Download The Wal-Mart Example

The Wal-Mart Example
The Wal-Mart Textile and Apparel Supply Chain
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Little-to-No SCM of Dependent Demand.
Wal-Mart
The China/Wal-Mart Supply Chain
Dynamic/Virtual Supply Chains with Power Imbalances
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Wal-Mart
Supply
• 68,000 + suppliers
• 5,000 in China
• 70% commodity products from China
• China's 8th largest trading partner
• Global Procurement Office
• Manages overseas operations
Company History
•First Wal-Mart opened in 1962(Rogers)
•First SAM’S Club opened in 1983(Midwest)
•First Supercenter opened in 1988(Washington)
•First international unit opened in 1991(Mexico)
Company History
• 1996 Wal-Mart enters China through a joint-venture agreement
• 1997 Wal-Mart becomes largest private employer in the USA,
with 680,000 employees worldwide and has its first $100 billion
sales year.
• 1999 Wal-Mart has 1.3 million employees, making it the largest
private employer in the world
Company Overview
•Wal-Mart is the largest real estate company in the United States, with an
entire division devoted entirely to building new stores, selling old stores,
and developing shopping centers around its new and existing stores
•Wal-Mart operates 3 major retail divisions:
•Wal-Mart Stores USA
•SAM'S CLUB
•Wal-Mart International
Company Overview
• Company Total: 5,246 stores (US$285.2 billion)
• Wal-Mart Stores USA 3,151 stores (US$191.8 billion)
o Discount Stores: 1,353
o Super-centers: 1,713
o Neighborhood Markets: 85
• SAM'S CLUB (United States): 551 Clubs (US$37.1 billion total)
• International: 1,587 (US$56.3 billion total)
Company Overview
• 2004
• Wal-Mart reported net income of US$10.3 billion on US$285.2 billion
of sales revenue (3.6% profit margin).
• If Wal-Mart were its own economy, it would rank 23rd in the world,
with a GDP between Austria and Saudi Arabia.
Distribution
• In 1998, Wal-Mart had over 40 distribution centers located at
different geographical locations in the U.S.
• Over 80,000 items were stocked in these centers.
• Wal-Mart has a dedicated fleet of 2,000 trucks and, on average;
stores are replenished twice a week.
Cross Docking
• Cross-docking is a strategy that Wal-Mart made famous.
• Wal-Mart delivers about 85 percent of its goods utilizing crossdocking techniques.
• Cross docking has enabled Wal-Mart to achieve economies of scale,
which reduces its costs of sales.
• Products are delivered to Wal-Mart's warehouses on a continual
basis where they are sorted, repackaged, and distributed to stores
without sitting in inventory.
Inventory
• Wal-Mart has an accelerated delivery system by which stores
located within a geographical center can receive replenishment
within 24 hours.
• To effectively track sales and inventories Wal-Mart set up its
own satellite system. Wal-Mart is able to reduce unproductive
inventory by allowing stores to manage their own stocks,
reducing pack sizes across many products categories, and
timely price markdowns.
Inventory
• To keep track of inventories employees use hand held
computer which is linked to in-store terminals.
• Wal-Mart also came up with bar coding and radio frequency
technology to manage its inventories.
• Bar coding devices enabled efficient picking, receiving and
proper inventory control of the appropriate goods.
• Easy order packing and physical counting of the inventories.
DRP
data-link
headquarters
data-link
suppliers
data-link
stores
Types of IT Methods Used
•
Point of Sales (POS): This system identifies each item sold, finds its price
in a computerized database, creates an accurate sales receipt for the
customer, and stores this item-by-item sales information for use in analyzing
sales and reordering inventory.
•
Satellite System: links all of the stores to company headquarters, giving
Wal-Mart's centralized IT department real-time inventory data.
•
Retail Link: which provides sales data – by item, store, and day- to its
vendor. This information extends the cost savings up the supply chain by
linking thousands of suppliers to Wal-Mart headquarters
Types of IT Methods Used
• Texlon Hard held computer: The hand held computer is linked to instore terminals through a radio frequency network which helped
keep track of inventory in stores, deliveries and backup merchandise
in stock at the distribution centers.
• Radio Frequency Identification (RFID): RFID helps track goods
throughout the supply chain and ultimately will help them get the
right products into the right stores at the right time.
• Black Haul Betty: which is an interactive telephone voice-response
system, via their Transportation or by Electronic Data Interchange
(EDI). Suppliers inform Wal-Mart of ready loads for transportation
through the “Black Haul Betty”.
Supplier Relationship
• Wal-Mart chooses suppliers that are geared towards minimizing costs
and maximizing efficiency. Wal-Mart has centralized buying at its
headquarters, which keeps purchasing costs down.
• Wal-Mart has avoided supplier power by not allowing any single supplier
to have more than 2.4% of its purchases.
• Wal-Mart approached its suppliers as if they were partners, so by
implementing a collaborative planning, forecasting and replenishment
(CPFR) program, Wal-Mart began a just-in-time inventory program that
reduced carrying costs for both the retailer and its suppliers.
Supplier Relationship
• Major suppliers such as Procter and Gamble and GE are able to
share information with Wal-Mart electronically and have dedicated
teams to manage products for Wal-Mart. These key suppliers have
vendor managed inventory systems, which reduces Wal-Mart’s
inventory costs and allows suppliers to increase sales for their
products.
Requirements of Suppliers
• All suppliers are required to participate in Retail Link because of the
benefits it provides
• All suppliers are required to participate in Electronic Data Interchange
(EDI). Is the system of exchanging information-purchases orders,
invoices that allows Wal-Mart to improve customer service, lower
expenses and increase productivity.
• Be able to adapt to Wal-Mart lead time requirements. Lead time varies
ranging from 60 days to commitments made a year in advance of a
selling season.
Requirements of Suppliers
• All suppliers must be able to ship products in a reasonable amount of
time.
• All apparel suppliers must make arrangements with Consumers’ Testing
Lab(CTL) of Boston for testing well in advance of shipment to prevent
complications with items that do not meet specifications. As a general
rule Wal-Mart has all apparel, electronics and anything that touches
food tested by CTL for quality assurance and consumer protection.
• Some suppliers will RFID tag 100% of their products while some will
just tag 2%.
With Price Effect Subsidized by Indirect Government Forces
Wal-Mart
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Price effect
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SCM effect
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