SUPPLY CHAIN MANAGEMENT

FABINA MANI

A30101912154

ABOUT WALMART Walmart was founded by Sam Walton in 1962 with the opening

of the first Walmart store in Rogers, Ark. The company was incorporated as Wal-Mart Stores, Inc. in 1969.

Walmart serves customers more than 200 million times per week at more than 10,900 retail units in 27 countries.

For the fiscal year ended January 2013, Walmart increased net sales by 5% to $466.1 billion and returned $13 billion to shareholders through dividends and share repurchases.

Walmart ranked second on the 2012 FORTUNE 500 list of the world’s largest companies by revenue.

Today in the U.S., Walmart operates more than 4,600 retail facilities.

For fiscal year 2013, Walmart U.S. net sales were more than $274 billion.

Supply Chain: The sequence of organizations - their facilities, functions, and activities - that are involved in producing and delivering a product or service.

Sometimes referred to as value chains

Wal-Mart’s Procurement Wal-Mart emphasized the need to reduce purchasing costs and offer the best price to the customer.

The company directly procured from manufacturers, by passing all intermediaries.

Wal-Mart finalizes a purchase deal only when it is fully confident that the products being bought is not available else where at a lower price.

Vendor-managed inventory systems

• to replenish stocks

• Wal-Mart transmitted sales data, orders of products, delivery plan and reports of warehouse inventory status to them daily

• to plan inventory levels, generate purchase orders, and ship exactly what was needed

• both benefited from reduced inventory costs and increased sales

Using EDI (Electronic data interchange)for Procurement

• 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.

Electronic Data Interchange

• Increased productivity

• Reduction of paperwork

• Lead time and inventory reduction

• Electronic transfer of funds

• Improved control of operations

• Reduction in clerical labor

• Increased accuracy

Walmart Supply Chain Flow Chart

Manufacturer

Manufacturer

Distribution Center

Company Headquarter

Satellite System

Retail Store

Retail Store

Bar code, RFID

Retail Store

Radio, headphone

Logistics Management… Walmart is able to move goods to and from distribution

centers because they maintain a private fleet of trucks and a skilled staff of truck drivers.

Company hired experienced drivers having more than 300,000 accident free miles with no major traffic violation.

Every year they drive 700 million miles to make millions of deliveries to our stores and clubs.

Each driver averages around 100,000 miles annually—that’s like driving around the world 4 times!

Drivers follow the most efficient routes to their destinations, and work to minimize the number of “empty miles” they drive.

Hub and Spoke System • In the early 1970s, Wal-Mart became one of the

first retailing companies in the world to centralize its distribution system, pioneering the retail hub-and-spoke system.

Cross-docking by Wal-mart

Requisitions received for different goods from a store are converted into purchase or procurement orders.

Purchase orders are then forwarded to the manufacturers who convey their ability or inability to supply the goods within a particular period of time.

If manufacturer agrees, goods are directly forwarded to a place called the staging area.

The goods are packed here according to the orders received from different stores and then directly sent to the respective customers.

Wal-mart shifted the focus from “supply chain” to the “demand chain,” which meant that instead of the retailer ‘pushing’ products into the system; customers could ‘pull’ products, when and where they needed.

The Traditional Supply Chain Includes Inefficient and Unnecessary Steps

Wal-Mart Simplified Its Supply Chain

Cross-docking in distribution centers results in product flow from inbound to outbound shipping docks within 48 hours.

Flow-Time Analysis:

Point-of-sale

system

captures data

in real-time

Data is

transmitted to

warehouses

for Inv. Mgmt.

Retail Link

transmits

data to

supplier

Orders are

generated from

previous-day

sales

Merchandise is

loaded onto

trucks using

cross-docking

Merchandise

is delivered to

the store

Merchandise is

manufactured

based on historical

and real-time data

Merchandise

is shipped to

warehouses

Customer

made a

purchase

The store will re-

stock the shelves

with merchandise

Retail Link – real-time point-of-sales (POS) data transmission

Cross Docking

Fleet of 7,000 trucks in US

Inventory Management • Wal-Mart invested heavily in IT and communication

systems to effectively track sales and merchandise inventories in stores across the country.

• With the rapid expansion, it was essential to have a good communication system.

• Hence, Wal-Mart set up its own satellite communication system in 1983.

• Employees at the stores had the “Magic Wand,” a hand-held computer which was linked to in-store terminals through a radio frequency network.

• These helped them to keep track of the inventory in stores, deliveries, and backup merchandise in stock at the distribution centers.

• The order management and store replenishment of goods were entirely executed with the help of computers through the Point-of-Sales (POS) system.

• Through this system, it was possible to monitor and track the sales and merchandise stock levels on the store shelves.

Inventory Management… (quick replenishment)

• Since the floor area of any Wal-Mart store varied between 40,000 to 200,000 square feet, movement of goods within the store was an important part of logistics operations.

• Wal-Mart made significant investments in IT to quickly locate and replenish goods at the stores.

Voice-based Order Filling (VOF) • In 1998, Wal-Mart installed a voice-based order filling

(VOF) system in all its grocery distribution centers.

• Each person responsible for order picking was provided with a microphone/speaker headset, connected to the portable (VOF) system that could be worn on waist belt.

• They were guided by the voice to item locations in the distribution centers.

Inventory Management… (pretty darn quick displays)

• The company asked its suppliers to ship goods in store-ready displays called pretty darn quick (PDQ) displays.

• Goods were packed in PDQ displays that arrived at the stores ready to be boarded on the racks.

• Wal-Mart’s employees could directly replace the empty racks at the stores with fully packed racks, instead of refilling each and every item at the racks.

Distribution center Layout

Walmart’s distribution centers are hubs of activity for their business. Their distribution operation is one of the largest in the world. There are 9 disaster distribution centers, strategically located across the country and stocked to provide rapid response to struggling communities in the event of a natural disaster. Each distribution center is more than 1 million square feet in size, and uses more than 5 miles of conveyor belts to keep products moving to their stores 24 hours a day. Every distribution center supports 90 to 100 stores in a 200-mile radius.

Benefits

Able replenish stores within 48 hrs against 5 days for competitors.

Shipping cost of walmart 3% against 5% for competitors

Higher profits

Shorter lead time

Working of Distribution Center The distribution centers ensured steady flow & consistent flow of

products.

Large-scale use of sophisticated technology such as Bar code, hand held computer systems (Magic Wand) and now, RFID.

Every employee had information regarding products at distribution center.

They make 2 scans- one for identifying the pallet, and other to identify the location from where the stock had to be picked up.

The hand held computers guide employee to the location of the specific product.

The quantity of the product required from the center is entered in the hand held computer, which updates the information on the main central server.

The computers also enabled the packaging department to get accurate information such as storage, packaging & shipping

Bar Code System

Standardized bar code system

Applied by every supplier

Helps facilitating large scale operation

Pallets/Cases passed through conveyor belt are scanned automatically

Product codes are transferred to centralized computer system

Matching with the computer database and generate useful information

What it is. What quantity it is. Which packing compartment and truck to go. Which store to go.

RFID • In efforts to implement new technologies to reduce costs

and increase the efficiency, in July 2003, Wal-Mart asked its top 100 suppliers to be RFID compliant by January, 2005.

• Wal-Mart planned to replace bar-code technology with RFID technology.

• The company believed that this replacement would reduce its supply chain management costs and enhance efficiency.

• Because of the implementation of RFID, employees were no longer required to physically scan the bar codes of goods entering the stores and distribution centers, saving labor cost and time.

RFID helps to locate where the pallet is and the condition of it temperature

Humidity

Automatic sensor – avoid scanning codes one by one.