Wal-Mart Stores, Inc.Supply Chain Management

About Wal-Mart

• Based on Bentonville, Arkansas. Founded by Sam Watson

• The world’s largest retailer with more than 6,500 stores, in all 50 states, 15 countries, with US$312.4 billion in sales (in 2006)

• Had 1.3 million employee in US and 1.8 million worldwide to serve 138 million customers each week

• Provide merchandise and services at “Every Day Low Price”

• Ran Wal-Mart Super Centers, Sam’s Club, Neighborhood Markets

• Competitors:

• General merchandise category: Sears, Target• Specialty retailers category: Gap, Limited• Department stores category: Dillard, Federated, J.C. Penney• Grocery store category: Kroger, Albertsons, Safeway• Membership-only warehouse category: Costco Wholesale

Retail Industry

Category2005

(US$ billions)

General merchandise stores 525.7

Food and beverage 519.3

Food services and drinking places 396.6

Gasoline 388.3

Building materials and gardening equipment and supplies 327

Furniture, home furnishings, electronics and appliances 211.7

Health and personal care 208.4

Clothing and clothing accessories 201.7

Sporting goods, hobby, book, music 81.9

U.S. retail sales, excluding motor vehicles and parts dealer reached US$2.8 trillion in 2005

Wal-Mart’s Supply ChainWalton realized a new trend, discount retailing

Purchasing

Distribution

Retail Strategy

Information System

HR

The Development

of Supply Chain

• WM wielded enormous power over its suppliers

• Has 90,000 suppliers, of whom 200 are key global suppliers

• Using distribution centers to gain economic of scale

• Hub & spoke design• Stores located in low-rent,

suburban areas, close to major highway

• WM has 114 U.S. DC and 7,800 drivers

• Shipments were generally cross-docked, or directly transferred

• Standardized case and labeling

• WM trucks generated “back-haul” revenue

• WM implemented EDLP (which has impacts: smooth demand, did not need advertising

• Associates had authority to input orders

• Unique template of each store

• Invest in central database, store-level point-of-sale systems and satellite network

• Implemented UPC barcode• Developed retail link• Adopted CPRF• Developed VMI

• Had reguler “Saturday morning meetings”

• “Borrow” new ideas from competitors

• WM was non-union

Problem Identification

• In its 2006 fiscal year ended January 31, Wal-Mart posted a sales increase of 9.5 per cent from the previous year while its inventory grew 8.2 per cent. How do Wal-Mart reach the inventory growth rate to half of its sales growth rate?

• In U.S., Wal-Mart enjoyed profit from it strong supply network strategy, but Wal-Mart had been faring less well in other markets. For example in United Kingdom and South Korea. How to solve it? Did those strategy were not appropriate for several countries?

Supporting Theory

Supply network strategy is the strategic direction of an organization’s relationships with suppliers, customers, suppliers’ suppliers, customers’ customers, etc

Supporting TheoryThree Types of Supply Relationships

‘Partnership’ supply

relationships

Do nothing Do everythingThe character of internal operations activity

Virtual spot

tradingResource scope

Long-term virtual

operationVertical

integration

Traditional marketsupply

Type

of i

nter

-firm

con

tact

Tran

sact

iona

l –m

any

supp

liers

C

lose

–few

su

pplie

rs

Supporting TheoryThe Sourcing / Purchasing Design Matrix

Supporting Theory

Attitudes

Actions

Trust

Joint problem solving

Joint co-ordination of

activities

Joint learning

Long-term expectations

Sharing success

Multiple points of contact

Few relationships

Information transparency

Dedicated assets

Closeness of relationship

Elements of process partnership relationships

Supporting TheoryNetwork Strategies in transportation

Analysis

Analysis