Walmart case study

Introduction Founder- Sam Walton, born in 1918 Alma mater-University of Missouri 1940 Worked –J.C.Penny First lesson-”Offering significant discount on product prices to expand volume and increase overall profits.” • Business growth 1) Pharmacy 2) Auto service center 3) Jewellery. • Time constraints• Expansion-in 1990, Joint venture with Cifra. • • • •

Increase in business (revenue) • In 1979:- $ 1billion/ year • In 1991:-$ 1billion/ week • In 2001:-$ 1billio/1.5 day

Two factors 1) Highly automated distribution centers 2) Computerized inventory system

Background Note • Why RFID over Bar Code? - believed that reduces SCM cost & enhances efficiency - expected to save $8.35B/year primarily through labor cost. • Centralized Distribution System - Pioneer of Hub & Spoke System • In 1970’s use of IT Bar code- Inventory tracking EDI- establishing direct link to store Satellite - co-ordinate all activities in SCM CTN(computer terminal network)-link between stores and headquarters • In 1983 POS(point of sale)-

Facts: • Walmart has more employees- 2.1 million than 7 times the population of Iceland. • If Walmart's more than 900 million square feet of retail space were spread out over one place it would take up roughly 34 miles — about 1.5 times the size of Manhattan. • Walmart parking lots alone take up roughly the size of Tampa, Florida.

• In 2009, Walmart sold more bananas than any other item. • Each week, Walmart serves more than 200 million customers at more than 9,600 retail outlets in 28 countries. • China's exports to Walmart accounted for 11% of the growth of the total U.S. trade deficit with China between 2001 and 2006.

• An additional Walmart Supercenter per 100,000 residents increases average BMI by 0.25 units and the obesity rate by 2.4%. • The most frequent destination typed into GPS device Telenav is Walmart. • A Walmart store in Shenzen, China has its own fight song ("My heart is filled with pride .. I long to tell you how deep my love for Wal-Mart is ...")

• Walmart is one of the largest private employers in the USA, and the largest in Mexico. • In 2000, Walmart was sued 4,851 times — about once every 2 hours. • 90% of all Americans live within 15 miles of a Walmart.

Managing the Supply Chain

Procurement and Distribution • Bypassing all the intermediaries • Tough negotiator • Offer Lowest Price Products • Cost structure discussion vendors • In 1998 Wal-Mart’s own warehouses supplied 85% of the inventory as compared to 50-505 for competitors.

• High Inventory turnover rate • Use of ‘bar code technology’ and ‘hand held computer systems’. • Use of hand held computer • Reduced unnecessary paperwork with precision • Enabled the company to satisfy the customer needs and improved the level of efficiency.

Using EDI for Procurement • The computer systems to 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

Logistics Management

• Fast and responsive transportation system. • The distribution centers were serviced by more than 3500 company owned trucks

• Drivers who were committed and dedicated to customer service. • The company hired only experienced drivers • Private Fleet Driver Handbook

Cross Docking: • To make its distribution process more efficient, WalMart also made use of a logistics technique called “cross-docking.” • In this system, the finished goods were directly picked up from the manufacturing plant, sorted out and then directly supplied to the customers • The system reduced the handling and storage of finished goods, virtually eliminating the role of the distribution centers and stores.

Cross Docking:

Inventory management:

Inventory management: • Effectively track sales and merchandise inventories in stores across the country. • Good communication system. • Hence, Wal-Mart set up its own satellite communication system in 1983.

• Reducing pack sizes • Reducing the overall inventory levels by IT. • To keep track of the inventory in stores, deliveries, and backup merchandise in stock at the distribution centers

WalMart And IT

EDI (Electronic Data Interchange)

EDI (Electronic Data Interchange)

EDI (Electronic Data Interchange) • • • • • • • Save Time Made Procurement Efficient Use of Bar code Scanners Real Time Business Operations Established CTN (computer terminal Network) Fully Automated distribution Centre Information retrieved -> Centralized data warehouse • Right merchandise – Right Place – Right Time – Right Price • Helped Suppliers

Using IT in SCM Using Voice Based technology : Enhancing warehouse and Logistic Management • • • • • • • • Could replenish stock within 24 hours. Cross-Docking Receive and dispatch goods in less than a day. Installed VOF(Voice based order filling) Voice Recognition Talkman Terminals (VRTT) Radio Module on Wireless LAN Eliminated mis-picks Store Ready Displays called Pretty Darn Quick Displays (PDQ) • Aggregate Time saved.

GPS Communication in Trucks Location of Trucks Activate system by voice Interact with staff

Using IT in SCM The Retail Link System- Supporting Inventory Management • Connected EDI to extranet • Historical sales of 24 months • Sales Forecast • Study Competitor Product Demand • CPFR(Collaborative Planning Forecasting Replenishment)

Lead Time was cut to 11 days from 21 days. On-hand inventory was reduced by 2 weeks. Sales grew by $8.5 millions in 6 months. 90% of suppliers were doing business through Retail Link.

CPFR (Collaborative Planning Forecasting Replenishment) • Reduce Inventory Cost • Enhance Product availability across supply chain • To share forecasts and results data through Internet. • Mutually beneficial collaboration between Wal-Mart and its suppliers. • In October 2002, Wal-Mart asked its 14,000 suppliers to switch over from the existing Value Added Networks (VAN) EDI to web enabled EDI.

VAN EDI Transactions between business partners are routed and managed through private Value Added Networks (VAN) Through VAN EDI, it takes time for the messages to be communicated between the trading partners. The private networks charge transaction fees from those who utilize the service. Transaction costs are high. The transactions are not totally secure as they are routed through private players.

Web EDI Transactions between business partners are routed through Internet.

Through Web EDI, there is direct online communication between the trading partners. As the Internet is accessible to all, no transaction fee is charged. Costs are low. The security of the transactions is relatively high as the transactions are routed through a secured web server with a 128 bit end-end security.

RFID Technology (Radio Frequency Identification) • Replace bar-code technology with RFID technology. • Reduce supply chain management cost. • Enhance efficiency. • RFID would reduce the instances of stock-outs at the stores. • 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

Recommendations • Get employees from places where labor is cheap. • Increasing wage rate for employees. • Should focus on service along with lower price.