Seven-Eleven - is another popular case study in supply chain management.

Integration of
information technology between stores and its distribution centers play the important role. Since
the size of 7/11 store is pretty small, it's crucial that store manager knows what kind of products
should be displayed on shelves to maximize revenue. This is achieved through monitoring of
sales data every morning. Sales data enables company to create the right product mix and new
product on regular basis.

Seven-Eleven uses something called combined delivery system aka cross docking. Products are
categorized by temperature (frozen, chilled, room temperature and warm foods). Each truck
routes to multiple stores during off-peak time to avoid traffic congestion and reduce problems
with loading/unloading at stores.

- Tesco is one of the prominent retail stores in Europe. Since UK is relatively small when
compared with the United States, centralized control of distribution operations and warehouse
makes it easier to manage. They use bigger trucks (with special compartments for multi-
temperature products) and make less frequent delivery to reduce transportation cost. Definitely,
they use computerized systems and electronic data interchange to connect stores and central
process system.

- Wal-Mart's "Every Day Low Prices" is the strategy mentioned in many textbooks in supply
chain management. The idea is to try not to make promotions that make demand plunges and
surges aka bullwhip effect.

Wal-Mart has less than 100 distribution centers in total, each one serves particular market. To
make decision about new DC location, Walmart uses 2 main factors, namely, demand in the
proposed DC area and outbound logistics cost from DC to stores. Cost of inbound logistics is not
taken into account.
There are 3 types of replenishment process in Wal-Mart supply chain network as below,

Wal-Mart Replenishment Process

In contrary to general belief, Wal-mart doesn't use cross-docking that often. About 20% of orders are direct-to-
store (for example, dog food products). Another 80% of orders are handled by both warehouse and cross dock
system.

Wal-Mart has one of the largest private fleet in the United States. Delivery is made 50% by common carriers
and 50% by private fleet. Private fleet is used to perform backhauls (picks up cargoes from vendors to
replenish DCs + sends returned products to vendors). Short-hauls (less than one working day drive) is also
done by private fleet. For long-hauls, common carriers will be used.

There are 2 main information system deployed by Wal-Mart. "Retail Link" is the communication
system developed in-house to store data, share data and help with shipment routing assignments.

Another system is called "Inforem" for automation of replenishment process. Inforem was originally
developed by IBM and has been modified extensively by Wal-Mart. Inforem uses various factors such as POS
data, current stock level and so on to suggest order quantity many times a week.

Level of collaboration between Wal-Mart and vendors is different from one vendor to the other. Some vendors
can participate in VMI program but level of information sharing is also different. VMI program at Wal-Mart is
not 100% on consignment basis.

- Amazon has a very grand business strategy to "offer customers low prices, convenience, and a wide selection
of merchandise". Due to the lack of actual store front, locations of warehouse facilities are strategically
important to the company. Amazon makes facility locations decision based on distance to demand areas and
tax implications.

With 170 million items of physical products in virtual stores, the back end of order processing
and fulfillment is a bit complicated. Anyway, simplified version of order-to-cash process are illustrated as
below,


Amazon's Order-to-Cash Process
Upon receipt of orders, Amazon assign orders to appropriate DC with the lowest outbound logistics cost.

In Amazon's warehouse, there are 5 types of storage areas. Library Prime Storage is the area dedicated for
book/magazine. Case Flow Prime Storage is for products with broken case and high demand. Pallet Prime
Storage is for products with full case and high demand. Random Storage is for smaller items with moderate
demands and Reserve Storage will be used for low demand/irregular shaped products.

Amazon uses propitiatory warehouse management system to make put-away decision and order picking
decision.

After orders are picked and packed, Amazon ships order using common carriers so they can obtain economy of
scale. Orders will arrive at UPS facility near delivery point and UPS will perform last mile delivery to
customers.

Amazon is known to use Sales and Operations Planning (S&OP) to handle sales forecast. Anyway, this must
be S&OP process at product family/category level.

To compete with other online retailers, Zappos pays much attention to the way they provide services to
customers. Instead of focusing on call center productivity, Zappos encourages its staff to spend times over the
phone with customers as long as they can so they can fully understand customer's requirements. They also
upgrade the delivery from 3 days to 1 day delivery in order to exceed customer expectation.

Analysis
Through the analysis of 20 case studies, 10 types of best practices deployed by world's leading companies are
identified as below,



Strategic sourcing including overseas sourcing, make/buy decision seems to gain the popularity among
leading companies due to the fact that it delivers substantial savings quickly. Information Technology is also
the building block for supply chain excellence. Surprisingly, supply chain network design including facility
locations, strategic stock placement, manufacturing network configuration tends to be used by very large
corporation. Demand management is something a bit FMCG and Quick Response is something related to
fashion industry. Six Sigma is definitely not dead but the emerging technique in supply chain management.