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INSTITUTE OF

PRODUCTIVITY
AND
MANAGEMENT, MEERUT
REPORT ON DISTRIBUTION & LOGISTIC MANAGEMENT

SUBMITTED TO:-

RESP. PROF. MR. SHAM SHRMA SUBMITTED BY:-


M.A. (LUCKNOW), D.M.M, LONDON ASHWINI KUMAR

BIBEK BISWAS

ISHAN GHOSH

JAYBIR MAHTO

KUMAR AMRITANSU

BIPIN BIHARI PATHAK


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2nd SEMESTER, BATCH—2010-12

CONTENT
NO. OF WORDS—3,591

Acknowledgement 3

Executive summary 4

Introduction 5

Swot analysis 6-7

Details analysis of case study 8-13

Conclusion 14

Bibliography 15

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ACKNOWLEDGEMENTS

With immense pleasure, we would like to present this detailed report on


“WAL-MART”. It has been an enriching experience for us, which would
not have been possible without the support of our team.

As we all know that the assignment needs hard work, keen insight and
long patience with deep vision based on content operation hence it
becomes a humble duty to express our sincere gratitude to Prof. Sham
Sharma sir for giving us this interesting & challenging project

However, we accept the sole responsibility for any possible errors and
would be extremely grateful to the readers of this report if they bring
such mistakes to our notice. We express our gratitude to all those who
directly or indirectly help me in this project.

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Executive Summary
This case study is based on Distribution and logistics management of
world’s number one retail store “wal-mart”.. Delivering the world class
services to the customers is part all the businesses. In this particular case
study we have mentioned the various methods we adopt in order to
collect the information regarding the Wal-mart’s retail store, we have
written the brief introduction about the “Wal-mart” company profile, how
walmart provided technical assistant to its suppliers. They use the RFID
technology in supply chain management. Effective logistics management
help to reduce its cost. But behind every beautiful picture there is ugly &
dark truth, which is unseen and when we seen it’s a un digest able. So we
take you the other side of walmart that is the supplier point of view. What
they have experienced how they feel while maintain a relationship with
walmart. On one hand walmart improve the technology of its supplier
beyond its core competency. On the other hand its passion to reduce
costs; it drained its supplier to virtual bankruptcy. So we take stand on
supplier side with giving few evidences where walmart put pressure on
supplier to reduce the cost. Wal- Mart's promise is to always offer low
prices. As a consequence, if a supplier can't match Wal-Mart's requested
price, it either walks away from the business or moves it’s manufacturing
to a low-wage country. Usually, by the time that squeezes really bites the
supplier is in so deep with Wal-Mart that it is forced to respond to the
company's requests or go out of business. It’s the movement when
bankruptcy situation created in wall mart. This thing we want to present
by saying, how Wal-Mart passion to reduce cost it drain its supplier to
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virtue bankruptcy and strength our point of view we present evidence of
China which make the picture clear in front of you.

So in this case study we have gone deep inside and we came to know
that about wal-mart & some of its supplier.

INTRODUCTION
History of Wal-Mart-
Sam Walton, a businessman from Arkansas, began his retail career when
he started work on June 3, 1940, at a J. C. Penney store in Des Moines,
Iowa where he remained for 18 months. In 1945, he met Butler Brothers,
a regional retailer that owned a chain of variety stores called Ben Franklin
and that offered him one in Newport, Arkansas. Walton was extremely
successful in running the store in Newport, far exceeding expectations.
However, when the lease came up for renewal, Walton could neither come
to agreement on the existing store's lease renewal nor find a new location
in Newport. Instead, he opened a new Ben Franklin franchise in
Bentonville, Arkansas, but called it "Walton's Five and Dime." There, he
achieved higher sales volume by marking up slightly less than most
competitors. On July 2, 1962, Walton opened the first Wal-Mart Discount
City store located at 719 Walnut Ave. in Rogers, Arkansas. The building is
now occupied by a hardware store and an antique mall. Within five years,
the company expanded to 24 stores across Arkansas and reached $12.6
million in sales. In 1968, it opened its first stores outside Arkansas, in
Sikeston, Missouri and Claremore, Oklahoma.
Wal-Mart Stores, Inc. (formerly branded as Wal-Mart, branded as
Wal-Mart since 2008 is an American public multinational corporation that
runs a chain of large discount department stores and a chain of
warehouse stores. In 2010 it was the world's largest public corporation by
revenue, according to the Forbes Global 2000 for that year. Incorporated
on October 31, 1969, and publicly traded on the New York Stock
Exchange in 1972. Wal-Mart, headquartered in Bentonville, Arkansas, is
the largest majority private employer. and the largest grocery retailer in
the United States. In 2009, it generated 51% of its US$258 billion sales in
the U.S. from grocery business. It also owns and operates the Sam's Club
retail warehouses in North America.

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Wal-Mart has 8,500 stores in 15 countries, with 55 different names. The
company operates under its own name in the United States, including the
50 states. It also operates under its own name in Puerto Rico. It has
wholly owned operations in Argentina, Brazil, and Canada. Wal-Mart's
investments outside North America have had mixed results: its operations
in the United Kingdom, South America and China are highly successful.

SWOT Analysis
SWOT Analysis of Wal-Mart
Strengths
• Brand Image:
Wal-Mart is a powerful retail brand. It has a reputation for value for
money, convenience and a wide range of products all in one store.
• Core competencies:
Wal-Mart has grown experienced global expansion The company
has a core competence involving its use of information technology
to support its international logistics system, cross docking, supply
chain management.
• Investment and R&D:
People are key to Wal-Mart's business and it invests time and
money in training people, and retaining a developing them.
Weaknesses
• Weakness due to huge span of control:
Wal-Mart is the World's largest grocery retailer and control of its
empire, despite its IT advantages, could leave it weak in some
areas due to the huge span of control.
• Since Wal-Mart sell products across many sectors (such as clothing,
food, or stationary), it may not have the flexibility of some of its
more focused competitors.

• Exposure to few countries:


The company is global, but has a presence in relatively few
countries Worldwide.
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Opportunities
• Strategic Alliances:
It merges or form strategic alliances with other global retailers,
focusing on specific markets such as Europe or the Greater China
Region.
• Expansion of business: The stores are currently only trade in a
relatively small number of countries. Therefore there are
tremendous opportunities for future business in expanding
consumer markets, such as China and India.
• Growth of e-commerce: Growth of e-commerce enables a new
business channel for Wal-Mart.
Threats
• Competition: Being number one Wal-Mart face a tough
competition from competitors, locally and globally.
• Political Issues: Being a global retailer it can be exposed to
political problems in the countries where it can operate in.

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Detail analysis of case study
Wal-Mart is effective in up grading the technology of its
suppliers .
RFID enables Wal-Mart to improve the efficiency of its global supply
chain management through greater supply chain visibility and more
accurate ordering decisions. RFID stands for Radio frequency
identification and, in this paper, refers to a technology that is used to
track goods through the supply chain. A RFID system consists of three
main components: a tag, a reader, and a computer system. Typically,
RFID tags are made by joining a radio antenna with a microchip and then
surrounding the two with a protective case. These tags are usually able to
store up to two kilobytes of information. Stored data may include product
identification, the manufacture date, and the price of the product. These
tags can then be attached individually to the physical product itself or to
the product packaging. While the useful information is stored inside of the
tag, it needs a reader to detect, collect, and decode the information.
Finally, a computer system is used to interpret, filter, and store the
collected data in a meaningful way.

It is also useful for monitoring the overall health of the system,


identifying bottlenecks and other potentially useful data. RFID tags are
attractive because they are easily read. Bar Codes can become unusable
if the label is ripped or soiled but RFID tags can be read without having to
be in the line of sight of the reader.

In October 2001, Wal-Mart tied-up with Atlas Commerce for upgrading


the system through the Internet enabled technologies. Wal-Mart 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. To provide back-up in case of a
major breakdown or service interruption, the company had an extensive
contingency plan. By making effective use of computers in all its

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company’s operations, Wal-Mart was successful in providing uninterrupted
service to its customers, suppliers, stockholders and trading partners.

Technical support to farmers in United States

Fintrac, through programs funded by the United States Agency for


International Development (USAID) and millennium Challenge
Corporation (MCC), started implementing its farm-to-market value chain
approach Honduras in 2000. Highlights sustainable, systems-focused
technical support for smallholders linked with Wal-Mart (registered as
Hortifruti in Honduras) and other buyers.

Fintrac worked with Wal-Mart to assess needed crops, volumes, delivery


requirements and quality specifications and organized lead growers and
outgrowers for a calendarized production program for 20 different crops.
Currently about 100 farmers supply Wal-Mart/Honduras.

Technical interventions are designed to upgrade activities and improve


returns at different points along the chain, including:

Production: Enabling farmers to respond to market demand by


diversifying their product offerings, improving quality and supply
dependability, and increasing volumes sold, while simultaneously lowering
unit production costs and boosting revenues through the introduction of
improved, low-cost technologies and sustainable farming practices.

Postharvest handling and distribution: Reducing product losses after


harvest by establishing storage and collection centers to enable farmer
groups to maintain the quality of their produce, and by implementing
other best practice postharvest practices.

• Marketing and logistics: Facilitating marketing arrangements


between smallholder groups and private partners such as wholesalers,
processors and exporters, which lead to increases in volumes sold. Such
arrangements often involve the provision by these partners of inputs,
marke t information and technical assistance to their farmer suppliers, in
return for their assurance of receiving consistent quality and supply. The
result is the increased integration of smallholder suppliers into the farm-
to-market value chain.

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• Agribusiness service providers: The value chain analysis includes a
focus on availability of inputs and services in targeted production areas.
Bringing agricultural service providers into the fold is a key element of
Fintrac’s approach to providing extension and other information through
embedded technology transfer mechanisms.

Fintrac’s integrated approach leads to the identification and removal of


critical constraints at different points along the chain, constraints that
ultimately prevent farmers from realizing higher sales and incomes.

CHANGING PRODUCTION PRACTICES


To ensure that Fintrac could find producers, spread good agricultural
practices, and scale-up production for Wal-Mart and other buyers,
technicians employed the lead farmer approach. The lead farmer
approach entails identifying farmers in a community that are immediately
willing and able to implement technical recommendations and production
techniques and persuade and assist neighbouring farmers in upgrading
their production systems.

As lead farmers adopt good agricultural practices, they improve yields


and sales. In this case, lead farmers were also connected to a new buyer
of their produce, Wal-Mart, which usually pays farmers more than the
going rate for produce that meets their standards.

Lead farms also serve as a meeting place for in-field, hands-on technical
training sessions. Trainings are organized on a case-by-case basis based
on the needs of individuals and groups of producers. To ensure optimum
technical support, technicians generally maintain continuous contact with
lead and beneficiary farmers via phone and in-person farm visits. Lead
farmers also assist in providing technical assistance to beneficiary
farmers.

Regino Ramirez, USAID-RED Client and Wal-Mart Supplier

“I am 42 years old and my life has been growing vegetables. I am selling


to the local market and Hortifruti [Wal-Mart Honduras]. Many times
before I could not harvest a single celery leaf due to alternaria disease
problems. Now with the assistance I am receiving from USAID-RED, I
have the knowledge to control pests and diseases. I am also using the
agricultural practices that I have learned with celery production for my
parsley and spinach crops.”

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As above mentioned, we can see that how Wal-Mart help their suppliers in
increasing their productivity by providing them the technological
assistance.

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However, a serious allegation against Wal-Mart is that in
its passion to reduce costs, it drained its suppliers to
virtual bankruptcy.
Wal-Mart is the largest retailer in the world. They are a perfect example
of how supply alliances do not work for every situation. Some people may
argue that Wal-Mart has good relationships with their suppliers but when
doing the research; it’s found that this is not true. Wal-Mart is an
incredibly powerful company. The sole purpose of their business is to
bring consumers the lowest possible prices on products. In order to do
this, Wal-Mart continues to put obscene amounts of pressure on all their
suppliers, forcing them to lower their prices every year. They are strictly
price focused. If suppliers don’t lower their prices to meet WalMart’s
price, then they will simply get another supplier, and stop doing business
with you. WalMart may go to a competitor and have them match the price
or they make take the business overseas and import it. Wal-Mart will do
whatever it takes to get the lowest price for the consumer, even at the
expense of the supplier.

According to Charles Fishman’s article, “The Wal-Mart You Don’t Know”


talk about the “squeeze” Wal-Mart puts on all of its suppliers in order to
get the lowest price possible. One example is about Vlasic’s gallon-sized
jar of pickles. When it first came out, the jar was priced at over three
dollars and sold successfully. Then Wal-Mart took it further and wanted to
offer it to consumers for under three dollars, they priced the jar for
$2.97. Consumers went crazy over this, a gallon jar of Vlasic pickles for
under three dollars. While sales increased rapidly, Vlasic wasn’t making
any profit on the item. They were only making a cent or two on each jar
sold. It even started hurting the other Vlasic pickle items because
shoppers from other stores were going to Wal-Mart just to purchase the
gallon-sized jar. Vlasic shortly went to Wal-Mart to see if they would
increase the jar of pickles just slightly so that they would make some kind
of profit. Wal-Mart turned them down without a second thought. Wal-Mart
even told them that if they won’t sell the pickles for $2.97, then they
would go to a competitor and asks them, and quit doing business with
Vlasic altogether. Vlasic soon filed for bankruptcy; it is not fully
determined of the gallon-size of pickles had a direct effect on that.

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The another evidence that supports the fact is that Bain & Co., a global
management firm, did on Wal-Mart trying to find out if companies actually
have “healthy relationships with them”. They found that when negotiating
prices with suppliers, if Wal-Mart does not like the price then they will tell
the supplier, “Here’s the price you gave me. Here’s what I can get a
competitor’s product for. Here’s what I can get a private-label version for.
I want to see a better value hat I can bring to my shopper this year. Or
else I’m going to use that shelf space differently”.

Basically this is a direct threat from Wal-Mart to the suppliers, and they
have the power to do so. Carey, a partner at Bain & Co., gives the
example of his friend in the umbrella business that once supplied for Wal-
Mart. One year the umbrella owner went to Wal-Mart and requested a five
percent increase in sales price and Wal-Mart turned him down. The owner
then lowered his request to a small two percent increase and Wal-Mart
denied his request completely and even quit doing business with them
altogether. They told him that they would go with a Chinese manufacturer
which was incredibly cheaper than him.

Wal-Mart has ravaged companies by leveraging its enormous sales power,


and its access to products produced by slave-labor, to make suppliers
follow its pricing decisions. If the supplier company doesn't sell its goods
at the price Wal-Mart sets, Wal-Mart denies them shelf space at its stores,
which destroys that company. However, even when a supplier meets Wal-
Mart's prices, the prices are so low, and the supplier loses so much
money, that the supplier is forced into bankruptcy.

Textiles and Apparel:

* Carolina Mills is a 75-year-old company that supplies thread, yarn, and


textile finishing to apparel-makers-half of which supply Wal-Mart. But
since 2000, Carolina Mills' customers have begun to find imported
clothing sold so cheaply at Wal-Mart, that Carolina Mills could not
compete even if they paid their workers nothing! Since 2000, Carolina
Mills has shrunk from 17 factories to 7, and from 2,600 employees to
1,200.

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Lovable Garments,

Which was founded in 1926, had, by the 1990s, become the sixth-largest
producer of women's lingerie in the United States, employing 700
workers. Wal-Mart became the biggest purchaser of Lovable's goods. In
1995, Wal-Mart demanded that Lovable slash its prices to compete with
cheap imports. When Lovable indicated it could not do that, Wal-Mart
illegally reneged on its contract, and outsourced the lingerie production to
Ibero-America, Asia, and China. Without the Wal-Mart market, in 1998
Lovable had to close its American manufacturing facilities and fire the
workers. Stated Frank Garson, who was then Lovable's president, "Their
actions to pulverize people are unnecessary. Wal-Mart chewed us up and
spit us out."

Destroying Labor Overseas

Wal-Mart buys a lot of its goods from China, which in many sections of
the country, pays very low wages. One case that has come to light
concerns the Ching Hai Electric Works Co. in Shajing, which produces
electric fans. The factory makes several million fans per year, and sells
them under many of the world's leading brand names, and also under two
of the company's own names. The workers' starting salary is $32 per
month, which is more than 40% below China's minimum wage of $56 per
month. There are also reportedly many workplace accidents in the
factory. In the late 1990s, Wal-Mart started making demands that the
price of the fans be lowered, and they have fallen from approximately $7,
to $4 per fan. But to lower the price, the manager of the plant had to cut
its workforce in half, to 1,500 workers, while maintaining the same level
of orders. This has led to many workers working 14 hours per day, for a
little amount.

It’s also found that the companies currently worked as a supplier for
walmart most would say it’s great one about their relationship, as they
don’t want to say anything at all. A lot of companies refused to even
discuss Wal-Mart on any level. Just by refusing to talk, it is easy to grasp
how powerful Wal-Mart is. Companies do not want to take chance saying
anything that could be taken negatively if Wal-Mart heard about it
because they can stop doing business with any supplier at the drop of a
hat. Most companies cannot afford to lose their market share they get
from Wal-Mart shoppers. It’s hard to work with Wal-Mart, but it’s hard not
to work with them at the same time.

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CONCLUSION

Wal-Mart is the number one retailer in the World and is at the top of the
Fortune 500 listing. Wal-Mart operates in many countries world-wide and
is moving into new countries every year.
Wal-Mart is also expanding as a retailer. They have expanded into many
other sectors of the marketplace, including groceries, gas stations,
electronics, and auto maintenance. Each year, Wal-Mart finds new ways
to grow and offer more services to their customers.
As a result of Wal-Mart's ever growing size and variety of services they
offer, an efficient supply chain management and their public affairs
department is going to become more and more important. And as the
animosity against Wal-Mart becomes more widespread, here and in
foreign countries, Wal-Mart is going to have to work harder to maintain
their good reputation. Wal-Mart's foundation will become increasingly
more important for giving things back to the community. In order for Wal-
Mart to stay at the top of their game and follow the company strategy and
achieve their key policy goals, they are going to have deal better with
their stakeholders and make sure they guard their reputation well. Apart
from their core competency it also provides assistance to its suppliers
also, as it is mentioned in the report that there are evidences which
shows its support providing to farmers. Fintrac worked with Wal-Mart to
improve their quality of agricultural practices.
On the other hand Wal-Mart has ravaged companies by leveraging its
enormous sales power and its access to products produced by slave labor,
to make suppliers follow its pricing decision.

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Bibliography
http://www.academon.com/Research-Paper-Wal-Mart-and-
Supply-Chain-Management/91854.
http://www.logisticsmgmt.com/
http://www.slideshare.net/Iampinkcrystal/wal-mart-ppt-final#
http://www.authorstream.com/Presentation/akmohideen-
193472-wal-mart-case-study-education-ppt-powerpoint/
www.walmart.com
www.walmart.com/cp/Electronics/3944
http://www.casestudyinc.com/wal-mart-india-case-study
Book of Designing and Managing the Supply Chain by David Simchi-Levi.

http://www.larouchepub.com/other/2003/3046wal-mart_pricing.html

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