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Submitted To

Prof. Dhanya Joseph |

Prepared By

Dharmik Bhatt 148320592002

Sanyam Bhanwara 148320592046

Mit Patel 148320592034

Yogesh Kalal 148320592097

Umang Tapodhan 148320592093

SUPPLY CHAIN

MANAGEMENT

PROJECT

SUPPLY CHAIN OF WALMART*

College – Oakbrook Business School

Plot No. 225, OppMaharaj Hotel lane, Jamiyatpura Road, S.G Highway, Gandhinagar

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Supply Chain Management of Walmart*

Supply Chain Management

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

"People think we got big by putting big stores in small towns.

Really, we got big by replacing inventory with information."

Sam Walton, Founder of Wal-Mart

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Content of Report

Sr. No Content Pg. No

1 Introduction of Walmart * 3

2 Value Chain of Walmart* 6

3 Introduction of Walmart* 6

4 Supply Chain of Walmart * 8

4.1 Walmart* gets benefited through Supply Chain 8

4.2 Walmart* Strategy 9

4.3 Walmart* Distribution System 10

4.4 Walmart*s Procurement 10

4.5 Logistics Management 13

4.6 Hub and Spoke system in Walmart* 14

4.7 Cross-docking 15

4.8 Walmart* Communication Network 15

4.9 Inventory Management 17

4.10 Voice-based Order Filling (VOF) 19

4.11 CPFR 20

4.12 RFID Technology 21

Conclusion 23

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1. Introduction of Walmart

Walton started small, with a single discount store and the simple idea of selling

more for less, has grown over the last fifty years into the largest retailer in the

world.

Today, nearly 260 million customers visit our more than 11,500 stores under 65

banners in 28 countries and e-commerce sites in 11 countries each week

CEO: C. Douglas Mcmillon

Founder: Sam Walton

Founded: July 2, 1962, Rogers, Arkansas, United States

Revenue: 485.7 billion USD (2015)

Headquarters: Bentonville, Arkansas, United States

Net income: 16.36 billion USD (2015)

Walmart is the world's largest company by revenue, according to the Fortune

Global 500 list in 2014, as well as the biggest private employer in the world with

2.2 million employees.

The company was listed on the New York Stock Exchange in 1972.

Walmart operates over 11,500 stores in 28 countries around the world. They

operate stores under 65 different banners globally.

Walmart became an international company in 1991

Africa

Argentina

Brazil

Canada

Central America

Chile

China

India

Japan

Mexico

United Kingdom

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Global Presence

Mode of entry of International Expansion

Year Country Mode of Entry

1991 Mexico 50% Joint Venture Cifra

1994 Brazil 60% Joint Venture Lojas Americana

1994 Canada Acquisition Woolco (weak player)

1995 Argentina Wholly owned Susbidiary

1996 China New opening, JV, Acquisition

1998 South Korea Adquisition

1999 U.K. Acquisition of ASDA

2002 Japan Acquisition Seiyu

2002 Germany Acquisition of Wertkauf and Spar

2007 India Joint Venture

2011 Southern African Countries Acquisition of Massmart Holding Limited

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If Walmart were a country, its sales would rank it 28th in the world in GDP. That’s right behind Norway and ahead of Austria.

Walmart ’s sells 1 billion pounds of bananas each year.

The company is mentioned over 60,000 times each day on social media.

History Overview of Walmart

• 1962: Walten Brothers opened fist Walmart in Arkansas

• 1970: Walmart became public

• 1990: 1st National retailer

• 1991: International Expansion

• 1993: Creation of “Great Value”

• 2003: Largest corporation in the world

• 2012: 50th Anniversary

Mission Statement, Vision, Goals, & Purpose

Mission Statement:

To help people save money so they can live better

Goal:

Becoming in an international brand

Vision:

“If we work together, we’ll lower the cost of living for everyone…we’ll give the world an opportunity to see what it’s like to save and have a better

Advertising slogans:

• Save Money. Live better

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2. Value Chain of Walmart

3. Key Success Factors

• A supply chain with integrated technology

• An ability to generate large sales volume (economies of scale)

• Every Day Low Prices

• Superior logistics systems

• Decentralized operations

• A strong and unique culture (in U.S.)

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WAL*MART'S BUSINESS LOGIC

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4. Supply Chain of Walmart *

Walmart is world largest retail company just because of the supply chain

management.

4.1 Wal-Mart gets benefited through Supply Chain

• Lower inventories

• Higher productivity

• Greater agility

• Shorter lead times

• Higher profits

• Greater customer loyalty

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4.2 Walmart Strategy

• “Everyday low price”

• Effective use of logistics management

• Effective inventory control

• Bargaining power over suppliers

• Global Expansion for new market opportunity

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4.3 Walmart Distribution System

How Wal-Mart Manage the Supply Chain ?

• Procurement and Distribution

• Logistics management

• Inventory management

4.4 Walmart’s Procurement

Walmart 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.

Walmart finalizes a purchase deal only when it is fully confident

that the products being bought is not available elsewhere at a lower

price.

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Walmart spends a significant amount of time meeting vendors and

understanding their cost structure.

By making the process transparent, the retailer can be certain that

the manufacturers are doing their best to cut down costs.

Procurement and Distribution Management of Wal-Mart

• Bull whip effect

• Vendor managed inventory

Bull Whip Effect

Occurs when slight demand variability is magnified as information

moves back upstream.

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Vendor Managed Inventory

• A means of optimizing Supply Chain performance in which the

manufacturer is responsible for maintaining the distributors

inventory levels. The manufacturer has access to the distributors

inventory data and is responsible for generating purchase orders.

• Manufacturers generate orders, not distributors or retailers

Stocking information is accessed using EDI

• A first step towards supply chain collaboration

• Increased speed, reduced errors, and improved service

Using EDI for Procurement

The computer systems of Walmart 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 Walmart’s distribution centers.

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4.5 Logistics Management

Flow-Time Analysis

An important feature of Walmart’s logistics infrastructure was its fast and responsive transportation system.

The distribution centers were serviced by more than 3500 company

owned trucks.

Walmart believed that it needed drivers who were committed and

dedicated to customer service.

The company hired only experienced drivers who had driven more

than 300,000 accident-free miles, with no major traffic violation.

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4.6 Hub and Spoke system in Walmart

"Hub and spoke" arrangements, where materials are brought in to one central

location and then sorted for delivery to a variety of destinations

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.

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).

The hub and spoke system enabled Walmart to achieve significant cost

advantages by the centralized purchasing of goods in huge quantities..

And distributing them through its own logistics infrastructure to the retail

stores spread across the U.S.

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4.7 Cross-docking

Cross-docking means to take a finished good from the Manufacturing

plant and deliver it directly to the customer with little or no handling

in the process.

In purest form this is done directly, with minimal or no warehousing.

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.

The manufacturer directly forwarded the goods to a place called

the “staging area.”

The goods were packed here according to the orders received from

different stores and then directly sent to the respective customers.

4.8 Walmart Communication Network

• Cross Docking relies on continuous communication between

Walmart’s suppliers, distribution centers, and every point of sale system in each store.

• This enables orders to flow in, get packaged and then shipped.

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How does Wal-Mart do this?

• Walmart operates their own satellite network.

• Walmart’s satellite network sends the point of sale (POS) data directly to 4000 vendors

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4.9 Inventory Management

Walmart 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, Walmart set up its own satellite communication system in

1983.

Walmart was able to reduce unproductive inventory by allowing

stores to manage their own stocks, reducing pack sizes across

many product categories, and timely price markdowns.

Instead of cutting the inventory across the board, Wal-Mart made

full use of its IT capabilities to make more inventories available in

the case of items that customers wanted most, while reducing the

overall inventory levels.

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.

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Inventory Management…

(quick replenishment)

Since the floor area of any Walmart store varied between 40,000 to

200,000 square feet, movement of goods within the store was an

important part of logistics operations.

Walmart made significant investments in IT to quickly locate and

replenish goods at the stores.

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.

Walmart’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.

Inventory Management…

(retail link system)

In 1991, Walmart had invested approximately $4 billion to build a

retail link system.

More than 10,000 Walmart retail suppliers used the retail link

system to monitor the sales of their goods at stores and replenish

inventories.

Retail Link connected Walmart’s EDI network with an extranet,

accessible to Walmart’s thousands of suppliers.

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The suppliers could find out how their product was performing vis-

a-vis competitors’ products in a particular product category.

Walmart owned the largest and most sophisticated computer

system in the private sector.

The company used Massively Parallel Processor (MPP) computer

system to track the movement of goods and stock levels.

All information related to sales and inventories was passed on

through an advanced satellite communication system.

Information Technology: A Supply Chain Enabler

• Information links all aspects of supply chain

• E-business

– replacement of physical business processes with electronic

ones

• Electronic data interchange (EDI)

– a computer-to-computer exchange of business documents

4.10 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.

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The VOF system also verified quantities picked, and could respond

to a variety of requests such as providing product detail (type,

price, barcode number, etc.)

By installing the VOF system, Walmart eliminated mispicks and

product labeling costs since the system did not require paper lists

and labels to be affixed on the goods.

4.11 CPFR

By the mid 1990s, Retail Link had emerged into an Internet-

enabled SCM system whose functions were not confined to

inventory management alone, but also covered collaborative

planning, forecasting and replenishment (CPFR).

In CPFR, Walmart worked together with its key suppliers on a

real-time basis by using the Internet to jointly determine product-

wise demand forecast.

CPFR is defined as a business practice for business partners to

share forecasts and results data through the Internet, in order to

reduce inventory costs while at the same time, enhancing product

availability across the supply chain.

Though CPFR was a promising supply chain initiative aimed at a

mutually beneficial collaboration between Walmart and its

suppliers, its actual implementation required huge investments in

time and money.

A few suppliers with whom Walmart tried to implement CPFR

complained that a significant amount of time had to be spent on

developing forecasts and analyzing sales data.

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VAN EDI vs Web-EDI

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.

VANs route and manage EDI messages for their customers.

By implementing web-EDI, Walmart can save millions of dollars

in the form of license fees to the private VANs.

4.12 RFID Technology

(Radio Frequency Identification)

In efforts to implement new technologies to reduce costs and

increase the efficiency, in July 2003, Walmart asked its top 100

suppliers to be RFID compliant by January, 2005.

Walmart 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.

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Walmart expected that RFID would reduce the instances of stock-

outs at the stores.

Although Walmart was optimistic about the benefits of RFID,

analysts felt that it would impose a heavy burden on its suppliers.

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.

How does RFID works

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Conclusion

Walmart* have done tremendous work on supply chain management. One of the

keys to Walmart’s effective logistical system is the flexibility that it has when choosing suppliers.

When Walmart negotiates with suppliers and the suppliers know that Wal-Mart

will only pay the most competitive prices. This is because it is very easy for them

to find another supplier of that particular material with a lower price and very few

logistical problems

Another reason that Walmart's prices are so competitive is because they buy in

such large quantities that transportation from one end of the supply chain to

another is not as costly for additional units. Here they focus on bulk and get profit

out of it

This aspect of the logistical system does not come from skill or expertise it simply

comes from the sheer size of the company, but this is still a factor.

Walmart buys so many supplies from different places throughout the world, that

they have the luxury of using bigger trucks and using less fuel to go back and forth.

Also if by chance they have to use shipping services to transport material from one

location to another, Walmart will give them so much business that they will get

huge discounts.

So path of success of Walmart is given bellow