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Supply Chain of WalSupply Chain of Wal--martmart
Members:Members:Chan Man ChingChan Man Ching
Chan Mong TikChan Mong Tik
Chui Wai KaChui Wai Ka
Lam Fei FeiLam Fei Fei
Man Ka YuMan Ka Yu
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AgendaAgenda
Background Information of WalBackground Information of Wal--martmart
Supply chain of WalSupply chain of Wal--martmart Flow chat of the supply chainFlow chat of the supply chain
Technology used in various stage of SCTechnology used in various stage of SC
Impact of WalImpact of Wal--martmart
Wal-martBackground
Wal-martSupply Chain
Impact ofWal-mart
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Background of WalBackground of Wal--martmart~Well known retailer with heavy investment in IT~Well known retailer with heavy investment in IT
Types of industry: one stop shopping centerTypes of industry: one stop shopping center
Founder: Sam WaltonFounder: Sam WaltonYear of establishment: 1962Year of establishment: 1962
First store: in ArkansasFirst store: in Arkansas
Sam WaltonSam Walton
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No. of stores: 5311 units globallyNo. of stores: 5311 units globally
Wal-Mart has expanded its business to 10 countries: U.S., Mexico, Brazil,Argentina,Germany,Puerto Rico,U.K. , South Korea, Canada and China.
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Rapid growth of WalRapid growth of Wal--martmart
Revenues: $315,654,000, 000 in 2005Revenues: $315,654,000, 000 in 2005
Stock value from Aug 1972 to May 2006:Stock value from Aug 1972 to May 2006:
Sourced from finance.yahoo.comSourced from finance.yahoo.com
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How well is WalHow well is Wal--mart doing?mart doing?
WalWal--martmart SearsSearsHoldingsHoldings
Target CorpTarget Corp CostcoCostco
No. ofNo. of
EmployeesEmployees
1,800,0001,800,000 1,330,0011,330,001 338,000338,000 60,50060,500
Revenue 05'Revenue 05' 312.65B312.65B 49.12B49.12B 52.62B52.62B 55.68B55.68B
OperatingOperatingMarginMargin
5.93%5.93% 3.83%3.83% 8.22%8.22% 2.79%2.79%
ProfitProfitMarginMargin
3.60%3.60% 1.75%1.75% 4.58%4.58% 1.93%1.93%
InventoryInventoryTurnoverTurnover
7.477.47 3.923.92 5.985.98 11.5411.54
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Why can WalWhy can Wal--mart be so successful?mart be so successful?
Supply chain plays an important roleSupply chain plays an important role
Supply chain:Supply chain:a method of collaborating horizontallya method of collaborating horizontally among suppliers, retailers, andamong suppliers, retailers, andcustomers to create valuecustomers to create value
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WalWal--mart Supply Chain Flow Chatmart Supply Chain Flow Chat
Manufacturer
Manufacturer
Manufacturer
Retail Store
Retail Store
Retail Store
Point of sale terminal
Satellite system
Bar code, RFID
Radio, headphone
Distribution center
Company Headquarter
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Distribution CenterDistribution Center
108 centers in USA108 centers in USA
Place that various goods are gathered,Place that various goods are gathered,
sorted and delivered to different storesorted and delivered to different storeAbout 80% of merchandises shippedAbout 80% of merchandises shipped
from centersfrom centers
24 hours operation24 hours operation
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Manufacturer 1
Manufacturer 2
Manufacturer 3
Retail store 1
Retail store 2
Retail store 3Manufacturer 3
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Trucks outside WalTrucks outside Wal--martmart
PastPast--------written instructionswritten instructions
NowNow--------radio and headphoneradio and headphone
English ?Spanish?English ?Spanish?
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Minilift TrucksMinilift Trucks
Inside distribution centersInside distribution centers
equipped with headphoneequipped with headphone
Computer give direction to driver in voiceComputer give direction to driver in voice
What merchandises to transportWhat merchandises to transport
Where the merchandises should be carried toWhere the merchandises should be carried to
Which truck the merchandises be loadedWhich truck the merchandises be loaded
Report progress, ahead or behind scheduleReport progress, ahead or behind schedule
Benefit:Benefit: productivity and efficiencyproductivity and efficiency
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Bar Code SystemBar Code System
Standardized bar code systemStandardized bar code system
applied by every supplierapplied by every supplier
Helps facilitating large scale operationHelps facilitating large scale operation Pallets passed through conveyor beltPallets passed through conveyor belt
are scanned automaticallyare scanned automatically
Product codes are transferred toProduct codes are transferred tocentralized computer systemcentralized computer system
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Bar Code SystemBar Code System
Matching with the computer databaseMatching with the computer databaseand generate useful informationand generate useful information What it is.What quantity it is. Which packingWhat it is.What quantity it is. Which packing
compartment and truck to go. Which store tocompartment and truck to go. Which store togogo
Processes take place simultaneouslyProcesses take place simultaneously
Save time and labour sortingSave time and labour sortingmerchandisesmerchandises
Smooth logistic processesSmooth logistic processes
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RFIDRFID
Radio Frequency Identification SystemRadio Frequency Identification System
Use radio waves to identify objectsUse radio waves to identify objects
Tags with microchip and antenna builtTags with microchip and antenna builtinin Store data (type, quantity, manufacturer,Store data (type, quantity, manufacturer,
expired date)expired date)
Generate HF signal to transfer dataGenerate HF signal to transfer dataAllow WalAllow Wal--mart to keep track of palletsmart to keep track of pallets
at various stage of supply chainat various stage of supply chain
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RFIDRFID
Sensors in the distribution centerSensors in the distribution centerdetect and receive information fromdetect and receive information fromchipschips
Locate where the pallet is and theLocate where the pallet is and thecondition of itcondition of it temperaturetemperature
HumidityHumidityAutomatic senserAutomatic senser avoid scanningavoid scanning
codes one by onecodes one by one
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RFID Gen1 and Gen2RFID Gen1 and Gen2
Generation 1Generation 1 Generation 2Generation 2
HF signalHF signal UHF signalsUHF signals
Difficult to penetrate through liquidDifficult to penetrate through liquidand metalsand metals
Improve reception (Work withImprove reception (Work withvarious materials)various materials)
Costly (up to $200 per chip inCostly (up to $200 per chip in
early stage)early stage)
Cost drops to US$0.15 withinCost drops to US$0.15 within
near futurenear future
Basic functionBasic functionAdditional functions ( Better security,Additional functions ( Better security,
programmable)programmable)
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RFIDRFID
Further improve logistics efficiencyFurther improve logistics efficiency
Save time identifying merchandisesSave time identifying merchandises
Convenience in checking inventoryConvenience in checking inventory Information preInformation pre--stored in the chips =stored in the chips =
convenience of data processingconvenience of data processing
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PointPoint--ofof--sale terminalssale terminals
Invested in 1983Invested in 1983
Simultaneously rang up sales and trackedSimultaneously rang up sales and trackedinventory deductions for rapid reinventory deductions for rapid re--supply.supply.
Electronic scanning of Uniform ProductElectronic scanning of Uniform ProductCodes (UPC)Codes (UPC)
-- to priceto price--mark merchandisemark merchandise
-- to ensure accurate pricingto ensure accurate pricing SelfSelf--labeling systemlabeling system
The merchandise replenishment processThe merchandise replenishment process
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LargeLarge--scale satellite systemscale satellite system
Installed in 1987Installed in 1987
to improve communication between storesto improve communication between stores
Link all of the stores to headquarter, givingLink all of the stores to headquarter, giving
WalWal--Marts central computer system realMarts central computer system real--timetimeinventory data.inventory data.
Allow sales data to be collected and analyzedAllow sales data to be collected and analyzeddaily, and enable managers to adjustdaily, and enable managers to adjust
immediately.immediately. Daily information of individual store can beDaily information of individual store can be
compared.compared.
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CPFR ProgramCPFR Program
AACCollaborativeollaborative PPlanning,lanning, FForecasting,orecasting,andand RReplenishment program.eplenishment program.
JustJust--inin--time inventory program began.time inventory program began.
Advantage:Advantage:
To reduce carrying costs.To reduce carrying costs.
Less excess inventory.Less excess inventory.
Cost of goods is estimated to be 5 to 10Cost of goods is estimated to be 5 to 10percent less.percent less.
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TailoredTailored--made store managementmade store management
WalWal--Mart merchandise is tailored toMart merchandise is tailored toindividual markets and individual stores.individual markets and individual stores.
Store managers choose which products toStore managers choose which products to
display and allocate shelf space.display and allocate shelf space. A store devote only 10% of its squareA store devote only 10% of its square
footage to inventory.footage to inventory.
WalWal--Marts culture stress the key role ofMarts culture stress the key role of
associates.associates. Information and ideas are shared atInformation and ideas are shared at
individual stores.individual stores.
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Suppliers = PartnersSuppliers = Partners
As WalAs Wal--Mart grew, its relationships withMart grew, its relationships withsome suppliers evolved intosome suppliers evolved intopartnershipspartnerships
Sharing information electronically toSharing information electronically toimprove performance.improve performance.
How do they share information?How do they share information?
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Electronic data interchange (EDI)Electronic data interchange (EDI)
Enabled an estimated 3600 suppliersEnabled an estimated 3600 suppliers(about 90% of Wal(about 90% of Wal--Marts dollar volume)Marts dollar volume)to receive orders and interact with Walto receive orders and interact with Wal--Mart electronically.Mart electronically.
Later expanded to include forecasting,Later expanded to include forecasting,planning, replenishing, and shippingplanning, replenishing, and shipping
applications.applications.
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VendorVendor--managed inventory systemsmanaged inventory systems
to replenish stocksto replenish stocks
WalWal--Mart transmitted sales data, orders ofMart transmitted sales data, orders ofproducts, delivery plan and reports ofproducts, delivery plan and reports of
warehouse inventory status to them dailywarehouse inventory status to them daily
to plan inventory levels, generate purchaseto plan inventory levels, generate purchaseorders, and ship exactly what was neededorders, and ship exactly what was needed
both benefited from reduced inventory costsboth benefited from reduced inventory costsand increased salesand increased sales
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Business planning packetsBusiness planning packets
Each WalEach Wal--Mart department developedMart department developedcomputerized, annual strategic businesscomputerized, annual strategic businessplanning packets for its suppliersplanning packets for its suppliers
including:including: departments sales, profitability, and inventory targets,departments sales, profitability, and inventory targets,
macroeconomic and market trends, and Walmacroeconomic and market trends, and Wal--MartsMartsoverall business focusoverall business focus
WalWal--Marts expectations on themMarts expectations on them
Suppliers recommendationsSuppliers recommendations
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How WalHow Wal--mart affects suppliersmart affects suppliers
Domestic Suppliers:Domestic Suppliers:
WalWal--mart imported 18 billion worth ofmart imported 18 billion worth ofgoods from 5,000 Chinese suppliers ingoods from 5,000 Chinese suppliers in20042004
Ranked as Chinas 8 biggest tradingRanked as Chinas 8 biggest tradingpartner ahead ofRussia, Australia andpartner ahead ofRussia, Australia and
CanadaCanadaUsed power to squeeze domesticUsed power to squeeze domestic
suppliers profitsuppliers profit
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How WalHow Wal--mart affects suppliersmart affects suppliers
WalWal--mart Defense :mart Defense :
If all of supplier were squeezed dryIf all of supplier were squeezed dry
WalWal--mart no suppliersmart no suppliers Suppliers found ways to surviveSuppliers found ways to survive
do better at what they did beforedo better at what they did before
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How WalHow Wal--mart affects suppliersmart affects suppliers
WalWal--mart not only selling foreignmart not only selling foreignimported goods, also encourage theimported goods, also encourage theuse of domestic American productsuse of domestic American products
Buy American Program Buy American Program
Retained over 1.7 billion in retailRetained over 1.7 billion in retailpurchases that produced offshore.purchases that produced offshore.
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How WalHow Wal--mart affects dometic workersmart affects dometic workers
Domestic workers :Domestic workers : Face keen competition from overseasFace keen competition from overseas
markets,markets,
offshore manufacturingoffshore manufacturing Close down of factoriesClose down of factories Loss of jobsLoss of jobs
Competition with WalCompetition with Wal--martmart Competitors cut labors health care benefitsCompetitors cut labors health care benefits
and wagesand wages
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How WalHow Wal--mart affects dometic workersmart affects dometic workers
WalWal--mart Defense:mart Defense:
Insist not responsible for the offInsist not responsible for the off--shoring ofshoring ofmanufacturingmanufacturing
Example :Example :
Sanyo ( TV sets producers ) planned to closeSanyo ( TV sets producers ) planned to closethe plant and move Mexico and Asia.the plant and move Mexico and Asia.
WalWal--mart buys the TV sets from Sanyo if theymart buys the TV sets from Sanyo if theydont movedont move
Eventually stay in USEventually stay in US
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How WalHow Wal--mart affects dometic workersmart affects dometic workers
Destructive CreationDestructive Creation
Shrinking of manufacturing and laborShrinking of manufacturing and laborintensive sectorsintensive sectors
Technical changes substitute unskilled laborTechnical changes substitute unskilled labor
Create new jobs and expansion in servicesCreate new jobs and expansion in servicesand technology sectorand technology sector
Estimation : 225,000 job loss by outsourcingEstimation : 225,000 job loss by outsourcingin the next 15 years < 1.5% of the jobin the next 15 years < 1.5% of the jobavailable in 2002available in 2002
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How WalHow Wal--mart affects dometic workersmart affects dometic workers
Unemployment is a structuralUnemployment is a structuralproblem ,rather than a cyclical problemproblem ,rather than a cyclical problem
Mismatch of job skills with the marketMismatch of job skills with the marketdemanddemand
Unskilled labors cannot match withUnskilled labors cannot match withincreasing skilled labor demandincreasing skilled labor demand
Not loss of job , but cannot find a jobNot loss of job , but cannot find a jobmatches with their skillsmatches with their skills
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How WalHow Wal--mart affects economymart affects economy
Reallocation of capital and technologyReallocation of capital and technologyto the foreign marketsto the foreign markets
Less to employ domestic workers andLess to employ domestic workers andinvest in local economyinvest in local economy
Decline in labor productivity and realDecline in labor productivity and realincomes of the countryincomes of the country
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How WalHow Wal--mart affects economymart affects economy
may not necessarily imply a decrease in realmay not necessarily imply a decrease in realincome and productivityincome and productivity
For example,For example, Globalization and lower technology cost,Globalization and lower technology cost,
Lead to higherAmerican productivity growthLead to higherAmerican productivity growth
added $230 billion extra GDP between 1995added $230 billion extra GDP between 1995
and 2002and 2002 Equivalent to extra 0.3% points of growth aEquivalent to extra 0.3% points of growth a
yearyear
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WalWal--martmart
Q & AQ & A
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