Walmart Supply Chain Management who is the biggest retail chain in the world

1. Supply Chain
Management

2. "People think we got big by putting big stores in
small towns. Really, we got big by replacing
inventory with information."
Sam Walton, Founder of Wal-Mart

3. History of Wal-MartHistory of Wal-Mart
• The company’s founder is Sam Walton.
• He was born in 1918 at Oklahoma.
• In 1940, he worked for the famous retailer, J C Penney.
• Walton gave up the job and decided to set up his own retail
store.
• He purchased a store franchise in Arkansas.
• Offering significant discounts on prices, he became
successful and acquired a second store in 3 years
• By 1969, Walton had established 18 Wal-Mart stores.

4. • By late 1970s, the retail chain had established a pharmacy
and an auto service center.
• In 1980s, Wal-Mart continued to grow due to huge
customer demands in small towns.
• Wal-Mart was offering low prices, customer satisfaction
guaranteed, and hours that were realistic for the way people
wanted to shop.
– Open all night, for university students
• By 1984, there were 640 Wal-Mart stores in U.S.
• Wal-Mart suffered a setback in 1992, when Walton died

5. • But it continued its growth in the 1990s, focusing on
overseas stores.
– 1992, Mexico (joint venture with Cifra)
– 1994, Canada (acquired 122 Woolco stores from Woolworth)
– 1997, Germany (acquired 21 store of Wertkauf)
– Korea, Brazil, and so on.

6. VIDEO
http://www.youtube.com/watch?v=ojLQ2t6N1EU

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

9. Ranked First in the Global Fortune 500 list in
2013 financial year
Company Revenues ($b) Profits ($mm)
Wal-Mart Stores 469.2 16,999
Exxon Mobil 449.9 44,880
Chevron 233.9 26,179
Phillips 66 169.6 4,124
Berkshire Hathaway 162.5 14,824
Apple 156.5 41,733
General Motors 152.3 6,188
Source:www.fortune.com

10. Wal-mart Competitors
Wal-martWal-mart SearsSears
HoldingsHoldings
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
OperatingOperating
MarginMargin
5.93%5.93% 3.83%3.83% 8.22%8.22% 2.79%2.79%
Profit MarginProfit Margin 3.60%3.60% 1.75%1.75% 4.58%4.58% 1.93%1.93%
InventoryInventory
TurnoverTurnover
7.477.47 3.923.92 5.985.98 11.5411.54

11. Supply Chain: The sequence of organizations -
their facilities, functions, and activities - that
are involved in producing and delivering a
product or service.
Sometimes referred to asSometimes referred to as value chains

12. Video
WALMART SUPPLY CHAIN

13. Wal-mart 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

14. • Lower inventories
• Higher productivity
• Shorter lead times
• Higher profits
• Greater customer loyalty
Wal-Mart gets benefited through Supply Chain

15. Wal-Mart Strategy
• “Everyday low price”
• Effective use of logistics management
• Effective inventory control
• Bargaining power over suppliers
• Global Expansion for new market opportunity

16. Supply Chain Management of Wal-Mart
• Procurement and Distribution
• Logistics management
• Inventory management

17. Wal-Mart’s Procurement
• Wal-Mart emphasized the need to reduce purchasing costs
and offer the best price to the customer.
• The company directly procured from manufacturers, by
avoiding all intermediaries.
• Wal-Mart finalizes a purchase deal only when it is fully
confident that the products being bought is not available
else where at a lower price.

18. Electronic Data Interchange
• Increased productivity
• Reduction of paperwork
• Lead time and inventory reduction
• Facilitation of just-in-time systems
• Electronic transfer of funds
• Improved control of operations
• Reduction in clerical labor
• Increased accuracy

19. Distribution Management of Wal-Mart
• Bull whip effect
• Vendor managed inventory

20. Bull Whip Effect
 The bullwhip effect (or whiplash effect) is an observed
phenomenon in forecast-driven distribution channels.
- Customer demand is rarely perfectly stable.
- Businesses must forecast demand in order to properly
position inventory and other resources.
 The concept first appeared in Jay Forrester's Industrial
Dynamics (1961) and thus it is also known as the Forrester
effect

21. Forecasts are based on statistics, and they are rarely
perfectly accurate.
Companies often carry an inventory buffer called "safety
stock".
Moving up the supply chain from end-consumer to raw
materials supplier, each supply chain participant has greater
observed variation in demand and thus greater need for
safety stock
In periods of rising demand, down-stream participants will
increase their orders.
In periods of falling demand, orders will fall or stop in
order to reduce inventory.

22. Bull Whip Effect

23. Vendor Managed Inventory
• The vendor (supplier) manages the stock levels and
availability for the customer based on safety stock levels
the as per the agreed Terms & Conditions.
• Vendor Managed Inventory (VMI) is a planning and
management system in which the vendor is responsible
for maintaining the customer’s inventory levels.
• Manufacturers generate orders, not distributors or
retailers Stocking information is accessed using EDI
• A first step towards supply chain collaboration
• Increased speed, reduced errors, and improved service

24. Logistics Management
• An important feature of Wal-Mart’s logistics infrastructure
was its fast and responsive transportation system.
• The distribution centers were serviced by more than 7000
company owned trucks.
• Wal-Mart believed that it needed drivers who were
committed and dedicated to customer service.
• The company hired only experienced drivers who had
driven more than 300,000 accident-free miles, with no
major traffic violation.

25. Logistics Management of Wal-Mart
• Cross Docking
• Hub and Spoke

26. Flow-Time Analysis
Point-of-sale
system
captures data
in real-time
Data is
transmitted to
warehouses
for Inv. Mgmt.
Retail Link
transmits
data to
supplier
Orders are
generated from
previous-day
sales
Merchandise is
loaded onto
trucks using
cross-docking
Merchandise
is delivered to
the store
Merchandise is
manufactured
based on historical
and real-time data
Merchandise
is shipped to
warehouses
Customer
made a
purchase
The store will re-
stock the shelves
with merchandise

27. Cross docking
• Cross-docking means to take a finished good from
the Manufacturing plant and deliver it directly to the
customer with little or no handling in the process.
• In purest form this is done directly, with minimal or
no warehousing.

29. Hub and Spoke
In the early 1970s, Wal-Mart became 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).

30. The hub and spoke system enabled Wal-Mart to achieve
significant cost advantages by the centralized purchasing
of goods in huge quantities..
And distributing them through its own logistics infrastructure
to the retail stores spread across the U.S.

31. Hub and Spoke

32. Wal -Marts Communication
Network
• Cross Docking relies on continuous communication
between Wal Mart’s suppliers, distribution centers,
and every point of sale system in each store.
• This enables orders to flow in, get packaged and then
shipped.
• Wal Mart operates their own satellite network.
• Wal Mart’s satellite network sends the Point Of Sale
(POS) data directly to 4000 vendors

33. Inventory Management
Wal-Mart invested heavily in IT and communication
systems to effectively track sales and merchandise
inventories in stores across the country.
With the rapid expansion, it was essential to have a good
communication system.
Hence, Wal-Mart set up its own satellite communication
system in 1983.

34. Inventory Management(cont……)
Wal-Mart was able to reduce unproductive inventory by
allowing stores to manage their own stocks, reducing pack
sizes across many product categories, and timely price
markdowns.
Instead of cutting the inventory across the board, Wal-
Mart made full use of its IT capabilities to make more
inventories available in the case of items that customers
wanted most, while reducing the overall inventory levels.

35. Inventory Management(cont……)
Employees at the stores had the “Magic Wand,” a hand-
held computer which was linked to in-store terminals
through a radio frequency network.
These helped them to keep track of the inventory in stores,
deliveries, and backup merchandise in stock at the
distribution centers.

36. CPFR
• By the mid 1990s, Retail Link had emerged into an
Internet-enabled SCM system whose functions were
not confined to inventory management alone, but also
covered collaborative planning, forecasting and
replenishment (CPFR).
• CPFR is defined as a business practice for business
partners to share forecasts and results data through
the Internet, in order to reduce inventory costs while
at the same time, enhancing product availability
across the supply chain

37. Though CPFR was a promising supply chain initiative
aimed at a mutually beneficial collaboration between
Wal-Mart and its suppliers, its actual implementation
required huge investments in time and money.
A few suppliers with whom Wal-Mart tried to
implement CPFR complained that a significant amount of
time had to be spent on developing forecasts and
analyzing sales data.

38. Radio Frequency Identification
• In efforts to implement new technologies to reduce
costs and increase the efficiency, in July 2003, Wal-
Mart asked its top 100 suppliers to be RFID
compliant by January, 2005.
• Wal-Mart planned to replace bar-code technology
with RFID technology.
• The company believed that this replacement would
reduce its supply chain management costs and
enhance efficiency.

39. • Because of the implementation of RFID, employees
were no longer required to physically scan the bar
codes of goods entering the stores and distribution
centers, saving labor cost and time.
• Wal-Mart expected that RFID would reduce the
instances of stock-outs at the stores.
• Although Wal-Mart was optimistic about the benefits
of RFID, analysts felt that it would impose a heavy
burden on its suppliers.
• To make themselves RFID compliant, the suppliers
needed to incur an estimated $20 Million.
• Of this, an estimated %50 would be spent on
integrating the system and making modifications in
the supply chain software

40. Information Technology: A Supply Chain
Enabler
• Information links all aspects of supply chain
• E-business
– replacement of physical business processes with
electronic ones
• Electronic data interchange (EDI)
– a computer-to-computer exchange of business
documents

41. What we learned
so far….

42. One of the keys to Wal-Mart's effective logistical system
is the flexibility that it has when choosing suppliers.
When Wal-Mart negotiates with suppliers and the
suppliers know that Wal-Mart will only pay the most
competitive prices. This is because it is very easy for
them to find another supplier of that particular material
with a lower price and very few logistical problems

43. Another reason that Wal-Mart's prices are so competitive
is because they buy in such large quantities that
transportation from one end of the supply chain to another
is not as costly for additional units.
This aspect of the logistical system does not come from
skill or expertise it simply comes from the sheer size of
the company, but this is still a factor.

44. Wal-Mart buys so many supplies from different places
throughout the world, that they have the luxury of using
bigger trucks and using less fuel to go back and forth.
Also if by chance they have to use shipping services to
transport material from one location to another, Wal-Mart
will give them so much business that they will get huge
discounts

46. Thank you!
For your precious time….