Supply Chain of Wal-mart

Members:
Chan Man Ching
Chan Mong Tik
Chui Wai Ka
Lam Fei Fei
Man Ka Yu
 Agenda
 Background Information of Wal-
Wal-mart
Background mart
 Supply chain of Wal-mart
 Flow chat of the supply chain
Wal-mart  Technology used in various stage of SC
Supply Chain
 Impact of Wal-mart

Impact of
Wal-mart
 Background of Wal-mart
~Well known retailer with heavy investment in IT

 Types of industry: one stop shopping center

 Founder: Sam Walton
 Year of establishment: 1962
 First store: in Arkansas

Sam Walton
 No. of stores: 5311 units globally

Wal-Mart has expanded its business to 10 countries: U.S., Mexico, Brazil

, Argentina,Germany,Puerto Rico,U.K. , South Korea, Canada and China
.
 Rapid growth of Wal-mart
Revenues: $315,654,000, 000 in 2005
Stock value from Aug 1972 to May 2006:

Sourced from finance.yahoo.com

 How well is Wal-mart doing?

Wal-mart Sears Target Corp Costco

Holdings
No. of 1,800,000 1,330,001 338,000 60,500
Employees
Revenue 05' 312.65B 49.12B 52.62B 55.68B

Operating 5.93% 3.83% 8.22% 2.79%

Margin
Profit 3.60% 1.75% 4.58% 1.93%
Margin

Inventory 7.47 3.92 5.98 11.54

Turnover
 Why can Wal-mart be so successful?

 Supply chain plays an important role

 Supply chain:
a method of collaborating horizontally –
among suppliers, retailers, and
customers to create value
 Wal-mart Supply Chain Flow Chat
Radio, headphone

Retail Store
Manufacturer

Retail Store
Manufacturer Distribution center
Bar code, RFID
Point of sale terminal

Retail Store
Manufacturer Satellite system

Company Headquarter
 Distribution Center
 108 centers in USA
 Place that various goods are gathered,
sorted and delivered to different store
 About 80% of merchandises shipped fr
om centers
 24 hours operation
Manufacturer 1 Retail store 1

Manufacturer 2
Retail store 2

Manufacturer 3

Retail store 3
Manufacturer 3
 Trucks outside Wal-mart
 Past----written instructions
 Now----radio and headphone

English ?
Spanish?
 Trucks outside Wal-mart
 Use both hands
 Keep contact with the headquarter
 Behind or ahead the expectation
 Adjust to any sudden changes

 Benefit: Cost
 Minilift Trucks
 Inside distribution centers
 equipped with headphone
 Computer give direction to driver in voice
 What merchandises to transport
 Where the merchandises should be carried to
 Which truck the merchandises be loaded
 Report progress, ahead or behind schedule

Benefit: productivity and efficiency

 Bar Code System
 Standardized bar code system
 applied by every supplier
 Helps facilitating large scale operation
 Pallets passed through conveyor belt
are scanned automatically
 Product codes are transferred to
centralized computer system
 Bar Code System
 Matching with the computer database a
nd generate useful information
 What it is. What quantity it is. Which packing c
ompartment and truck to go. Which store to g
o
 Processes take place simultaneously
 Save time and labour sorting merchand
ises
 Smooth logistic processes
 RFID
 Radio Frequency Identification System
 Use radio waves to identify objects
 Tags with microchip and antenna built i
n
 Store data (type, quantity, manufacturer, expir
ed date…)
 Generate HF signal to transfer data
 Allow Wal-mart to keep track of pallets
at various stage of supply chain
 RFID
 Sensors in the distribution center detec
t and receive information from chips
 Locate where the pallet is and the condi
tion of it
 temperature
 Humidity
 Automatic senser – avoid scanning cod
es one by one
 RFID Gen1 and Gen2
Generation 1 Generation 2

HF signal UHF signals

Improve reception (Work with vario

Difficult to penetrate through liquid us materials)
and metals

Costly (up to $200 per chip in Cost drops to US$0.15 within

early stage) near future

Additional functions ( Better security,

Basic function
programmable…)
 RFID
 Further improve logistics efficiency
 Save time identifying merchandises
 Convenience in checking inventory
 Information pre-stored in the chips =
convenience of data processing
 Point-of-sale terminals
 Invested in 1983
 Simultaneously rang up sales and tracked
inventory deductions for rapid re-supply.
 Electronic scanning of Uniform Product
Codes (UPC)
- to price-mark merchandise
- to ensure accurate pricing
 Self-labeling system
 The merchandise replenishment process
 Large-scale satellite system
 Installed in 1987
 to improve communication between stores
 Link all of the stores to headquarter, giving
Wal-Mart’s central computer system real-time
inventory data.
 Allow sales data to be collected and analyzed
daily, and enable managers to adjust
immediately.
 Daily information of individual store can be
compared.
 CPFR Program
 A Collaborative Planning, Forecasting,
and Replenishment program.
 Just-in-time inventory program began.
 Advantage:
 To reduce carrying costs.
 Less excess inventory.
 Cost of goods is estimated to be 5 to 10
percent less.
 Tailored-made store management
 Wal-Mart merchandise is tailored to
individual markets and individual stores.
 Store managers choose which products to
display and allocate shelf space.
 A store devote only 10% of its square footage
to inventory.
 Wal-Mart’s culture stress the key role of
associates.
 Information and ideas are shared at
individual stores.
 Suppliers = Partners
 As Wal-Mart grew, its relationships with
some suppliers evolved into
partnerships
 Sharing information electronically to
improve performance.
 How do they share information?
 Information sharing
 Open its databases
 Retail Link private extranet system:
- to see exactly how its products are selling
and when it might need to up its production
- to give more than 2000 suppliers computer
access to point-of-sale data
 Advantages:
- Gain more information about the customers.
- Shelves will always be stocked with the
right items at the right time.
 Electronic data interchange (EDI)

 Enabled an estimated 3600 suppliers

(about 90% of Wal-Mart’s dollar
volume) to receive orders and interact
with Wal-Mart electronically.
 Later expanded to include forecasting,
planning, replenishing, and shipping
applications.
 Vendor-managed inventory systems

 to replenish stocks
 Wal-Mart transmitted sales data, orders of
products, delivery plan and reports of
warehouse inventory status to them daily
 to plan inventory levels, generate purchase
orders, and ship exactly what was needed
 both benefited from reduced inventory costs
and increased sales
 Business planning packets
 Each Wal-Mart department developed
computerized, annual strategic business
planning packets for its suppliers
 including:
 department’s sales, profitability, and inventory targets,
macroeconomic and market trends, and Wal-Mart’s
overall business focus
 Wal-Mart’s expectations on them
 Suppliers’ recommendations
 How Wal-mart affects suppliers
 Domestic Suppliers:
 Wal-mart imported 18 billion worth of g
oods from 5,000 Chinese suppliers in 2
004
 Ranked as China’s 8 biggest trading pa
rtner ahead of Russia, Australia and Ca
nada
 Used power to squeeze domestic suppl
iers’ profit
 How Wal-mart affects suppliers

 Wal-mart Defense :
 If all of supplier were squeezed dry
Wal-mart no suppliers
 Suppliers found ways to survive
 do better at what they did before
 How Wal-mart affects suppliers

 Wal-mart not only selling foreign import

ed goods, also encourage the use of do
mestic American products
 “ Buy American Program “
 Retained over 1.7 billion in retail purcha
ses that produced offshore.
 How Wal-mart affects dometic workers

 Domestic workers :
 Face keen competition from overseas market
s,
 offshore manufacturing
 Close down of factories
 Loss of jobs

 Competition with Wal-mart

 Competitors cut labor’s health care benefits
and wages
 How Wal-mart affects dometic workers

 Wal-mart Defense:
 Insist not responsible for the off-shoring of m
anufacturing

 Example :
 Sanyo ( TV sets producers ) planned to close
the plant and move Mexico and Asia.
 Wal-mart buys the TV sets from Sanyo if they
don’t move
 Eventually stay in US
 How Wal-mart affects dometic workers

 Destructive Creation
 Shrinking of manufacturing and labor
intensive sectors
 Technical changes substitute unskilled labor
 Create new jobs and expansion in services
and technology sector
 Estimation : 225,000 job loss by outsourcing
in the next 15 years < 1.5% of the job
available in 2002
 How Wal-mart affects dometic workers

 Unemployment is a structural
problem ,rather than a cyclical problem
 Mismatch of job skills with the market
demand
 Unskilled labors cannot match with
increasing skilled labor demand
 Not loss of job , but cannot find a job
matches with their skills
 How Wal-mart affects economy

 Reallocation of capital and technology

to the foreign markets
 Less to employ domestic workers and
invest in local economy
 Decline in labor productivity and real
incomes of the country
 How Wal-mart affects economy
 may not necessarily imply a decrease in real
income and productivity

 For example,
 Globalization and lower technology cost,
 Lead to higher American productivity growth
 added $230 billion extra GDP between 1995
and 2002
 Equivalent to extra 0.3% points of growth a
year
Wal-mart

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