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MANAGEMENT
K.VARUN
123511
BACKGROUND
Types of industry: one stop shopping center
Founder: Sam Walton
Order Order
Order
Tag/
Receive Select Pack Select Storage Sell
Label
Storage
Wholesaler
Order
Manufacturer
(Supplier)
Make Pack
Shipper
Ship Ship Ship
WALMART:BUSINESSPROCESS
WALMARTSIMPLIFIEDITSSUPPLYCHAIN
DistributionCenter IndividualStore
Retailer
POS
Order
<48hours <48hours
Wholesaler
Deliver
within
Manufacturer 72hoursof
order
(Supplier)
Tag/
Make Select Pack
Label
Shipper Ship
Crossdockingindistributioncentersresultsinproduct
Crossdockingindistributioncentersresultsinproduct
flowfrominboundtooutboundshippingdockswithin48
flowfrominboundtooutboundshippingdockswithin48
hours.
hours.
CROSSDOCKING
Tomakeitsdistributionprocessmore
efficient,WalMartalsomadeuseofa
logisticstechniquecalledcrossdocking.
Inthissystem,thefinishedgoodswere
directlypickedupfromthemanufacturing
plant,sortedoutandthendirectly
suppliedtothecustomers.
6
INVENTORYMANAGEMENT
WalMartinvestedheavilyinITand
communicationsystemstoeffectively
tracksalesandmerchandiseinventories
instoresacrossthecountry.
Withtherapidexpansion,itwasessential
tohaveagoodcommunicationsystem.
Hence,WalMartsetupitsownsatellite
communicationsystemin1983.
7
INVENTORYMANAGEMENT
WalMartwasabletoreduceunproductive
inventorybyallowingstorestomanage
theirownstocks,reducingpacksizes
acrossmanyproductcategories,and
timelypricemarkdowns.
Insteadofcuttingtheinventoryacrossthe
board,WalMartmadefulluseofitsIT
capabilitiestomakemoreinventories
availableinthecaseofitemsthat
customerswantedmost,whilereducing
theoverallinventorylevels.
8
INVENTORYMANAGEMENT
EmployeesatthestoreshadtheMagic
Wand,ahandheldcomputerwhich
waslinkedtoinstoreterminalsthrougha
radiofrequencynetwork.
Thesehelpedthemtokeeptrackofthe
inventoryinstores,deliveries,andbackup
merchandiseinstockatthedistribution
centers.
9
INVENTORYMANAGEMENT
Theordermanagementandstore
replenishmentofgoodsareentirely
executedwiththehelpofcomputers
throughthePointofSales(POS)system.
Throughthissystem,itwaspossibleto
monitorandtrackthesalesand
merchandisestocklevelsonthestore
shelves.
10
INVENTORYMANAGEMENT
(QUICKREPLENISHMENT)
SincethefloorareaofanyWalMartstore
variedbetween40,000to200,000square
feet,movementofgoodswithinthestore
wasanimportantpartoflogistics
operations.
WalMartmadesignificantinvestmentsin
ITtoquicklylocateandreplenishgoods
atthestores.
11
INVENTORYMANAGEMENT
(RETAILLINKSYSTEM)
In1991,WalMarthadinvested
approximately$4billiontobuildaretail
linksystem.
Morethan10,000WalMartretail
suppliersusedtheretaillinksystemto
monitorthesalesoftheirgoodsatstores
andreplenishinventories.
Detailsofdailytransactions(~10million
perday)wereprocessedthroughthis
system.
12
INVENTORYMANAGEMENT
(RETAILLINKSYSTEM)
RetailLinkconnectedWalMartsEDInetwork
withanextranet,accessibletoWalMarts
thousandsofsuppliers.
Thesupplierscouldfindouthowtheirproduct
wasperformingvisaviscompetitorsproductsin
aparticularproductcategory.
13
WALMART:BUSINESSPROCESS
WALMARTINVESTSHEAVILYININFORMATIONTECHNOLOGY(CONT.)
VariousQuickResponse(QR)systems(retaillink)toallowdirectstoretosupplier
ordering:continuousreplenishment
VendormanagedQR
Distribution
WalMart
Center
POSData
Supplier Store
RFIDTECHNOLOGY
(RADIOFREQUENCYIDENTIFICATION)
Ineffortstoimplementnewtechnologiesto
reducecostsandincreasetheefficiency,in
July2003,WalMartaskeditstop100
supplierstobeRFIDcompliantbyJanuary,
2005.
WalMartplannedtoreplacebarcode
technologywithRFIDtechnology.
Thecompanybelievedthatthisreplacement
wouldreduceitssupplychainmanagement
costsandenhanceefficiency.
15
RFIDTECHNOLOGY
(RADIOFREQUENCYIDENTIFICATION)
BecauseoftheimplementationofRFID,
employeeswerenolongerrequiredto
physicallyscanthebarcodesofgoods
enteringthestoresanddistribution
centers,savinglaborcostandtime.
WalMartexpectedthatRFIDwould
reducetheinstancesofstockoutsatthe
stores.
16
RFIDTECHNOLOGY
(RADIOFREQUENCYIDENTIFICATION)
AlthoughWalMartwasoptimisticabout
thebenefitsofRFID,analystsfeltthatit
wouldimposeaheavyburdenonits
suppliers.
TomakethemselvesRFIDcompliant,the
suppliersneededtoincuranestimated
$20Million.
Ofthis,anestimated%50wouldbespent
onintegratingthesystemandmaking
modificationsinthesupplychain
software. 17
THE BENEFITS REAPED
Better Stakeholder Relationships
Strengthening relationships with customers, suppliers and employees
by passing on the savings on cost to them and thereby adding value.
Benefits of own transportation system
Low transportation costs (3% against competitors 5%)
Faster delivery to stores (with in 48 hours) and faster replenishment
than competitors (4 times)
Benefits of pricing strategy
Low pricing with day-to-day variations coupled with higher discounts
than competitors
Good bargaining power because of purchasing huge quantities
Good revenues in terms of higher and consistent sales volumes
THE BENEFITS REAPED (CONTD.)
Benefits of efficient supply chain
Reduction in lead time
Faster inventory turnover
Accurate forecasting of inventory levels
Increased warehouse space
Reduction in safety stock
Better working capital utilization
SAVINGPEOPLEMONEYSOTHEYCANLIVE
BETTER
Eachweek,morethan200millioncustomersand
membersvisit10,700storesunder69bannersin
27countriesandecommercewebsitesin10
countries.
Withfiscalyear2013salesofapproximately$466
billionwasmade,Walmartemploys2.2million
associatesworldwide.