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This casc was wrilten by P. Mohan Chandtan, under the dirclion of Vivek Gupla, ICFAI Center Ior l\4anagenrenl Research (lC[4R). h intended to be used as a h.sis for class dirculsion rather than to illuslGte elther effective or 's managementsituation. ineffeclive handlingota
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WAL-MART'S SUPPLY CHAIN MANAGEMENT PRACTICES

''Iyhan .\)au start ta colldpse tha suppu (hdin. dcctlracy h arccution becames critical. Anf lack af dccumte infornatian and pnce.\\e.\ d'e.ile\ castly battlenecks in the |ott al goods and maletials. "

I\1 RODUCTIO\

Bnrcc Richmond, Global hcad, Andersen Consulting.

The Us-based Wal-Mart rankecl first in the globel -Fortrure 500 lrst inthe firrancial iear 2001-02 earning revenues of$219.81 billion (Refer Table l). Wal Marl wdi Lh;.Jirgeslretailing e"mpcnl rn the *o .1. T}e oompany was much bigger than its conlpeiito rs ..in.ihl{ US Sears Roebuck, KMart. JC Penney al1d Nordstrom combiDed (Refcr Exhibit il),.ln. i0al:,,'Wal-Mart operated more than 3.500 discount storcs, San's Cllubs and Superceiiers in ille-ljs and more than 1.170 stores in all major countries across the world. The cornpany allo soldiproducts on the lntemct through its
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Wal-Mrl1 Stores 'i.

General Motor$'i:.

ReYenues (in $ millions 219,812.0

191,58t.0
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7,260.0

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162.412.0

138.7I8.0
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Wal-Mrn $ft une ofthe largest pri\ate sector employers in ihe world, wiih employec strength of afJprorirnatell 1.2 8 nrrliion. Thc company s founder, Sam walton (walton) had always focused on improving sales, constantiy reducing costs, adopting eficient distribution and logistics rnanageneit systens and using innovative infbrnlatioi technoiogy (lT) toolsAccording to analysts, Wal-Mari was ablc to achieve a leadership status ((Refer Exhibit fI)) in rhe retail industry because ot' its efficient supply chain mturagement practices. Captain Vernon L. Beatry, aide-de-camp to the col]]mander, Defense Supply Center, Columbus, Ohio said, "Supply chain management is moving the right items to thc righi customer at the right time by the most etficient means. No one does ihat hcttcr ihan Wal-Mart."
This case was w tten by P. Mohan Chandmn, under the direction of Mvek Gupta, ICFAI Centr lor l4anagenent Research (|CI4R).

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Wal-lvlart s Supply Chain Management Practices

BACKGROUND NOTE
Wallon \!as born in l918 at Kingfisher, Oklahoma, US. After graduating fiom the tlniversity ot Missouri in 1940. Walton worked tbr the famous rctailer, J C Penney- Ir his firstjob, Walton had displaycd the qualities of a good salesmtui. He realized the inpofance of building lo)'alty anong ouslolllers as \rcll as employees. In the nid I940s, Walton gave up his job and decided to set up his o\rn retail store. He purchased a storc fianchise fiom Ben lranklin in Newport, Arkansas. It was here that hc leamt his fi$t lessons in lctailing offerirrg significant discounls on product priccs to expand volurres a d incrcasc overall profils. The business was successful ind walton soon acquircd a second store wilhin three yeais. Wahor not only looked fbr oppor{unities to open stores in olher snall towns bul also explored thc possibilily of inlroducing innovative practices such as self'-service. As the need lor people to manage his stores iDcreased, Walton tried to atlract talented and experienced people from other slorcs, rcportirg an annual sale of $44 stores. nores. By 1969, Walton had established 18 Wal-Marl slorcs. h Siohigan and lllinois. By the acquired 16 Mohr-Value stores in million. ll1 lrr mid 1970s. Wal-Mad accluired late 1970s, lhe retail chain had cstablished a pharI11acy, an autq servi$ center, and several iewellcru divisions '._. '. ,lrl di\'isions. ie$ellcry

a-:

sc'iustorl towns. where most oI its stores were located. Comm-eiling.b!'thp gioivth of Wal-Marl. Walton said: "When \le arriled irr thesc small towns offerirr(1orv prlecs tvery day, cuslomer salisfaction eople lwanied to shop, we passed right by guaranteed, and hours that were rcalisiic for the ups. liniied selection and limited that old varieiy storc conpetition, with its 45 hours." wal-Mart stores were locatcd at a con}gqient phae in a big \larehouse rype building and largeled customers who bought nerchandise in'ir!l\ Customers could buy goods at rvholesale fee. By 1984, lhcre were 640 priies by bccoming rnembers and paylng a !o'n:!t n{] , nr "nrbership mn w^l'Marr stores srores ir in the llre US, lJS gcnerating ccneratins sales diibqnt ofriboirt $+.s $4.5 bn ana and accming accruins profii Drofii ofover $200 rnn Wal'Mar
to
h:ii

*ie

Wal-Marl suffcrcd a sctback in 1992, wfieivatton died aller a prolonged illness. But ii continued its impressi\'e grolrth in fhe 1990s;-.'lbcusirrg more on establishing its stores overseas ln 1992, WalNfaft expanded ils operations in Mi\9o by enteri g into ajointventure with Cifra. Two years later. lhe co pany acquired ]22-Woolco (torcs from Woohvorlh, Canada. By 1997, Wal-Mart had becorne the largest volume disiqNrt"Ietailer in Canada and Mexico. ln 1997, Wal_Mart acquired thc 21 store Gennan hy,plimzr4eae hain. Wertkauf. Olher intemational expansion eJlbds included ihe purchase of Braz.lllin reiilir Loias Amcricans' 40 percent intcrest in their joint venture, ard the acquisilion of lo'oi'st!ie5. rd additional sites in South Korea liom Korea Makro. ln January 1999, Wal-N{al1 expanded it/Gennan operations by buying 74 stores of the hypermarket chain, lnterspar. The stores were aiquired from Spar Handels AC, which owned mulliple rcrail formats and wholesale operations ilroughout Germany.

By 2002, Wal-Mart had emerged as the largest company in the world in ienns of revenues Aralysts felt thal wal-Mart had come a long rlay since 1979, when the company generated annual reveuucs ofmore than a billior dollar lor the first time. By 1993, the company was doing a billion dollnr business in a week and by 2001, it was crossing the billion dollar mark in evcry 1.5 days. Analysts aftributed this phenomcnal growth to Wal-Mart's continued focus on customer needs and reducing costs through efficient supply chain managenent plactices. The company was able to offer a vast range of products at the lowest costs in the shortest possible time. This was possible nainly due to two factors Wa1-Mart's highly automated dist.ibution centers, which significantly reduced shipping cosls and iinle, and its computedzed inventory systern, which speeded up the checking out time and recording ofliansactions.

ffiN
MANA(]ING THE SUPPLY CHAIN
PROCUREMENT AND DISTRIBUTION

Wal-Marts Supply Chain Management Practices

Wal-Mart always cnphasiTed the need 1() rcduce its purchasing cosls and off'er the best prioe 1{) ils customers. The conpany procured goods directly liom manufactureN, b-t_passing all intermediarics. Wd-Mart was a lough negotiator on prices and finalizcd a purchasc deal only lvhcn it \\'as fully confide l that lhe products being bought were not available elscwhere al a lower priceAcoording to Claudc Flarris, one ofthe earliest employees. "Every buyer has to bc tough That is rhe job. I al$,als lold the buyers: 'You are ncgotiating for your ouslomcr. And your customer dcscrves the best prices lhat you can get. Don't cvcr leel sorry 1br a vendor. He always kno*s what he can sell, and we want his botlom pdcc.'We would tell d1e vendols.'Don'l leave iD any room for a kickback because \!c don't do it here. And wc don't want your adverlising program or delivery prcgram. Our truck *'ill pick it up at your warehouse- Now what is your best price?"
iitrrdcrstanding lheir cost wal Mart spent a significant amount of time meeting vendors a-nJ structure. By making the process traisparent, the retailer could be certai[-dhat the manuf-acturers were doing their best to cut dorn costs. Onc('sitisfied. wal-Man beie\cd in establish gahnglern rclationship with the vendor. In its attempt lu drite lrrrd barlairrs. Wnl Maft did noi cven spare

manufacturers like Procler & Gamble (P&C).,:l.Io\1dYqr;.lhe company, generally, t preferred local and regional vendors and suppliers. :..

big

Ir

1998, wd Mart had over 40 distribulion thc US. Over 80,000 items were stocked in thcsc ielltlrs',Wal-Maft's own warehouses direclly supplied 85 percent of the invcntory, as corllprred to j0 65 percent f.r colnpetitoh Accordinlilo rough eslimales. Wal Mad wlls able to provide GplenishDrents withi i$o days (on an average) against at leasl five days lor competitors. ShlpPin! costs 1br Wal-Mart worked ou1 to be roughly 3 pcrcent as against 5 percenl for competitors. r. r.. '

.'..."i centersl ltr.caterl ii differcnt geographical localions in

,.r-

Each distribution centcr was dividedin'to iliffqrert sections on the basis ofthe quantity ofgoods rcrc\ed a d ur. m:rrugeJ rhr .an. $ail"r both ca'e- arrd palleri/ed Cood.. ll-e irr\enl^f turno!er ratc uas lerl high, cbout o ce cvtry two weeks lor most ofthe itens. Goods neant for distribulion wiihin the US rsu;rlly .arrivdd in pallets, while irnpo .3d goods arrived in re-usahle clelivercd pioods such-as aulollotive ancl drug products boxes or mses. In ,o." "u.".1!ii'pp'li"rs directly to the stores. About s5%i"thc goods rvhich were available at the slores passed through
the

distributio centelJ:.\ '...

The distribution centers ens.qred a stead) and consistent flow of products to suppoft the supply function. As wal-Maft useii sophisticated barcode technology and haad'held computer systems: managing the center became easicr and more economicai, Every employee had an access to realtime infomation regarding the inventory levels of all the products in the center. 'Ihey had tojust make t*'o scans one to identify the pallet, and thc other to ;deniill lhe location fron where the stock had to be picked up. Diflelnt barcodes were used to label ditferent products, shelvcs and bins in a center. The handhcld computer guided an employee $ith legard to the locatron of a particular product from a particular bin or shelf in lhe center. When the computer verified the bin and picked up n product, the employee confirmed whether it was the dght prodDct or not. The qualrtity of the product required from the cenler was entered into the hand_held computer by the employee and then the computer updated the ;nformation on the main server. The hand-held computer also enabled the packaging department lo get accurate information about the products to be packed. It displayed all informalion about the storage, packaging and shipping of particular product thus, saving time on unnecessary paperwork. It also enabled lhe center

Wal-l\lart's Supply Chain Nlanagement Practices

supelviso$ to monitor their empbyees closely enabling them to give dircctions and even guide thcm cvcn on thc movc. Ihis cneblcd thc company to satisl-.r' customer needs quickly ard ill1prove the level ofefficierc), oithe distribution cente| managenent operations.

[ach dislribution cenler had lacililies for nainiainirg personal hygicne such as shower bath and fltness centers. It also had provision for fbod, sleep and persoDal business. Thc distribution cenler corld also bc used for rnectlngs and paperwork. The truck drivers of Wal-Maft sonletincs availed
these facilities.

LOGISTICS MANAGEMEN'T

An in]portant leature ol Wal-Mad's logistios infrastruoture rvas its last and respor"irc transpofatjon systcm. Thc distribution ccnters were serviced by more than 3,500 co pany owned tfucks. These dedicated tmck fleets allorved the company 10 ship goods liom the distribution certers to the stores within t*,o days and repleDish the store shelves twjqe a wcck. The truck fleel \ras the visible link bet$een the stores and clistribution centers. Wal+j4\ believed that it needed drivers who were conmitted aDd dedicated to clrstoner servic6. The'.company hired only experienced drivers who had driven Inore than 300,000 accirient lieq'nriles.\ith no major traffic ! i. r ',',, ', ... r. \.. !.,. Wal-Mal1 truck drivers generally moved the ne.r-chitndisgilgndgil,'1mit... from Wal-Mart distlibution centers to the rctail storcs sc iced b\ each dislribution cenler. These retail stores were considered as cuslorners by the dislribulior centcls.'l he ddvcis had 10 rcport their hours ofscrvice to a coordinator daily. The coodiDator schectuled all ttaijatelt;s {lepeDding on thc available driving tirnc and the estimated time fbr travel betweelr.tJle dis_tribution centers and the retail stores. The coordinator infonned lhe dri\'er of bis dispalches:.qither on tbe drivor's affival at the dislrib tion center or on his return to the distributidr oenrei'.li6m llre retail slore- Ihc dr;ver was usuallv expected to trke a loaded truck trailer.,ftom:ilie.distribution center to ihe rctail store rnd reru back $ith an empt-v tmiler. He had to iiiaii{ch.a loaded truck trailer at the retail store and spcnd the night there. A driver had to briDg ,tli-iiiiileiil,thc dock of a store only at its scheduled uiloading time. no rrrlter \\ hen he ,rn i\ ed rt tie store. The drivers delivered the trailers in the aJiernoon and c\r('ning llou.s a d tLrcl $ouLd bc u lordqd afthe store at nights. There \\'as agap of t*'o hours between unloading of each traji.r,..I 01 instance. if a store received three trailers, thc frrst one would be unloaded at midnight'il?.,{M), the second one $ou1d be unloaclcd at 2 AM and rhe third
one at 4

AM.

/:

\'-

'::,'

Althoueh, the traile;i \\,.;ie..left unattended. they rvere secured by the drivcrs, until the slore personnel took charge of ilieiat night. Wal-Mart received more trailers than they had dooks. due ro rlreir l.,rge \olunre or br.r'e.s.

walMart maintaincd a stdct vigil ovcr its drivers by keeping a record of their activities through the "Privale Fleet Driver Handbook" (Refer Exhibit III). Thc purposc ofthe book was to cducate the drjvers with regard to the code ofconduct. It also included the tenns ard conditions regardiog the sale exchange oflrailers wilh the slore personnel and the safety of Wal-Maft's propefy- This book also contai ed a list of odrer activities, the non complia cc of which would result in the temination of thc driver.
To make its distribution process more eficieDt, Wal-Marl also made use of a logistics technique known as'cross-docking.'In this syslen, thc finished goods were directly picked up from the manufacturing plant ofa supplier, sorted out and then directly supplied to the cuslorners. fhe syslem reduced the handling ard storage of finished goods, virtually eliminating the role of the distribution centers and stores- There were five rypes ofcross-docking (Refer Exhibit lV).

Wal-tvlart s Supply Chain wlanagement Practices

In

cross docking, requisitions receivcd for diifarent goods from a store werc corverted iito purchase or procurem;nt orders, These purchase orders were then for*ardcd to the nranul'acturers who conveyed their abilit]' or inability to suppl-v the goods within a particular period ol time- In cases rvhere thc manufaolurer agreed lo supply thc requirecl goods within the specified linrc the goods wcre directly lorwarded to a place called the stagirg area lhe goods were packed hcre iccording to the orders reccived f'rorl different stores aDd lhen direclly sent to the rcspcclive

To gain nraxinun out of

app."ou"h to piomotions had becn highly centralized and $ere generally taken at the corporate level' The crossdocking system. however, changed this practicc The syslem shilied the locus lrom "supply chaii" to thc';demard chajn," which rneant that irstead olthe retailer'pushing' prcducts into the systen; customers couki 'puil' products. when aDd where they nccded This approach placed a prenritrm on frequent, informil cooPeration arlong stores! distribulion centers and suppliers *'i1h far less ceftraliTed coDtrol than earlier. ,,, ll.

managerial control. Iladitionally, decisions about nerchandising, pricing

cross docking, Wal-Mart had

to make fundanental charges il1

its

and

INVL,NTORY

MANAGEMENT
abilit) to cater
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rhe iDdividual ne;ds':lot its slorcs storcs could choose from a mrmber ofdelivcry pl s. lor insrance. Jhlre rvar!;q ac;lierated clelivery systcm by which storcs located within a cefiain distance of a gedgraphicdlcditer could rcceive replcnishnent within a daY. r'.-.

Wal-Ma

had developed an

.... ,,'

Wal-Mart jnveste.l heavily in

and conmuljcati;;i sistems to elleclively track sales and merchandise invcntories in stores across the coLriiiry With the rapid expansion of Wal_Mart stores in the US. it was essential lo have a good colrr;;ticiilion systen llence. wal-Mart set up its o\ln satellile commuDicatiorr sysrem in lt8i'r Exi;lainilig fic bcnefits of lhc system Walton said, "l can walk in the satcllite room, where ou. Lic\i"i";!'sit in lront ofthc cornputer screens talking on the phonc to any stores that might be/hdtiigriEoblen with the systen, and just looking over their ;houlLlers for a minute or two wiliiiilqle a lot about how a particular day is going on the screen. I can see the total of the day's bank cildit sales adding up as they occur' If we have something really impo ant or urgeil to cgmnlunicarte to dre stores and distrjbution centers' I, or any other wrl-Ma; executive ca; walk daat'to\our TV studio and gct on thal satcllite transmission aDd gct it as'lrturday mo ing around three, look over these printouts and right out lherc. I can a we have had." kno\\ preciseh $hrt

lT

wrl-Mart was ablc to

unproductive inventory by allowing stores to manage thet own pack many product categories, and timely price markdowns lDstead sizes'across stocks, reducing of cutting inveitory across the board, wal-Ma( made tuIl use of its IT capabilities to nrake more invenlories availabie in the case of items that customen wanted most' while reducing the overall invcntory levels. Wal-Mart also nelworkcd its suppliers through computers. The company entered into collaboralion with P&G fot maintaining the inve tory in its stores and built an autonlated reorderirg system, which linked all conputers bet$een P&G and its stores and other distribulion centcrsiTlre computer system at Wal-Mart stores identified an itcm which was low in stock and sent a signal to PAC. The system then sent a re-supply ordcr to the nearest P&G f'actory through a satellite;ommunicatjon system. p&c thcn delivercd the iten either to the wal-Mart .listribution center or directly to the concemed stores This collaboration between Wal-Mart and P&C was a

rvin-win proposition for both because Wal-Mart could nonitor its stock levcls in the stores constantli and also identify the items that were moving fast. ?&G could also lo er its cosls and pass on sorne ofthe savings to Wal-MaIl due to better coordination.

I
Wal-lvlart's Supply Chain Management Practices

Enlplolees at thc slores had the Magic Wand.' a hand-held computer \\,hich \\,as linked to in-store terminals through a radio fiequc cy nebvork. thcsc helped then lo keep track ofthe inventory jn stores, dcliveries and b.rckup merchandise in stock ar rhe distrib tion cenle$. The order management and store replenishnlent ofgoods were entirely cxeculed \'/ith the help ofconputers through the Point-of Sales (POS) syslern. Through this s\stenl: it was possibte to monjt;r a d track rhe sales and nte|chandise slock levels on thc store shelvcs. Wal-Mift also made usc ofthe sophistjcatcd algorithm system which enabled it ro lorecasl the exact quantilies ofeach item to be dclivered, bascd on ihe invcntories in each store_ Since rhc data was accurate. even bulk items could bc broken and supplied to thc slores. \l al-Mart rlso used a celltralzed in\;nrory data systen using which rbe personrcl at tbe stores could fi ril uur rLc le\ <l ot invcrrrorics alLl tie location of e:lch product at a|y giveD time. ]t aiso showed \\,hether a producl was beinc loaded io lhc disiribution ccnler or was in lraDsit on a tflrck. On(< the goods \\ere utrloadcd at th; store. the store was ftrmished with full stocks ofinventories ofa panicular item and the inventory data systcm was imlnediately updated.

Wal-Mart also nade usc ofbar coding and ridro trequelcy t<(hnolot\ to ltrcncge rls iDventories. Using bar codes and fixed optical readers. thc gooLl\ eoutd bc illecled ro rhe;npropriaic dock, from where they \\'ere loaded on to thc lrucks for shipmcnl. ear coairiCdirvices enabled eflicient picking, receiving and proper invenlory control olthc appropriate good!.1i aiso enabled casy order packiDg a.d physioal counting olthe invcntories. I al, _.,.r.

.:.

S+ Uitfien to biriiii;;ait link systen- More than 10,000 Wal MaI1 retail suppliers used the rerait link s].sldm Jo\rninitol the sales ofiheir qoods at stores and replenish iDveniorics. The details of daily'Gansactiiixl rvhich approximatcl],a;noult<il 1() lnore than 10 lnillion pcrday, \\'ere processed rhroug! this integrated sysicm and weic turnished to every Wal-Ma( store by 4 a.m.. the nexr day. In.Qalobii 200t, Wal-Mar1 ried-up $jth Atlas Comnrerce lor upgrading thc systen through tl)e. IDtemeiaitableLl rechnologics.

lrr 1991, Wal-l'lar1 had invcsted approximately

Wal-Nlaft owncd lhe largest and nost so|Listr(nred cnnrprrter sJsrem in the nri\are sector. The companv uscd Massivcly Parallel PlocessoilMPP) conputer systcn to track the movement of goods and stock levels. All inlonnatidi .rglatcd ldlales and i[venbries was passcd on through an :,'h"rr.cd.rr<l .re corntlUnrcir'io":1.{enr. lo p.,\iJc bJ(k-up i ca,( ulil rn, t.r br.:r(d.\,n or .cA icJ irr<n..nri^-. rhe ermor"l hrd arr e',ren. i\(,oIr rCencl nlan. By making eflectivc use ofcomputcrs in : l its conlpany,s operations. Wal-MaIt was successful in pro\ iLlirg urintc Uplrd serviccto tscustomcrs. suppliers. stockholders and trading partlre$.

THE BENITFITS RI'APXD.' :7

Wul-Mad strongly helie!cd alrd consta lly enphasized on strengthening its rclationships \lith its cusiorners. supplicrs inJ enplolces. The company was very vigilant and sensed the smallcst ol chanes in store hjouts and merchandaing techniques to improve pcrfomrance and value for customers. The company made effots to capitaljze on every cost saving oppodunity. The savings on cost \\,ere alwirys passed on to the consuners, therebl' addiDg value at cvery stage and process. Wal-Mart also enjoyed the benefits of low lfansportation costs sincc it had its ow lransportation system which assisted Wal,Mart ir delivering thc goods to differeDt stores within (or sometines less than) 48 hours. Trausporlation costs for W.l-Ma11 $cre estimarecl ot approxjrrrctely 3% ofthe lotal costs as cornpared to 5% lor their competitors. Having its ovvD transportation systcm enab)ed Wal-Mart to replenish the shelves four times faster than its competitors. Wal Mar'l priced its goods economically and the prices varied from day to day. The company enioyed good bargaining power as it purchascd huge quantiiies. This enabled it to price iti products competitively and pass on the benefits to the consumcrs. The company ofiered highcr discounts than rny other rctailer and they camed good revenues in the form of highcr volu;es_ Low pricing ensured tbat the sales volunes were hieh and consistent.

,,1... ..

Wal-Mart's Supply Chain Manaqement Practics

The benefits of an efficient supply chain management syslen included rcduciion in lead time,r faster inventory tunover, accurate forecasting of inventory levels, jncreased warchouse space, rcduction in safety stock .!rd better working capital utilizatioD. 11 also hclpcd reduce the dependency on lhe distribuliou ccnter rnanagement personnel resulting in I1linirnizalion oftraining costs and errols. The stock-out of goods aDd llre subsequent loss arising out of it was conpletcly elirninaled. Wal-Mart's supply chain nanagcment practices resulted in increased etioiency in opcratjons and It elilnirated old slocks and maintdned qualiry of goods. Bar coding and radio frequency technologies enabled accurate distribution of goods. Cross docking also helped Wal-Marl to reduce iDventory slomge costs. lt also helped to cut down the labor and oth,'r handling costs involved ir the loading and unloadilrg ol goods.
better customer service.

QUESTIONS FOR DISCUSSION:

i.
2.
3-

Wal-Mad has been able to achieve respectable leadership i lhe,rctlill industry becarrre of its Iocus on supply chaii lnanagement. Discuss in detail the disltibutioi and logisiics system adopted by wal-Mart. ,-i: ....'. a.l ,....a -.,., The use of innovative infoanatior technology tools hajlr\ertfitd. rwai-Mart's supply chain Dlanagement. ln rhe lighl ofthe above statcrlent, Eigfly p\Atain hdi TT beDefiled wal-Mart's logistics and inventory management. 1i ,. '
What were the supply chain managernent proces5es ad-apted
they eliictive?

/:'

Discuss.

b) wal Mal1

and lrow lar were

l.: "\
\,,.

4- what lvas the nalure of

Explain.

management practices and horv

Uenenrs aeriye,i..try Wal Mart froin the efficient supply chain falit haiiqdntiibuled to its sustaiiable competitive advaitage?

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Wal-Nlart s Supply Chain l,lanagement Practices

EXHIBTT

I
2001 Srles

WORLD'S 25 LARCEST RETAIL COMPANIES BY SALES (2002)

Rank
Company Wal-Marl Canefour

Coutrtry

(in mn

Rrnk by Nlarl(cl

)
3 5

lls
SuDerna*et/Hv.enn.rlcl
tJ,S,

:t
6

7.800

t,121

6 12

cl.'r0l
50
0913

)
SuDernrJrket

{JS
Metro AG
U.S.

t:l
32
5

6
1
8

.18.264

Discouni
Store/Department store SuDermarket/HvDcrnrarket

lq.t'5
tr,qi
I

ll.s.

)o
9

I]K
Se
S,l(oebuck

37.17S

t0

U.S.

Dcpadmcnl store/ceneral

lt
12
13

fr$.handi(.

..
'..

35i817

l4
t5
P

u.s.

3+.lUl

ti.s.
]TM
Enterorises

rlrb Diversified ,.
Wholesale

i.
'-

,'':l:t 640 32-9)2

32.00,1

l4

i:t'

ti
t6
17
18

.l.C.Pemy

u.s.

Depxrftrent .. slore/Drue
storc FoodlDi3coxnt stole

t8
P

i0

000

Edeka Gruppc
J Sainsbury

Div-n;ifie:l
IJ K

)9,3(]2.

)7.1)1 Divelsified
21,019
24,623

25

I'inault
l9
10 27
3

lI.s-

Druq srore

2l
22

Diverified

A*h."
GruDDe

,"'i..

Hypernn*et/
Diversified

23.118

?'l 24
25
Source:

TeDselmann

u.s.
U.S.

Ho

e lmDrovenr-".1

22

t8
t

ws*.chrirstorcage.con

Nolc: *P: P.ivately owned

All amounts are in nrillions ofU.S. dollars. using the average 2001 exchange raies. All dala is corporare Ielel for retail-di!'ersiiied companies, excludhg VAT and non,retailing rcvenue rhen available. Thc
different businesses olJapanese Conglonerates are accounted for separatel_v.

Wal-lvlart's Supply Chain lvlanagement Practices

IIXHIBIT II
THN STRENCTH OF WALMART
Yearlv sales Iotal emplo\ees Jero'" thc qlohe Numhcr ofstores \\,o dwide Nnmher of Suoercenlers
$220 biLlion
1.28

million 4.i82
1.060 495 420

Nunber ofSam's Chbs Numher ot'new stores oDcned in 2002 Number olsuDoliers Number of Wal-Mart's in Texas (US) Vnlue of 100 shares of wal-Malt (as on January 28, 2003) nurchased in 197014 $16.50 Der share wal-Mari's rank/position anong all retailers in the US (in tenns of

r0.000
316

$l

1.5

million

wrl Mart's rank in ie*ellery sales Nunrbcr ofDallets shinDed bv Wal-Maf tntck everv week Annual sales ofhot doqs bv Wal-Mart every year (approx) /''. '\ l Percentase ofdry dog lood bought by walMalt iD the US -. \. i.
{orrl o.cunied lloor area ot \\ r, Marl
Percentase oftoothDaste bousht bv

'l
18.

50 70 J

million

nillion
iles

square

Wal-Mart

,7_

24vo

Ycarh ad \ ertis in !. e\pelldiiurc V.urtr pr'.hi.e olcold lo- wll-Man bl i s .upplier' Hirhesr oll<-dav 'alcs record rill Jate(No\qn'ber 2r,20011 Number olJ-eariets owned by Wal Mart I Nu-ber of pilc'ts o*n"d b) Wal-Mart , --:'..", N mber ofemDlovees emDloved bv,iwal:MirJ in China Yearly sales of850 McDonalds stiri\thdt-dpdiatc inside wal-Mat
stores

$498 million 18.4 metric tonne $1.25 billion

t8
60

4000 $1.3 billion

15.7

\urllberol c,rslomer'<\cl]da\

ar W:l'-Marl clore.

$o'ld$iLl(

million

Number ofeverv dav visitors at Wal:M?rft's websitc. walmart.com Number of items stored bv awal-Mait SuDercenlers Itcms slored b\ ualnrarl.cod Estimnled markct ctpitalizlt'ior1-df Wal-MaI1 in 2020

1.50.000
1.00.000

6.00.000

$l1 I irillion

l0

Wal'Mart s Supply Chain lvlanagement Practices

NXHIBTT

III

PRTVATE FI,IIET DRIVER HANDBOOK

Wal Mart's Private Fleet Driver Handbook contajned terms and conditions with regard 1() tenniiation olthe truck drivers. ,^ccording to lhe Wal Maf's Privatc Ileet Driver Ilarrdbook, a driver oould be terminated from his iob il he relused to deliler an assignment given to him. However, if a drivcr rcfused to deliver the assignmcnt duc to faligue or insufficicnt rest. the relusal was not considered as a violation. This book included other rules, the violation oiwhich would rcsult in inmcdiate tennination of the driver. This book was nraintained by Wal-Mart to oreale a\rareness about thc rcle, duties and responsibililies ol a driver towa s lhc company, sociefy and profession in various situations. Ihe expected actions ofeech driver and the'code o havior'\\as clearly detailed in this handbook arld the drivcr had to strictly adhere to thcse rules aDd regulations. However. drivcrs wcro not temrinated sinply because thcy violated the rulcs and ternN mcntioned in the handbook. The facts, cilcunstarces, situations and othcr collaborative evidence were taker into account and thoroughly assessed lo decide abdut the termination. When a driver violated a rule or 'code of behavior'. he was not terminated ilni\rediately, but was firsi taught the coffect code oibehavior by Wa1-Mar,. ... 1.. l\

For example, though tlre handbook mcrtioned that Jri\crs h. lo be \cr) polite and kind rvbile dcaling with the store personnel and others, a driver rvqs npl t*dr iii:,rqd4' tor be;ng.ude. Instead, he was given a warning aod asked to behave properly:ge '44'bi.ininited only when he showed no improvenent. The drivers were also reqL'ir.d io "..u,. tt,e truck rrailirt at the timc dclivering them to the stores. Tlre inabilily or f.riluie tn do s; $as nor eonsidered rs ! breach contlact that would result in immediate termination. Horvel'dr. a driver wns once tcrminated fron his job (in the yeal 2000) by Wal Mad's theri'llivale Fleel Manager, Mr. Paul Darwir, (who loo.,lrar"e'n looRrl', r <a\Irg. rri l(r u scc,rredrtore lr e.ror(.reir dl,iglr\:rl.
Moreover, according to the rules nle;fiCnddlllijt* handbook. the drivers should exchange the truck trailers in a totally 'safe and,respoiilJl2le' manner. so that neither thc fraileN are damaged during exchange or in transit. nor'doetil rsilt in any loss to other people in the fbrn of injury, etc. When a drivcr lcavcs an un lo;dqd ,trailer ir1 front of thc WalMalt slore for the siore personnel to pick il up, he should cnsrile that the lrailer is properly safegua|ded and secured against a closed dock in lhe sli;re.'Ihis wouid ensure lhal no other person would gain access to
the unloaded

tmilers.

'.t... t,]

For \\al Mart. ar aroidable aLcidenr ur" a norc severe oftense than refusing to deliver an nssrg mcnt for dispatch. Mt Paul Dart\ in, the then Private Fleet Manager of Wal-Mad, once dismissed a drvfl for being inlol\ed in an accident that could have been avoided or prevented.
Ho$'cvcr- the driveds dismissal *,as later withdrawn.
Sorrcei U.S. Dcpt. of Labor, rvnrv.oali.dol.gov

l1

wal'Marts Supply Chain lvlanagement Practices

BXHIBIT IV
TYPES OP CROSS DOCKING
Opportunislic Cross docldng

tlis meihod ofcross docking, cxact information about wherc the required good rvas to be shippcd and from where it has to be procurcd and the exad quantily 1() be shipped, was Decded lhis method of cross docking enabled ihe company to directly shjp the goods nccded by the rctail customers. sithout storing lhem in the warehouse bins or shelves. Opporluuistic cross docking coxld also be used when thc *arehouse management software, installed by the relailer, alerted him thal a particular producl rrs rcady lor moving and could be nroved immediately.
Ilr FlorY-through Cross docking ln this rypc ofcross docking, there vas a constant irflow and outflow olgoods from thc disiribution center. This 1)rpe of cross docking was nroslly suirable for perishable goods. which had a verf short time span. or goods that were difficult to be stored in the warehouses. Thjs cross dockjng system $as mostly followed by tbe sxpermarkets and olhcr r etail discount stores, especially for perishable items.

Distributor Cross docking In this typ of cross docking. t|e manulacturer delivered the goods direcily to the [etaiLer. No intcmediaries Nere involved in this proccss. This enabled the reiailer to save a major portion ofthe costs in the form ofstorage. As Lhc rctailer did not teed to maintain a dislribution cenler for stornlg
various kinds ofgoods, he helped hnn save warehouse costs. Thc lead lime for rhe delivery of goods lrom the manufacturer ki thc consunrer was also drastically rcduced. However, this nethod had some disadvantages too. TIe tra.spoiation cosrs for both thc manufacturer and the relailer tended to increase over a period oftnn, when the goods we.e rcqulred to be transpoted to different locrlions several times. Moreover. the lransportalion systen had to be very fast. Otheiuise, rhe very purpose of cross docking was losL. The traosporiation systenr should also be highly responsive and take the responsibilit) lbr thc delsys in delivery ofthe goods. The relajler was at .t greater risk lle lost the advarrtagcs olsharing the risks Nith the manufacturer. fhis lype ofcross docking was suitable only onods for thosc .elailers who had a large distribuLion network and could be used h situations "vhen had to be dclivered in a short span oftjme.

Manufjlcturing Cross docking

In Manufacturing cross docking, these cross docknlg facilities served ihe faclories and acied as lcmporary and 'lnini rva|ehouses." Whenever a manufacturing company required sone pa{s or
naterials for nanufacturnrg
.t

verf short

span

oftilrle,just

Frticular product, it lvas delivered by lhe sxpplier

$,hc'n

il

,as needed.

nr small lots $'ithin a Tbis heiped i:drce the transpofatlon and warehouse

costs substantially.

Pre-Allocated Cross Docking

Pre-allocated cross dockiig is very much like tbe sual cross-docking, except thai in ihis tjpe ofcross docking, the goods are alread!, packed and labeled by the nanufacturer and it is ready for shipnent to the distribution center liom where it is sent to ihe store. The goods can be delivered bv rhe disiribution center directly Lo the store without opning the pack of the nanufrcturer and re-packing

Tle store can theo deliver ihe goods djrectly ro the consumer without aoy further r+ packing. Goods receivcd by lhe distribxtion centcr or rhe store are directly sent into the orihound shippirg truck, io be delivercd to the consumer, wiLhoul altering the package of the good Cross
the goods.

dockirg requires very close co-ordinalion and co-operation of rhe manufacturers. warehouse
Tnterchange (EDI) and other geDeral sales infonnation.

personnel and the storcs personnel- Goods can be easily and quickly delivered only when accnrate inionnation is available readjly. 'l'he lnlbrrnaiion can be manrged w'ih rhe help of Electronic Data

Source: Conpiled hy IClvlR throuSh sources ilcluding wcb.nps.nary.mi1, colbt.com.au. wnalogistics com and

12

Wal'lvlart's Supply Chain Manaqement practices

ADDITIONAL RXADING l\ND REFIIRENCITS:

L L

2. "Dist

bution and Rct:riling in China Revolution and Competition,'. w\tw.alberla_orgl November 12, 1996. Ro$al. Christine, "Cross docking: The move from supply to denand", wwn,.dmg.co.uk, Augrst 1998.

Oftrneyer, K.cwcndolyn. and Laltin M. James, ',A Theoretical Rationale for Evcry Day Lo$ Pricing by grocery rctailrs," Sranfbrd cradLlatc SchooI oiBrrsiness- Igg I

,1. Hulet. D.William, "clobat Warming an(t Wal-Mafi, Why gtobrt warming is a nunicipal gor(rnnrent concern . \$\ e.(Ire t..Io.ii. \eplcmber Iqqg. 5. "Cross Docking and Cross Doching Nelwork Dsign,,, www.tti.js],e.gaieoh.edu!
1998-99
6.
1.

"Cross docldng dclivers for Retait,,, w!\.\\,.spscommercc.coln. 1999. Haffinglrnr, Lisa, "Digital Age $arehousing,,' penton Media. *,ww.industryweek.conl, July

8. "Distribution 9.

Logistics Jounral, \r-1vrv.infochain.orr, Apiil.2l. 2001. t5. "Wil-Mart.com: The ehysic'al:\giarii_,rgocs Virtual," Red Herjog Magazire. \r \ s.f(J\e. rinq.ro ", M:rJ 7. 201,1. 16. Hulten, Stall'en and Nyberd. -Anna, ' otuntary retiit chains and tho threats and opportunities oltruropean tntegt;ilqn,', www.s ee.org, May 15.2001. I7. "It's not only the retail side,--w:ll-Itiart Distribution,'. www.Wal Maf\rarch.conl- Januarv
0. ) 1,u2.

N. Maria. "Wrreho ce Evolution: High .Telh..'DCiJclopnents cct Inatustry Cooking", Plants. sites and parks magazinc, ww*,.Iizsit-!i:qid p;Uilrarv/March.2000. l1."Cross-dockinginthU.K,"SiemcnsDern3tic,l\\\\\.sicmensde taric.:orn.3U.2001. l2. "WhAt is cross docking?, Tle Wateho!se \! ord, \a s $.colof$ hoLrsrnc.conr aU. 200l. 13. Colosino, Robert and Medr,yk, Nicholas, ',Whgjesati Distribution, Managing comptcx srpply chain requirements r..in thc foodscrvice industry,,, wholcsaleclistribution.sen,ices.ibnr.com. Apriiil.t, 200 t. 14. Daudelin.,\lcxandre, "Supply Chain Managcmnt thr Wat-l\lxrr Way,.. Supply Chain and
10. Weiscotl.

,, --r, www.eng.aubum.edu, 2000. O'Brien. P. Kevin, 'rValue Chain Report- Warehous MaL{geientSysterrx Add Vahr,,, rvrvw.industryu'eek.corrr, w!vw.i\waluechain.com, February.-1.0';.20110. '-'

strategiesJ Supply Chain analysis

at

Volirlwagen

of An

ca",,

18. "StaufTer V Wnl-ryarl a-tqie!:Iirc., wrvrv.oalj.dol.gov. June 14. 2002. 19. Coylc. J. John,,,U'ardi, l' ltdrvar.l. Langley, C. Joln, ,'The Management

20.

Logisticsr A Suiily..Chail'Prospctive,', wwrv.house.gor,, June 25.

oI

Brsiness News,

2l.

www.autorentalne\r's.coin, J ly 29, 2002. "Transloading, Cross docking," $,ww.connnoditylogistics.co1n. October 23. 2002.

"Thriry Wal-Mart \Pjlrtner for Flat Rite Rental plan," Auto Renral

200-2.

l3