Wal-Mart's Supply Chain: A Business Success

Wal-Mart’s Supply Chain
A Business Success
1
Wal-Mart is the World’s Largest Retail
Company
2
Introduction
• American retailer which runs chains of large, discount
department stores.
• Founder - Sam Walton in 1962.
• Headquarters -Bentonville, Arkansas
• It has operations in argentine, brazil, Puerto Rico,
Mexico, U.K, Japan.
• 14 countries, 2980 stores outside U.S.
 On may 30th 2009 it ope

• Business model-selling wide variety of merchandise
at “low prices”.
• Year 2009 wal-mart reported net income of 13.6 $
billion providing employment to approximately
21,00,000 people.
• On may 30th 2009 it opened its doors in Amritsar by
the name of best price modern wholesale.
Wal-Mart Store Plan
Supply Chain
• All facilities, functions, activities, associated with flow
and transformation of goods and services from raw
materials to customer, as well as the associated
information flows
• An integrated group of processes to “source,” “make,”

and “deliver” products
Supply Chain Processes
Supply Chain Illustration
1\
Supply
Chain
for
Denim
Jeans
Copyright 2006 John Wiley & Sons, Inc. 10-9

Supply
Chain
for
Denim
Jeans
(cont.)
10-
Copyright 2006 John Wiley & Sons, Inc. 10
Supply Chain for Service
Providers
 More difficult than manufacturing

 Does not focus on the flow of physical goods
 Focuses on human resources and support services
 More compact and less extended
Value vs. Supply Chain
 Value chain
› every step from raw materials to the eventual end user
› ultimate goal is delivery of maximum value to the end user
 Supply chain
› activities that get raw materials and subassemblies into
manufacturing operation
 Terms are used interchangeably
Wal-mart Strategy
WAL-MART STRATEGY & OPERATIONS STRUCTURE

Enable everyday low prices and above average profitability by procuring, distributing, and selling
products, when and where needed, at lower costs than any competitor.
Operations Structure
Operations Strategy  Cross Docking
 Short Response Times
 Low Inventory Level
 Retail Link
 RFID
 Fast Transportation System
Process Flow Measures: Wal-Mart
 Process Flow Measures
› Flow Time (T) – total time spent by a flow unit within
process boundaries
› Flow Rate – number of flow units that flow through a specific

point in the process, per unit of time
› Inventory (I)– total number of flow units present within

process boundaries
 Throughput (R) – average flow rate or average number of flow

units that flow through the process, per unit of time
 Little’s Law: Average Inventory (I) = Throughput (R) x Average
Flow Time (T) or I=RxT
 Inventory Turns or Turnover Ratio – number of times
inventory is sold and replaced during a specific period, R/I
Flow-Time Analysis: Wal-Mart
 Wal-Mart’s merchandise replenishment cycle is no more
than 48 hrs.
Point-of-sale Data is Orders are Merchandise is
Customer Merchandise The store will re-
system transmitted to generated from loaded onto
made a is delivered to stock the shelves
captures data warehouses previous-day trucks using
purchase the store with merchandise
in real-time for Inv. Mgmt. sales cross-docking
Retail Link Merchandise is

Merchandise
transmits manufactured
is shipped to
data to based on historical
warehouses
supplier and real-time data
 Retail Link – real-time point-of-sales (POS) data

transmission
 Cross Docking
 Fleet of 7,000 trucks in US
Flow-Time Analysis: Wal-Mart
Walmart’s Centralized Hub-and-
Spoke System of Warehouses and
Distribution Centers
250 mile
radius
Flow-Time Analysis: Cross Docking
Cross docking: take a finished
good from the
manufacturing plant and
deliver it directly to the retail
store with little or no
handling in between.
Flow-Time Analysis: Advantages
of Cross Docking
 Reduces operating costs.
 Increases throughput.
 Reduces inventory levels.
 Helps in increase of sales space.
 Eliminates unnecessary handling and storage of product.
 Reduces product damages and product obsolescence.

Collaborative Planning, Forecasting, and
Replenishment (CPFR)
 By implementing a collaborative planning, forecasting, and
replenishment system (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 dataon-hand inventory
› scheduled promotions
› forecasts
Bar code
10-
RFID
Radio Frequency Identification

 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
RFID Capabilities
RFID Capabilities
10-
Inventory Management: Why 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.
Warehouse Management Systems
• Controls item picking, packing, and shipping
Features
transportation management
order management
yard management
labor management
warehouse optimization
A WMS
10-
Suppliers
 Procurement
› purchase of goods and services from suppliers
 On-demand (direct response) delivery
› requires supplier to deliver goods when demanded by
customer
 Continuous replenishment
› supplying orders in a short period of time according
to a predetermined schedule
 Cross-enterprise teams coordinate processes
between company and supplier
Distribution
• Encompasses all channels, processes, and functions, including

warehousing and transportation, that a product passes on its way to
final customer
• Often called logistics
Logistics
transportation and distribution of goods and services
Driving force today is speed
Particularly important for Internet dot-coms
Transportation
 Rail
› low-value, high-density, bulk
products, raw materials,
intermodal containers
› not as economical for small
loads, slower, less flexible
than trucking
 Trucking
› main mode of freight
transport in U.S.
› small loads, point-to-point
service, flexible
› More reliable, less damage
than rails; more expensive
than rails for long distance
Transportation
 Air
› most expensive and fastest, mode of
freight transport
› lightweight, small packages <500 lbs
› high-value, perishable and critical goods
› less theft
 Package Delivery
› small packages
› fast and reliable
› increased with e-Business
› primary shipping mode for Internet
companies
Transportation
 Water
› low-cost shipping mode
› primary means of international shipping
› U.S. waterways
› slowest shipping mode
 Intermodal
› combines several modes of shipping-truck,
water and rail
› key component is containers
Supply Chain Uncertainty
 One goal in SCM:  Factors that contribute to

› respond to uncertainty in uncertainty
customer demand without › inaccurate demand forecasting
creating costly excess › long variable lead times
inventory › late deliveries
 Negative effects of › incomplete shipments
uncertainty › product changes batch
› lateness ordering
› incomplete orders › price fluctuations and
discounts
 Inventory
› inflated orders
› insurance against supply
chain uncertainty
Summary
 Supply Chain Management  Sharing of ideas and data is key
 Benchmark company to the just-in-time practices that
 Used cutting edge technology to are in place within Wal-Mart
build IT infrastructure that  Data sharing from a retailers on
includes all aspects of the chain a global basis allows suppliers to
 First to use Radio Frequency reduce their inventory costs,
Identification (RFID) resulting in a lowering of overall
costs
 Implemented a collaborative
planning, forecasting, and
 Efficiency in supply chain is key
replenishment (CPFR) program, for low-price leadership,
beginning a Just-In-Time resulting in far lower margins for
Inventory Program suppliers and retailers
 Wal-Mart’s system can work
well for all businesses and has
been studied in-depth

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How does Walmart manage its supply chain?

How does Walmart manage its supply chain?

What technologies does Walmart use in its supply chain?

What technologies does Walmart use in its supply chain?

Wal-Mart’s Supply Chain

 On may 30th 2009 it ope

• An integrated group of processes to “source,” “make,”

Copyright 2006 John Wiley & Sons, Inc. 10-9

 More difficult than manufacturing

WAL-MART STRATEGY & OPERATIONS STRUCTURE

› Flow Rate – number of flow units that flow through a specific

› Inventory (I)– total number of flow units present within

 Throughput (R) – average flow rate or average number of flow

Retail Link Merchandise is

 Retail Link – real-time point-of-sales (POS) data

 Reduces inventory levels.

 Helps in increase of sales space.

 Eliminates unnecessary handling and storage of product.

 Reduces product damages and product obsolescence.

Radio Frequency Identification

 Reduce the possibility of inventory shrinkage and out-of-stock

 Improve fulfillment rates.

 Improve the customer service.

 Reduce inventory and labor cost.

 Eliminate many manual process and improve the operation

• Controls item picking, packing, and shipping

• Encompasses all channels, processes, and functions, including

 One goal in SCM:  Factors that contribute to

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