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CASE STUDY PRESENTATION ON

CASE STUDY PRESENTATION ON WALMART Service Operations Management Submitted to, Prof.J M Subramanya Presented By, Deepak

WALMART

CASE STUDY PRESENTATION ON WALMART Service Operations Management Submitted to, Prof.J M Subramanya Presented By, Deepak

Service Operations Management

Submitted to, Prof.J M

Subramanya

Presented By, Deepak C-1201

Why Walmart founded by Sam Walton in 1962 has seen an unprecedented growth in Retail industry

Why

Walmart founded by Sam Walton in 1962 has seen an

unprecedented growth in Retail industry

$ The world’s largest public corporation by revenue

$ The largest private employer in the world $ The largest grocery retailer in the USA

$ The largest toy seller in America

$ Each

year

93%

of

the

American

households do shopping in some Wal-

Mart store at least once

$ 10400 stores in 27 different countries

3 different segments:

Wal-Mart Stores- sales amounted to 64.3%; Discount Stores- 1,568 U.S Supercenters- 1,258 U.S Neighborhood Markets- 49 stores U.S

3 different segments: Wal-Mart Stores- sales amounted to 64.3%;  Discount Stores- 1,568 U.S  Supercenters-

Sam’s Club- sales amounted to 13.0% 525 stores U.S Is a member only, cash and carry operations

International- sales amounted to 16.7% Discount stores- 942 Supercenters- 238 Sam’s Clubs- 71 Neighborhood Market- 37

MISSION STATEMENT

MISSION STATEMENT
MISSION STATEMENT

SATISFYING CUSTOMER DEMANDS DEPENDS ON FIVE CRITICAL SUCCESS FACTORS

SATISFYING CUSTOMER DEMANDS DEPENDS ON FIVE CRITICAL SUCCESS FACTORS Customer Demands • The right products •
Customer Demands • The right products • • Best value • Service and quality In stock
Customer Demands
The right products
• Best value
• Service and quality
In stock
SATISFYING CUSTOMER DEMANDS DEPENDS ON FIVE CRITICAL SUCCESS FACTORS Customer Demands • The right products •
Critical Success Factors (CSF) • Quick responsiveness to market changes • Low inventory • Quick replenishment
Critical Success Factors
(CSF)
• Quick responsiveness to
market changes
• Low inventory
• Quick replenishment of
inventory
• Effective human resource
system
• Efficient distribution system
SATISFYING CUSTOMER DEMANDS DEPENDS ON FIVE CRITICAL SUCCESS FACTORS Customer Demands • The right products •

HUB AND SPOKE SYSTEM

HUB AND SPOKE SYSTEM  In the early 1970s, Wal-Mart centralized its distribution system, pioneering the
  • In the early 1970s, Wal-Mart centralized its distribution system, pioneering the retail hub-and- spoke system.

  • Distribution center (hub)--->Individual stores (spoke).

  • Enabled Wal-Mart to achieve significant cost advantages by the centralized purchasing of goods in huge quantities..

and distributing them through its own logistics infrastructure to the retail stores spread across the U.S.

WAL-MART’S PROCUREMENT

WAL- MART’S PROCUREMENT  Emphasis on the need to reduce purchasing costs and offer the best
  • Emphasis on the need to reduce purchasing

costs and offer the best price to the

customer.

  • Procurement directly from manufacturers

eliminating intermediaries.

  • Meet vendors and understand their cost structure.

  • Finalizes a purchase deal only when it is fully confident that the products being bought is not available else where at a lower price.

USING EDI FOR PROCUREMENT

USING EDI FOR PROCUREMENT  The computer systems of Wal-Mart were connected to those of its
  • The computer systems of Wal-Mart were connected to those of its suppliers.

  • EDI enabled the suppliers to download purchase orders along with store-to-store sales information relating to their products sold.

  • On receiving information about the sales of various products, the suppliers shipped the required goods to Wal-Mart‟s distribution centers.

LOGISTICS MANAGEMENT

LOGISTICS MANAGEMENT  Fast and responsive transportation system.  The distribution centers were serviced by more
  • Fast and responsive transportation system.

  • The distribution centers were serviced by

more than 3500 company owned trucks.

  • Underscored the need of drivers who were committed and dedicated to customer service.

  • The company hired only experienced drivers who had driven more than 300,000 accident- free miles, with no major traffic violation.

CROSS-DOCKING

CROSS-DOCKING  In this system, the finished goods were directly picked up from the manufacturing plant,
  • In this system, the finished goods were directly picked up from the manufacturing plant, sorted out and then directly supplied to the customers.

  • The system reduced the handling and storage of finished goods, virtually eliminating the role of the distribution centers and stores.

  • The manufacturer directly forwarded the goods to a place called the “staging area.”

  • The goods were packed here according to the orders received from different stores and then directly sent to the respective customers.

THE TRADITIONAL SUPPLY CHAIN INCLUDES

THE TRADITIONAL SUPPLY CHAIN INCLUDES INEFFICIENT AND UNNECESSARY STEPS Distribution Warehouse Individual Store Retailer Order Order

INEFFICIENT AND UNNECESSARY STEPS

Distribution Warehouse Individual Store Retailer
Distribution Warehouse
Individual Store
Retailer
Order Order Order Tag/ Receive Select Pack Select Storage Sell Label Storage Wholesaler Order Receive Select
Order
Order
Order
Tag/
Receive
Select
Pack
Select
Storage
Sell
Label
Storage
Wholesaler
Order
Receive
Select
Pack
Manufacturer
(Supplier)
Make
Pack
Shipper
Ship
Ship
Ship
WAL-MART SIMPLIFIED ITS SUPPLY CHAIN Distribution Center Individual Store Retailer POS Order Receive Select Pack Ship

WAL-MART SIMPLIFIED ITS SUPPLY CHAIN

WAL-MART SIMPLIFIED ITS SUPPLY CHAIN Distribution Center Individual Store Retailer POS Order Receive Select Pack Ship
Distribution Center Individual Store Retailer POS Order Receive Select Pack Ship Receive Storage Sell <48 hours
Distribution Center
Individual Store
Retailer
POS
Order
Receive
Select
Pack
Ship
Receive
Storage
Sell
<48 hours
<48 hours
Wholesaler
Deliver
Manufacturer
within
(Supplier)
72 hours
of order
Tag/
Make
Select
Pack
Label
Shipper
Ship
Cross-docking in distribution centers results in product flow from inbound to outbound shipping docks within 48
Cross-docking in distribution centers results in product flow
from inbound to outbound shipping docks within 48 hours.

DELIVERY OF MERCHANDISE TO STORES VIA

DELIVERY OF MERCHANDISE TO STORES VIA DISTRIBUTION CENTER  The trucks are checked for trucking manifest.

DISTRIBUTION CENTER

DELIVERY OF MERCHANDISE TO STORES VIA DISTRIBUTION CENTER  The trucks are checked for trucking manifest.
  • The trucks are checked for trucking manifest.

  • On matching, delivery truck is instructed to specific unloading dock.

  • At DC, verification of each item is carried out. If

Merchandise is accepted, pallet label is attached.

  • Predetermined flow through- inbound delivery truck----> Stores served by DC

  • Reserve or staple stock flow through- Speciality items from other DCs to stores served by a particular DC

  • Reserve Stock- goods are moved from reserve stock area to order-filling area module for inventory replenishment---> merging station---> Sorting---> out

INVENTORY MANAGEMENT

INVENTORY MANAGEMENT  Invested heavily in IT and communication systems to effectively track sales and merchandise
  • Invested heavily in IT and communication systems to effectively

track sales and merchandise inventories in stores across the

country.

  • Wal-Mart set up its own satellite communication system in 1983.

  • Reduced unproductive inventory by allowing stores to manage

their own stocks through reduced pack sizes and appropriate

price markdown.

  • Use of IT capabilities to make more inventories available in the case of items that customers wanted most, while reducing the overall inventory levels.

  • Use of „Magic Wand‟, hand held computers linked to in store to keep track of inventories.

  • Execution of order management and store replenishment of

goods with the help of computers through the Point-of-Sales

(POS) system.

VOICE-BASED ORDER FILLING (VOF)

VOICE-BASED ORDER FILLING (VOF)  In 1998, Wal-Mart installed a voice-based order filling (VOF) system in
  • In 1998, Wal-Mart installed a voice-based order filling (VOF) system in all its grocery distribution centers.

  • Guided by the voice to item locations in the distribution centers.

  • The VOF system also verified quantities picked, and could respond to a variety of requests such as providing product detail (type, price, barcode number, etc.)

  • Eliminated mispicks and product labeling costs.

INVENTORY MANAGEMENT…

INVENTORY MANAGEMENT…  Pretty Darn Quick Displays- Implementation of PDQ displays by suppliers helped to directly


Pretty Darn Quick Displays-Implementation of PDQ displays by suppliers helped to directly replace the empty

racks at the stores with fully packed racks .

  • Retail Link System-Retail suppliers used the retail link system to monitor the sales of their goods at stores and replenish inventories.

  • RLC connected Wal-Mart‟s EDI network with an extranet, accessible to Wal-Mart‟s thousands of suppliers.

  • Enabled suppliers to know the performance of their products.

  • Use of Massively Parallel Processor (MPP) computer system to track the movement of goods and stock levels.

  • Real time broadcasting of information through an

advanced Satellite Communication System.

WAL-MART INVESTS HEAVILY IN INFORMATION TECHNOLOGY (CONT.)

WAL-MART INVESTS HEAVILY IN INFORMATION TECHNOLOGY (CONT.)  Various Quick-Response (QR) systems (retail-link) to allow direct
WAL-MART INVESTS HEAVILY IN INFORMATION TECHNOLOGY (CONT.)  Various Quick-Response (QR) systems (retail-link) to allow direct

Various Quick-Response (QR) systems (retail-link) to allow direct store-to-supplier ordering: “continuous replenishment”

Vendor-managed QR

WAL-MART INVESTS HEAVILY IN INFORMATION TECHNOLOGY (CONT.)  Various Quick-Response (QR) systems (retail-link) to allow direct
Supplier POS Data Store Warehouse Just-in-Time System Distribution Wal-Mart Center POS Data Supplier Store
Supplier
POS Data
Store
Warehouse Just-in-Time
System
Distribution
Wal-Mart
Center
POS Data
Supplier
Store

Wal-Mart-managed QR

Distribution Wal-Mart Center Order Supplier Store
Distribution
Wal-Mart
Center
Order
Supplier
Store

Inventory Management…

  • By the mid 1990s, Implementation of Internet-enabled SCM system- Collaborative, Planning, Forecasting and Replenishment (CPFR).

  • Business practice for business partners to share forecasts and results data through the Internet.

  • Helped to reduce inventory costs while at the same

time, enhancing product availability across the supply

chain.

  • Radio Frequency Identification- By 2005, Wal-Mart replaced bar-code technology with RFID technology.

  • Could reduce its supply chain management costs and enhance efficiency.

WAL-MART’S INVENTORY MANAGEMENT IMPROVEMENTS HAVE RESULTED IN EFFICIENCIES UNMATCHED BY THE COMPETITION Inventory in System (Days)
WAL-MART’S INVENTORY MANAGEMENT
IMPROVEMENTS HAVE RESULTED IN EFFICIENCIES
UNMATCHED BY THE COMPETITION
Inventory in System (Days)
Inventory-to-Sales Ratio
14
At Vendor
1:5.94
At Warehouse
30
In-Store
1:4.58
30
3
2
3
Before New
After New
Wal-Mart
KMart
System
System

IT systems have improved Wal- Mart‟s in-stock position and increased vendor responsiveness

Wal-Mart stores replenish inventory twice a week vs. industry standard of once every two weeks

Selling and Operating Expenses

of Sales 28% 15% Wal-Mart Sears Roebuck & Co.
of Sales
28%
15%
Wal-Mart
Sears Roebuck & Co.

Wal-Mart has lowest cost of operations in the retail area, aside from wholesale clubs

LESSONS LEARNED: THE ROAD TO SUCCESS IS

PAVED BY TECHNOLOGY AND BETTER USE OF PEOPLE

LESSONS LEARNED: THE ROAD TO SUCCESS IS PAVED BY TECHNOLOGY AND BETTER USE OF PEOPLE Strong
Strong Supplier Relationships
Strong
Supplier
Relationships
LESSONS LEARNED: THE ROAD TO SUCCESS IS PAVED BY TECHNOLOGY AND BETTER USE OF PEOPLE Strong
Economies of Sales: “Best Deals”
Economies
of Sales:
“Best Deals”
LESSONS LEARNED: THE ROAD TO SUCCESS IS PAVED BY TECHNOLOGY AND BETTER USE OF PEOPLE Strong
LESSONS LEARNED: THE ROAD TO SUCCESS IS PAVED BY TECHNOLOGY AND BETTER USE OF PEOPLE Strong
Stable Lower
Stable
Lower
LESSONS LEARNED: THE ROAD TO SUCCESS IS PAVED BY TECHNOLOGY AND BETTER USE OF PEOPLE Strong
Predictable Sale Patterns
Predictable
Sale
Patterns
LESSONS LEARNED: THE ROAD TO SUCCESS IS PAVED BY TECHNOLOGY AND BETTER USE OF PEOPLE Strong
Decreased Chance of Out-of-Stock
Decreased
Chance of
Out-of-Stock
Effective IT Systems Effective Distribution Systems Empowered Employees
Effective
IT Systems
Effective
Distribution
Systems
Empowered
Employees
LESSONS LEARNED: THE ROAD TO SUCCESS IS PAVED BY TECHNOLOGY AND BETTER USE OF PEOPLE Strong
LESSONS LEARNED: THE ROAD TO SUCCESS IS PAVED BY TECHNOLOGY AND BETTER USE OF PEOPLE Strong
Prices
Prices
LESSONS LEARNED: THE ROAD TO SUCCESS IS PAVED BY TECHNOLOGY AND BETTER USE OF PEOPLE Strong
Reduced Cost of Sale
Reduced
Cost of Sale
LESSONS LEARNED: THE ROAD TO SUCCESS IS PAVED BY TECHNOLOGY AND BETTER USE OF PEOPLE Strong
In-Depth Knowledge of Customer/ Market
In-Depth
Knowledge
of Customer/
Market
Increased
Increased

Sales

and

Profits

STATS AS OF 2013

STATS AS OF 2013  Sales- approximately $444 billion - If Walmart were a country, it
  • Sales- approximately $444 billion

  • - If Walmart were a country, it would be the 26th largest

economy in the world.

  • No. of employees worldwide- 2.2 million

  • - If Wal-Mart was an army, it would have the second largest military in the world, behind China.

    • No. of stores-10400 in 27 countries

-Each week, Walmart serves more than 200 million customers

-90 percent of all Americans live within 15 miles of a Walmart.

-Wal-Mart is bigger than Home Depot, Kroger, Target,

ISSUES OF CONCERN



Bill Simon, Walmart US CEO, says that a two-year problem with keeping store shelved stocked is "getting worse," and a major

threat to its operations.

As a strategy to „declutter‟ its stores, in 2011, Walmart pulled out 8500 products from its shelves.

Led to organised chaos.

Sales stagnated

After 6 months, it reversed its decision.

Though sales increased gradually, it often suffered with the problems of stock outs.

Except US, there is no significant contribution to sales from its operations in rest of the world.

Failed to implement global strategies locally.

Has the decline of world‟s largest retailer begun?

NEVERTHELESS….

NEVERTHELESS….  Wal- Mart‟s supply chain management strategy has provided the company with several sustainable competitive
  • Wal-Mart‟s supply chain management strategy has provided the company with several sustainable competitive advantages, including lower product costs, reduced inventory carrying costs, improved in- store variety and selection, and highly competitive pricing for the consumer.

  • This strategy has helped Walmart become a dominant force in a competitive global market.

  • As technology evolves, Walmart continues to focus on innovative processes and systems to improve its supply chain and achieve greater efficiency.

THANK YOU

THANK YOU