug 1972 to May 2006:Stock value from Aug 1972 to May 2006:

Sourced from finance.yahoo.comSourced from finance.yahoo.com


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How well is WalHow well is Wal--mart doing?mart doing?

WalWal--martmart SearsSearsHoldingsHoldings

Target CorpTarget Corp CostcoCostco

No. ofNo. of

EmployeesEmployees

1,800,0001,800,000 1,330,0011,330,001 338,000338,000 60,50060,500

Revenue 05'Revenue 05' 312.65B312.65B 49.12B49.12B 52.62B52.62B 55.68B55.68B

OperatingOperatingMarginMargin

5.93%5.93% 3.83%3.83% 8.22%8.22% 2.79%2.79%

ProfitProfitMarginMargin

3.60%3.60% 1.75%1.75% 4.58%4.58% 1.93%1.93%

InventoryInventoryTurnoverTurnover

7.477.47 3.923.92 5.985.98 11.5411.54


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Why can WalWhy can Wal--mart be so successful?mart be so successful?

Supply chain plays an important roleSupply chain plays an important role

Supply chain:Supply chain:a method of collaborating horizontallya method of collaborating horizontally among suppliers, retailers, andamong suppliers, retailers, andcustomers to create valuecustomers to create value


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WalWal--mart Supply Chain Flow Chatmart Supply Chain Flow Chat

Manufacturer

Manufacturer

Manufacturer

Retail Store

Retail Store

Retail Store

Point of sale terminal

Satellite system

Bar code, RFID

Radio, headphone

Distribution center

Company Headquarter


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Distribution CenterDistribution Center

108 centers in USA108 centers in USA

Place that various goods are gathered,Place that various goods are gathered,

sorted and delivered to different storesorted and delivered to different storeAbout 80% of merchandises shippedAbout 80% of merchandises shipped

from centersfrom centers

24 hours operation24 hours operation


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Manufacturer 1

Manufacturer 2

Manufacturer 3

Retail store 1

Retail store 2

Retail store 3Manufacturer 3


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Trucks outside WalTrucks outside Wal--martmart

PastPast--------written instructionswritten instructions

NowNow--------radio and headphoneradio and headphone

English ?Spanish?English ?Spanish?


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Minilift TrucksMinilift Trucks

Inside distribution centersInside distribution centers

equipped with headphoneequipped with headphone

Computer give direction to driver in voiceComputer give direction to driver in voice

What merchandises to transportWhat merchandises to transport

Where the merchandises should be carried toWhere the merchandises should be carried to

Which truck the merchandises be loadedWhich truck the merchandises be loaded

Report progress, ahead or behind scheduleReport progress, ahead or behind schedule

Benefit:Benefit: productivity and efficiencyproductivity and efficiency


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Bar Code SystemBar Code System

Standardized bar code systemStandardized bar code system

applied by every supplierapplied by every supplier

Helps facilitating large scale operationHelps facilitating large scale operation Pallets passed through conveyor beltPallets passed through conveyor belt

are scanned automaticallyare scanned automatically

Product codes are transferred toProduct codes are transferred tocentralized computer systemcentralized computer system


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Bar Code SystemBar Code System

Matching with the computer databaseMatching with the computer databaseand generate useful informationand generate useful information What it is.What quantity it is. Which packingWhat it is.What quantity it is. Which packing

compartment and truck to go. Which store tocompartment and truck to go. Which store togogo

Processes take place simultaneouslyProcesses take place simultaneously

Save time and labour sortingSave time and labour sortingmerchandisesmerchandises

Smooth logistic processesSmooth logistic processes


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RFIDRFID

Radio Frequency Identification SystemRadio Frequency Identification System

Use radio waves to identify objectsUse radio waves to identify objects

Tags with microchip and antenna builtTags with microchip and antenna builtinin Store data (type, quantity, manufacturer,Store data (type, quantity, manufacturer,

expired date)expired date)

Generate HF signal to transfer dataGenerate HF signal to transfer dataAllow WalAllow Wal--mart to keep track of palletsmart to keep track of pallets

at various stage of supply chainat various stage of supply chain


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RFIDRFID

Sensors in the distribution centerSensors in the distribution centerdetect and receive information fromdetect and receive information fromchipschips

Locate where the pallet is and theLocate where the pallet is and thecondition of itcondition of it temperaturetemperature

HumidityHumidityAutomatic senserAutomatic senser avoid scanningavoid scanning

codes one by onecodes one by one


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RFID Gen1 and Gen2RFID Gen1 and Gen2

Generation 1Generation 1 Generation 2Generation 2

HF signalHF signal UHF signalsUHF signals

Difficult to penetrate through liquidDifficult to penetrate through liquidand metalsand metals

Improve reception (Work withImprove reception (Work withvarious materials)various materials)

Costly (up to $200 per chip inCostly (up to $200 per chip in

early stage)early stage)

Cost drops to US$0.15 withinCost drops to US$0.15 within

near futurenear future

Basic functionBasic functionAdditional functions ( Better security,Additional functions ( Better security,

programmable)programmable)


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RFIDRFID

Further improve logistics efficiencyFurther improve logistics efficiency

Save time identifying merchandisesSave time identifying merchandises

Convenience in checking inventoryConvenience in checking inventory Information preInformation pre--stored in the chips =stored in the chips =

convenience of data processingconvenience of data processing


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PointPoint--ofof--sale terminalssale terminals

Invested in 1983Invested in 1983

Simultaneously rang up sales and trackedSimultaneously rang up sales and trackedinventory deductions for rapid reinventory deductions for rapid re--supply.supply.

Electronic scanning of Uniform ProductElectronic scanning of Uniform ProductCodes (UPC)Codes (UPC)

-- to priceto price--mark merchandisemark merchandise

-- to ensure accurate pricingto ensure accurate pricing SelfSelf--labeling systemlabeling system

The merchandise replenishment processThe merchandise replenishment process


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LargeLarge--scale satellite systemscale satellite system

Installed in 1987Installed in 1987

to improve communication between storesto improve communication between stores

Link all of the stores to headquarter, givingLink all of the stores to headquarter, giving

WalWal--Marts central computer system realMarts central computer system real--timetimeinventory data.inventory data.

Allow sales data to be collected and analyzedAllow sales data to be collected and analyzeddaily, and enable managers to adjustdaily, and enable managers to adjust

immediately.immediately. Daily information of individual store can beDaily information of individual store can be

compared.compared.


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CPFR ProgramCPFR Program

AACCollaborativeollaborative PPlanning,lanning, FForecasting,orecasting,andand RReplenishment program.eplenishment program.

JustJust--inin--time inventory program began.time inventory program began.

Advantage:Advantage:

To reduce carrying costs.To reduce carrying costs.

Less excess inventory.Less excess inventory.

Cost of goods is estimated to be 5 to 10Cost of goods is estimated to be 5 to 10percent less.percent less.


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TailoredTailored--made store managementmade store management

WalWal--Mart merchandise is tailored toMart merchandise is tailored toindividual markets and individual stores.individual markets and individual stores.

Store managers choose which products toStore managers choose which products to

display and allocate shelf space.display and allocate shelf space. A store devote only 10% of its squareA store devote only 10% of its square

footage to inventory.footage to inventory.

WalWal--Marts culture stress the key role ofMarts culture stress the key role of

associates.associates. Information and ideas are shared atInformation and ideas are shared at

individual stores.individual stores.


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Suppliers = PartnersSuppliers = Partners

As WalAs Wal--Mart grew, its relationships withMart grew, its relationships withsome suppliers evolved intosome suppliers evolved intopartnershipspartnerships

Sharing information electronically toSharing information electronically toimprove performance.improve performance.

How do they share information?How do they share information?


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Electronic data interchange (EDI)Electronic data interchange (EDI)

Enabled an estimated 3600 suppliersEnabled an estimated 3600 suppliers(about 90% of Wal(about 90% of Wal--Marts dollar volume)Marts dollar volume)to receive orders and interact with Walto receive orders and interact with Wal--Mart electronically.Mart electronically.

Later expanded to include forecasting,Later expanded to include forecasting,planning, replenishing, and shippingplanning, replenishing, and shipping

applications.applications.


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VendorVendor--managed inventory systemsmanaged inventory systems

to replenish stocksto replenish stocks

WalWal--Mart transmitted sales data, orders ofMart transmitted sales data, orders ofproducts, delivery plan and reports ofproducts, delivery plan and reports of

warehouse inventory status to them dailywarehouse inventory status to them daily

to plan inventory levels, generate purchaseto plan inventory levels, generate purchaseorders, and ship exactly what was neededorders, and ship exactly what was needed

both benefited from reduced inventory costsboth benefited from reduced inventory costsand increased salesand increased sales


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Business planning packetsBusiness planning packets

Each WalEach Wal--Mart department developedMart department developedcomputerized, annual strategic businesscomputerized, annual strategic businessplanning packets for its suppliersplanning packets for its suppliers

including:including: departments sales, profitability, and inventory targets,departments sales, profitability, and inventory targets,

macroeconomic and market trends, and Walmacroeconomic and market trends, and Wal--MartsMartsoverall business focusoverall business focus

WalWal--Marts expectations on themMarts expectations on them

Suppliers recommendationsSuppliers recommendations


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How WalHow Wal--mart affects suppliersmart affects suppliers

Domestic Suppliers:Domestic Suppliers:

WalWal--mart imported 18 billion worth ofmart imported 18 billion worth ofgoods from 5,000 Chinese suppliers ingoods from 5,000 Chinese suppliers in20042004

Ranked as Chinas 8 biggest tradingRanked as Chinas 8 biggest tradingpartner ahead ofRussia, Australia andpartner ahead ofRussia, Australia and

CanadaCanadaUsed power to squeeze domesticUsed power to squeeze domestic

suppliers profitsuppliers profit


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WalWal--mart Defense :mart Defense :

If all of supplier were squeezed dryIf all of supplier were squeezed dry

WalWal--mart no suppliersmart no suppliers Suppliers found ways to surviveSuppliers found ways to survive

do better at what they did beforedo better at what they did before


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WalWal--mart not only selling foreignmart not only selling foreignimported goods, also encourage theimported goods, also encourage theuse of domestic American productsuse of domestic American products

Buy American Program Buy American Program

Retained over 1.7 billion in retailRetained over 1.7 billion in retailpurchases that produced offshore.purchases that produced offshore.


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How WalHow Wal--mart affects dometic workersmart affects dometic workers

Domestic workers :Domestic workers : Face keen competition from overseasFace keen competition from overseas

markets,markets,

offshore manufacturingoffshore manufacturing Close down of factoriesClose down of factories Loss of jobsLoss of jobs

Competition with WalCompetition with Wal--martmart Competitors cut labors health care benefitsCompetitors cut labors health care benefits

and wagesand wages


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WalWal--mart Defense:mart Defense:

Insist not responsible for the offInsist not responsible for the off--shoring ofshoring ofmanufacturingmanufacturing

Example :Example :

Sanyo ( TV sets producers ) planned to closeSanyo ( TV sets producers ) planned to closethe plant and move Mexico and Asia.the plant and move Mexico and Asia.

WalWal--mart buys the TV sets from Sanyo if theymart buys the TV sets from Sanyo if theydont movedont move

Eventually stay in USEventually stay in US


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Destructive CreationDestructive Creation

Shrinking of manufacturing and laborShrinking of manufacturing and laborintensive sectorsintensive sectors

Technical changes substitute unskilled laborTechnical changes substitute unskilled labor

Create new jobs and expansion in servicesCreate new jobs and expansion in servicesand technology sectorand technology sector

Estimation : 225,000 job loss by outsourcingEstimation : 225,000 job loss by outsourcingin the next 15 years < 1.5% of the jobin the next 15 years < 1.5% of the jobavailable in 2002available in 2002


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Unemployment is a structuralUnemployment is a structuralproblem ,rather than a cyclical problemproblem ,rather than a cyclical problem

Mismatch of job skills with the marketMismatch of job skills with the marketdemanddemand

Unskilled labors cannot match withUnskilled labors cannot match withincreasing skilled labor demandincreasing skilled labor demand

Not loss of job , but cannot find a jobNot loss of job , but cannot find a jobmatches with their skillsmatches with their skills


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How WalHow Wal--mart affects economymart affects economy

Reallocation of capital and technologyReallocation of capital and technologyto the foreign marketsto the foreign markets

Less to employ domestic workers andLess to employ domestic workers andinvest in local economyinvest in local economy

Decline in labor productivity and realDecline in labor productivity and realincomes of the countryincomes of the country


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How WalHow Wal--mart affects economymart affects economy

may not necessarily imply a decrease in realmay not necessarily imply a decrease in realincome and productivityincome and productivity

For example,For example, Globalization and lower technology cost,Globalization and lower technology cost,

Lead to higherAmerican productivity growthLead to higherAmerican productivity growth

added $230 billion extra GDP between 1995added $230 billion extra GDP between 1995

and 2002and 2002 Equivalent to extra 0.3% points of growth aEquivalent to extra 0.3% points of growth a

yearyear


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WalWal--martmart

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3 Supply Chain of Walmart

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