Wal-Mart -Supply Chain Mgmt

7/30/2019 Wal-Mart -Supply Chain Mgmt

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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

1992 revenues totaled $43.9 billion:

- Increased 35% from previous year, whereas competitors growth rates averaged only 10%

Net income increased 25% to $1.6 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:

- Joint venture with CIFRA, Mexicos largest retailer

18% market share of $250 billion discount department store industry:- KMart, the next largest competitor, has 13.8%

- Analysts estimate that by the year 1995, Wal-Mart will drive all competitors, aside from KMart and Target, outof business

WAL-MART: BACKGROUND

Source: Annual report.

Wal-Mart grows th rough volum e and m arket share gains rather than

margin expansion s.


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Stronger Competitors and More Powerful Suppliers Are ChallengingWal-Mart in Quickly and Effectively Responding to Customers

WAL-MART: BACKGROUND

Customer Demands:

The right product

In stock

The best value

Service and quality

Improved operations

Foreign competition

Industry consolidation

Intense price competition

Compet i tors:

TargetKMart

Improved operations

Powerful brandmanagement

Industry consolidation

Suppl iers:

Wal-Mart


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Customer Demands

Crit ical Succ ess Factors

(CSF)

Satisfying Customer Demands Depends on Five CriticalSuccess Factors

Quick responsivenessto market changes

Low inventory

Quick replenishment ofinventory

Effective human

resource system Efficient distribution

system

The right products

In stock

Best value

Service and quality

WAL-MART: BUSINESS PROCESS



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 ofsales/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 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



Low Inventory

Quick Replenishment

Effective HR System




All employees are consideredassociates

Extensive training and support

Stock-ownership program

Profit-sharing

Employees are your biggest capital investment, so it makes sense to

mainta in themtheir skills, their morale, and their participation.

CSF




Low Inventory

Quick Replenishment

Effective HR System




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




Low Inventory

Quick Replenishment

Effective HR System



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The Traditional Supply Chain Includes Inefficient andUnnecessary Steps

SelectTag/Label

Ship

Pack

Ship

Select PackReceive

Ship

Manufacturer

(Supplier)

Retailer

Shipper

Wholesaler

Receive PackSelect Storage

Storage

Sell

Order

Individual StoreDistr ibut ion Warehouse

OrderOrder

Order

Make



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Wal-Mart Simplified Its Supply Chain

Ship Receive

Select

Ship

Manufacturer

(Supplier)

Retailer

Shipper

Wholesaler

Receive PackSelect Storage Sell

Individu al StoreDistr ibutio n Center

Tag/Label

PackMake


Cross-dockin g in dist r ibut ion centers results in product f low from

inbound to outbound sh ipp ing dock s wi th in 48 hours.

Deliverwithin72 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 needof each particular store

- State-of-the-art satellite communication network which supports data, voice, and video



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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

Vendo r-managed QR

Supplier Store

Wal-Mart-managed QR

Order

Wal-Mart

Supplier Store

Warehous e Jus t-in-Time System

DistributionCenter

DistributionCenter


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 ofonce every two weeks

Wal-Mart has lowest cost of operations in theretail area, aside from wholesale clubs

Sell ing and Operating Exp enses of Sales

KMartWal-Mart

15%

28%

IT systems have improved Wal-Martsin-stock position and increased vendorresponsiveness

Inventory in System(Days)

At Vendor

At Warehouse

In-Store

30

30

14

323

After NewSystem

Before NewSystem


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Lessons Learned: The Road to Success Is Paved byTechnology and Better Use of People

Economiesof Sales:

Best Deals

Strong

Supplier

Relat ionships

Effect iveIT Systems

Effective

Distr ibut ion

Systems

Empowered

Employees

ReducedCost of Sale

In-DepthKnowledge

of Customer/Market

StableLower

Prices

PredictableSale

Patterns

DecreasedChance of

Out-of-Stock

IncreasedSalesand

Profits

WAL-MART: IMPLICATIONS


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Wal-Mart -Supply Chain Mgmt

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