Download - 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
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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: BUSINESS PROCESS
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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
WAL-MART: BUSINESS PROCESS
Quick Responsivenessto Market Changes
Low Inventory
Quick Replenishment
Effective HR System
Efficient DistributionSystem
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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
Wal-Mart Fulfills the Customer-Satisfaction CriticalSuccess Factors (cont.)
WAL-MART: BUSINESS PROCESS
Quick Responsivenessto Market Changes
Low Inventory
Quick Replenishment
Effective HR System
Efficient DistributionSystem
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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
Wal-Mart Fulfills the Customer-Satisfaction CriticalSuccess Factors (cont.)
WAL-MART: BUSINESS PROCESS
Quick Responsivenessto Market Changes
Low Inventory
Quick Replenishment
Effective HR System
Efficient DistributionSystem
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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
WAL-MART: BUSINESS PROCESS
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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
WAL-MART: BUSINESS PROCESS
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
WAL-MART: BUSINESS PROCESS
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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
WAL-MART: BUSINESS PROCESS
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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