Post-Graduate Programme in Management(PGPM: 2011-13) Section: CTerm: IV (13 Jun – 1 Sep, 2012)

Management Development Institute - Gurgaon

Supply Chain Management

Case 04

Wal-Mart’s Supply Chain

ID Name

1 11P171 Suryansh Kapoor2 11P207 Naved Siraj3 11P208 Nayan Jain4 11P210 Paritosh Baisoya5 11P231 Sumit Chandra6 11P237 Vikram Agarwal7 11P239 Vishesh Garg

SCMCase

Presentation

Presentation Date: July 12, 2012

Walmart Supply Chain - Video

Introduction

• Founded by Sam Walton in 1962• In 2012 it is the largest retailer in the world• It has 8,500 stores in 15 countries, under 55 different names• Service 100 million customers on weekly basis

“Supply chain management is moving the right items to the right customer at the right time by the most efficient means. No one does that better than Walmart” - Captain V L Beatty

Walmart Supply Chain Practices

Procurement & Distribution Management

Logistics Management

Inventory Management

Procurement & Distribution Management• Procurement of goods directly from manufacturers

bypassing all intermediaries• Tough Negotiator on prices, ensures 100% process

transparency• Believed in establishing long term relationship with the

vendor• Ensure product is not available elsewhere at even lower

prices• Proffered local and regional vendors & suppliers• Own warehouse supplied 85% of inventory compared to

50 -65% of competitors • Provides replenishments in 2 days compared to 5 days

for competitors • Shipping cost 3% of total cost compared to 5% for

competitors• Each distribution centre had provision of food, sleep,

bath & personal business• Barcode, RFID, hand held computer systems

Distribution Network

250 mile radius

Walmart’s Centralized Hub-and-Spoke System of Warehouses and

Distribution Centers

Hub and Spoke System

• 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).

EDI for ProcurementEDI : Electronic Data Interchange

• The computer systems of Wal-Mart were connected to those of its suppliers.

• EDI enabled the suppliers to download purchase orders along with store-to-store sales information relating to their products sold.

• On receiving information about the sales of various products, the suppliers shipped the required goods to Wal-Mart’s distribution centers.

RFID

• 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

Advantages of using 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

RFID : Radio Frequency Identification

Logistics Management

• Fast & responsive transportation system• Ships goods within 2 days, 3500 company owned trucks,

replenishes store shelves twice every week • Hired only experienced drivers who had driven more

than 300,000 accident free miles with no major violation• Private Fleet Handbook , maintained strict vigil over

drivers• Cross Docking , supply chain – demand chain , push - pull

Supply Chain

Demand Chain

Push

Pull

Cross Docking

Finished goods were directly picked up from the manufacturing plant, sorted out and then directly supplied to the customers (virtually eliminating the role of the distribution centers and stores)

Advantages of cross docking• Reduces operating costs, inventory levels• Increases throughput• Helps in increase of sales space• Eliminates unnecessary handling and storage of product• Reduces product damages and product obsolescence

CPFR

• By implementing 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 data on-hand

inventory– scheduled promotions & forecasts

CPFR : Collaborative Planning, Forecasting and Replenishment

CRP - Continuous replenishment program, DRP- Distribution Requirements Planning

Inventory Management

• RFID, Hand held computer system• Own satellite communication

system,• Automated reordering system• Point of sale system• Sophisticated algorithm system• Centralized inventory data system• Retail link system• Internet enabled technologies

Use of RFID technology and hand-held computer systems

Hand Held computer guides an employee with regard to the location of a particular product from a particular place in the shop

Walmart IT systems

WAL-MART SECRET DATA CENTRE(Set up in 1983)

• 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• Merchandising Artificial Intelligence System:

– To adjust vendor merchandise assortments based on the need of each particular store

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

Nature of benefits Derived

Sustainable competitive advantage

• Everyday low price• High volume purchase• Overall cost saving• Improved customer

service• Stock management

Self dependence

• Low transportation cost

• Reduction in lead time• Increased warehouse

space• Accurate forecasting• Better working capital

utilization• Faster inventory

turnover• Reduction in safety

stock

Strong customer relationship

• Lowest prices• High throughput

products• Pull strategy• Higher frequency of

replenishment

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