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Wal-Mart Delivery Service Says to Amazon:

'Bring It'

Students:
- Céspedes Del Águila, Alcides Junnior
- Piñan Sinisi, Valery Julyssa
- Rabines Amaya, Luiggie Joel
- Sánchez Figueroa, Lenny
- Villar Romero, Juan Jesus

Subject:
Supply Chain Management

Professor:
Ramos Palomino, Edgar David

Section::
INA4

2016-2
Wal-Mart Delivery Service Says to Amazon: 'Bring It'
By: Shelly Banjo, The Wall Street Journal
Oct. 9, 2012

In its latest bid to take on Internet powerhouse Amazon.com Inc. this holiday season, Wal-
Mart Stores Inc. is promising same-day delivery in some cities for orders placed online.

Wal-Mart, aiming to take on Amazon, is offering same-day delivery. The retailer began testing the new service in select
cities last week and says it will cost $10 regardless of the size of the order. (Photo: Getty Images)

Called Wal-Mart To Go, the service costs $10 regardless of the size of the order. The
products will be shipped from the company's stores, not from a warehouse or distribution
center. Wal-Mart began testing the same-day service last week in Philadelphia and northern
Virginia.

It added Minneapolis on Tuesday and will add San Jose and San Francisco later this month.
The trial will last through the holidays.

Over the past several years, Wal-Mart has launched several attacks on its online rival,
including a price war over best-selling books three years ago.

This time, Wal-Mart is betting that its network of thousands of stores, combined with an
improved online presence and strong financials, can help it compete head to head with
Amazon, which has increasingly stressed fast, free or low-cost deliveries. Amazon launched
same-day shipping in 10 cities in 2009.

But shipping from stores, rather than from warehouses as Amazon does, is expensive,
analysts said.

"It can be three to four times the cost for the retailer to pick items and pack them from a store
versus having a really efficient, automated process back in a distribution center," said Al
Sambar, a retail strategist at consulting firm Kurt Salmon.

"It's setting up to be an interesting ballgame between Amazon and Wal-Mart," said Wells
Fargo analyst Matt Nemer. Wal-Mart has the scale of nearly 4,000 stores across the U.S.
and billions of dollars in free cash flow, but Amazon is nimbler and has years of customer
data at its disposal, he said.
Wal-Mart doesn't disclose its online sales, but the trade publication Internet Retailer
estimates they were $4.9 billion, or about 1% of the company's total revenue last year,
compared with Amazon.com's $34 billion in online sales.

Wal-Mart has been ramping up its e-commerce business, which employs 1,000 workers in
San Bruno, Calif., down the street from YouTube's offices and far removed from the retailer's
headquarters in Bentonville, Ark.

The retail giant has acquired nearly a dozen start-ups to help broaden its online presence
and developed @Walmart Labs, its Silicon Valley tech shop that has revamped the
walmart.com website and mobile applications to make them more competitive with Amazon
and other online retailers.

Wal-Mart also has been trying to compete with Amazon's prices inside its stores. In some, it
has quietly begun matching the online retailer's prices when customers ask, a practice
historically done only against local brick-and-mortar competitors.

Nathan Engels, a blogger in Cincinnati, snagged a Cannon laser printer at Wal-Mart for $98
earlier this summer, even though the printer's advertised shelf price was $108. Wal-Mart
lowered the price for Mr. Engels after he scanned the printer's bar code using Price Check, a
smart phone application developed by Amazon, and showed a Wal-Mart customer service
representative that the same printer was for sale on the Amazon website for $98.

"I can't imagine Wal-Mart makes a profit on this, but it does keep me in the store buying from
them rather than Amazon," he said.

Wal-Mart's corporate policy states it doesn't match competitors' Internet prices. But analysts
say executives are weighing plans to change that.

A Wal-Mart spokesman declined to comment on future policy, but said, "It's possible that an
individual store may honor the price of an item online if a customer asks."
Reuters
Shopping carts outside a Walmart Express store in Chicago

Wal-Mart also has been trying to use its stores to tap into millions of shoppers who either
don't have credit or debit cards or don't feel comfortable disclosing their personal financial
information online.

In April, the retailer began a program that allows customers to order merchandise online and
pay for it at a store with cash. Shoppers can pick up the items at a store or have them
delivered.

Nearly half of Wal-Mart's online sales now come from purchases customers make online and
pick up at a store, said Wal-Mart spokesman Ravi Jariwala.

"We have a unique advantage because we have the national footprint of stores combined
with our online site that enable programs like site to store, pay with cash or pick up today," he
said. A spokeswoman for Amazon declined to comment on Wal-Mart.

Instead of shipping goods from its distribution centers, Wal-Mart will pluck products from its
network of stores in the four areas of the test program. The retailer wouldn't provide details
on who would be picking and packing the products.

United Parcel Service Inc. will pick up the goods and deliver them to customers, who have
until noon to place orders and can choose a four-hour window in the evening to receive
deliveries.

Only about 5,000 items, such as televisions and toys, will be available for same-day shipping;
the service doesn't apply to the millions of products available on Walmart.com.

It also doesn't cover grocery and produce items, except in California where Wal-Mart has
been testing a grocery delivery service for the past couple of years and the program fees and
order deadlines vary.
1. Background

2. Problem Statement
3. Questions

1. What competencies is Wal-Mart trying to develop? Why is this important for them to be
able to compete with Amazon?

Among the core competencies that handles Wal-mart they are:

Delivery on the same day of application for the order of the product, but only what is
developing in some cities and will soon deploy to other of its premises and in each city is
different cost and transport time, analysts are still looking at the possibility to continue with
the project because they see the high cost unlike what Amazon offers.
Order web and pick up in store, this is because most of their clients are distrustful of
providing their personal accounts on a web page so that Wal-Mart is offering the option of
applying the product and book in a store then pass to pick up the shop, yet this project is
being implemented in all its premises as it is tested.

2. How is Wal-Mart's strategy different from Amazon's?

 (Introductory) What are the advantages of each?

Wal-Mart has physical shops and online shops in its supply chain to what they call
combined shops, which allows it to offer a service where customer can pay in cash what
they buy online. This is because there are still a lot of people that don’t trust online
shopping and having to put their credit card number in a webpage to pay. On the other
hand, Amazon has a strategy that allows it to be more agile and be able to offer low
prices to his clients. Basically, this is because they have warehouses all over USA and
when a customer makes an order, Amazon gets the product from the nearest warehouse,
which is much cheaper than what Wal-Mart wants to do (take the products from the retail
store and deliver it to the customers in their houses).

 (Introductory) What are the operations management challenges of each?

Wal Mart has to reduce his costs and online services need to be integrated with physical
stores. The main challenge of Wal Mart is that they have to manage a way to deliver
customers product orders from the retailer store to their houses in an economic way. This
is a challenge because it is more expensive to deliver products from an store than from a
warehouse, this is because of all the TI that a warehouse has and a store doesn’t.

Amazon’s main challenge is to deliver products the same day as the customer asked for
it. So, basically, the operations management challenge is in the purchases and planning,
because it is necessary that Amazon has a good level of inventory (in order that there are
not cuts and at the same time, not too many products being storage) and this can be
achieved by having an excellent planning of what needs to be in inventory, all of that is
based in the sales and forecasts made.
3. (Introductory) How is this strategy related to Supply Chain management?

 What Supply Chain Management strategies would help Wal-Mart achieve their goals?

The strategy of Wal-Mart to deliver the products the same day that they are requested,
would contribute to efficient supply chain way. In this case, it is very important to improve
the sales process customer, as this directly increases the level of service of the company
and, in turn, makes them feel more satisfied customers and generate, at the same time, a
loop of trust between them and the company. This is quite useful for a company, because
the customer will feel like and recommend and will continue opting for the level of service
Wal-Mart. On the other hand, by reducing a link in the supply adena, we would reduce the
total time of service of the client company. On the other hand, it contributes to reduce
maintenance costs to inventories because delivering products on time, brings benefits in
maintaining these as the products leave the warehouse and fast, these, not maintained.

4. (Advanced) The article highlights a company that is pursuing supply chain expertise.

 How your company’s supply chain is currently managed?

The supply chain of Opp Film can be managed better. This is because Purchases
department can have a better communication with the suppliers so that Opp Film has
information about the raw materials that they are able to send, the lead time (it comes
from another country) and the supplier can have information about the raw materials
inventory of Opp Film.

Moreover, although Commercial department has a great communication flow with the
customers, this doesn’t have with Manufacturing and Purchases team. Nowadays, there
are issues because the kardex are not created correctly and that generates confusion and
re-work.
 Who manages the transactions and logistics in your supply chain?

The Purchases team, who’s leader is the Purchases Manager is responsible of the
availability of raw materials for the manufacturing. The Manufacturing Manager (there is
one for each family of products) is responsible of having the products on time to deliver to
customers. The Transportation Manager is responsible of programming trucks so that
they arrive at the right time to the customer’s company and check that Opp Film is
working with the right transportation companies (Local and I-trade) because this service is
outsourced. Finally, the Commercial Manager is responsible of activating commercial
plans and selling all the products. It is important to mention that there is a Logistic
Manager, who is in charge of Transportation, Warehouse, Purchases and Planning.

All of them need to have excellent communication because only in that way Opp Film will
be able to provide and sell their products to the customer at the right time and minimizing
the total cost of the supply chain.
 What are the advantages and disadvantages for outsourcing this competency?

The only competency that is outsourced is transportation (Local and I-trade).

Advantages Disadvantages
- It lets the company focus on the core - Opp Film may lose control of the process if
business, which is attract new customers the don’t track and make follow up to the
and sell their products. transportation providers.
- It lets the company have more strategic - Information sharing can be a risk, that’s
collaborative relationships with suppliers and why Opp Film needs to have a solid
customers. selection process of the transportation
- It can be cheaper than having a float providers.
because there is no need to hire new - The transportation providers in some way
personal, buy trucks and take care of its influence in the company’s image because if
manteinance. they don’t have good presence and give a
good service when they arrive to the
customer’s company, it won’t be beneficial
for Opp Film.

5. (Advanced) The article implies the importance of Supply Chain Management and
Operations Management in maintaining the competitiveness of a company.

 What business area is your company's strength?

In OppFilm the strength of the business is in the commercial area of the company because it
is the only company producing flexible films for food packaging in Peru. Because of this the
company offers selling prices according to their production costs. Prices are the most
competitive market in China. At such low prices the company can not compete but
competitive advantage is direct delivery in one day transit customer material. For customers
import material from Asia is longer transit and import costs. The company also makes
commercial agreements for volume purchases. A higher volume of purchase price is
readjusted.
 Where does operations or supply chain management rank as a strength in your
company?

The main operations for the company is dealing directly with customers and suppliers in
the domestic market and export. Refine business operations linked to market: distribution,
promotion, sales and services.

 What advantages would be realized by strengthening your supply chain and operations
management competencies?

Strengthening supply chain management skills and operations in Opp Film generates the
following advantages:

 Supply management: benefits that can provide suppliers in the expansion process,
both in cost, location, quality and technology. •

 Advantages of the Economy of Scale: Lower cost related benefits. Bargaining


power. Market positioning.