CASE STUDY PRESENTATION ON WALMART

Service Operations Management

Submitted to, Prof.J M Subramanya

Presented By, Deepak C-12013

Why
Walmart founded by Sam Walton in 1962 has seen an unprecedented growth in Retail industry
$ The worlds 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 WalMart 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

Sams 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 Sams Clubs- 71 Neighborhood Market- 37

MISSION STATEMENT

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

Effective human resource system

Efficient distribution system

HUB AND SPOKE SYSTEM

In the early 1970s, Wal-Mart centralized its distribution system, pioneering the retail hub-andspoke 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.
6

WAL-MARTS PROCUREMENT
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

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-Marts distribution centers.

LOGISTICS MANAGEMENT
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 accidentfree miles, with no major traffic violation.

CROSS-DOCKING

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 INEFFICIENT AND UNNECESSARY STEPS

Retailer Distribution Warehouse Individual Store
Order Order Order

Receive

Select

Pack

Select

Tag/ Label

Storage

Sell

Storage

Wholesaler

Order

Receive

Select

Pack

Manufacturer (Supplier)
Make Pack

Shipper
Ship Ship Ship

WAL-MART SIMPLIFIED ITS SUPPLY CHAIN

Retailer Distribution Center Individual Store
POS Order

Receive

Select

Pack

Ship

Receive

Storage

Sell

<48 hours

<48 hours

Wholesaler

Manufacturer (Supplier)
Make Select Tag/ Label Pack

Deliver within 72 hours of order

Shipper

Ship

Cross-docking in distribution centers results in product flow from inbound to outbound shipping docks within 48 hours.

DELIVERY OF MERCHANDISE TO STORES VIA DISTRIBUTION CENTER

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

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)

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.

15

INVENTORY MANAGEMENT

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-Marts EDI network with an extranet, accessible to Wal-Marts 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.)

Various

Quick-Response (QR) systems (retail-link) to allow direct store-to-supplier ordering: continuous replenishment
Vendor-managed QR Wal-Mart-managed QR
Distribution Center Supplier POS Data Store Order
Wal-Mart

Supplier

Store

Warehouse Just-in-Time System Distribution

Center

Wal-Mart

POS Data 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.
18

WAL-MARTS INVENTORY MANAGEMENT IMPROVEMENTS HAVE RESULTED IN EFFICIENCIES UNMATCHED BY THE COMPETITION
Inventory in System (Days)
14 30

Inventory-to-Sales Ratio
1:5.94 1:4.58

At Vendor
At Warehouse In-Store

30

3 2 3 After New System Wal-Mart KMart

Before New System

IT systems have improved WalMarts 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 28% of Sales

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
Strong Supplier Relationships Economies of Sales: Best Deals

Effective IT Systems Reduced Cost of Sale Effective Distribution Systems In-Depth Knowledge of Customer/ Market

Stable Lower Prices

Predictable Sale Patterns

Decreased Chance of Out-of-Stock

Increased Sales and Profits

Empowered Employees

STATS AS OF 2013
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 worlds largest retailer begun?

NEVERTHELESS.

Wal-Marts supply chain management strategy has provided the company with several sustainable competitive advantages, including lower product costs, reduced inventory carrying costs, improved instore 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