2. Walmart
Walmart, an American multinational retail corporation
that runs chains of large department and warehouse
stores
Established 1962, Arkansan-USA
Sam Walton- Founder & Mike duke- current CEO
Successful due to its IT usage in SCM
3. Introduction to case
1990 –Superseded ‘K-Mart’ rival retail chain as one of the
largest retailing chain in US
1991- Superseded ‘Sears Roebuck & Company’ and
became the largest retailing chain in US
In November 2003, Wal-Mart, world’s largest retailer,
planned to replace bar code technology with RFID.
Objective: To enhance supply chain efficiency
Expected they could save $8.35 million per year primarily
in labor costs
4. Background Note
Wal-Mart known for innovative business practices
One of the first retailing companies to centralize
distribution system.
Always among the front runners in employing IT to
manage its supply chain processes.
5. Using IT in supply chain
management
Using EDI for procurement
- EDI saved time and made procurement efficient.
- Using the bar code scanners, an analysis of daily, weekly,
monthly sales data helped the store manager determine
what products were selling and at what quantity.
- Accordingly, the store manager would place orders in the
manufacturing division.
EDI=Electronic Data Interchange
6. Using IT in supply chain
management
In 1977, Wal-Mart set up a computer terminal network
(CTN) to establish a communication link between its
stores and the company headquarters
Real time business operations
In 1978, Wal-Mart set up its first fully automated
distribution center
7. Using EDI for procurement
Wal-Mart placed orders for huge quantities of goods
with its suppliers
Cost of sales worked out to be 2-3 %(very low from
industry average)
Information of product, manufacturer, price was
recorded on computer system
That information was passed to centralized data
warehouse
8. Using EDI at Wal-Mart
Analysis of daily, weekly, monthly sales data helped store
manager to determine which products were sold in
which quantities
So that they can place purchase order
Edi also helped suppliers
Right merchandize at the right time, and have it at right
place at right price
9. Using IT in supply chain
management
Using voice based technologies: Enhancing warehouse
and logistics management
Wal-Mart could replenish stock at any of its 1525 stores in
US within 24 hours
Cross-docking
It enabled the company to receive goods and dispatch
them to stores in lees than a day
How it works at distribution centers?
10. Using IT in supply chain
management
It installed voice based order filling(VOF) system in all
distribution centers
Is consisted portable Voice Recognition Talkman
Terminals(VRTT) and radio module on company’s wireless
LAN
It eliminated mis-picks and product labeling costs since
VOF didn’t require paper lists labor
11. How to quickly locate &
replenish goods?
Store ready displays called PDQ(pretty darn quick)
displays
Time saved per employees were not much but
aggregate time saved was quite good
12. GPS
GPS system in communication in trucks
Any truck can be located
Drivers could activate system by voice and interact with
staff
13. Using IT in supply chain
management
The Retail Link system- Supporting Inventory Management
Retail link connected EDI network to extranet ,accessible
to all suppliers
Provided suppliers historical sales data of 24 months,
allowed them to track invoice, can make demand
forecast
Suppliers could also study competitors products demand
14. Using the Internet in Supply chain
Management
CPFR (Collaborative Planning Forecasting
Replenishment)
Real time bases to determine product wise demand
forecast
Wal-Mart shared past data, customer data,
demographic data, stock positions
Both forecasted demand individually and then co-
operated
Reduced inventory cost
Product availability across supply chain
15. As a result lead time was cut to 11 days from 21 days
On-hand inventory was reduced by two weeks
Sales grew by $8.5 millions in six months
Later on it was implemented to other stores
By 1990’s, about 90% of suppliers were doing business
through Retail Link
16. Barriers to CPFR
Lack of discipline to execute primary phases
Promotions and new items events are not jointly planned
Ineffective replenishment in response to demand
fluctuations
Trading partners focus on traditional supply chain steps
Scalability and critical mass
17. Recent Supply Chain
Initiatives
2001- Global Procurement Division[Shenzhen, China
Exchange of sales and inventory data
Best deal procurement from any part of world
Strategy Employed
Identify generic products
Enhance product quality
reduce cost by collaborating
2001- copy paper – increased sales
[ 46% in UK, 94% in Federal Republic of Germany,
38% in Canada, 25% in US]
18. Recent Supply Chain
Initiatives
October 2002- Asked suppliers to replace VAN-EDI to
Web based EDI
Direct online communication between trading partners
No transaction costs
Highly secured
Saved millions[ VAN-EDI cost $200 Billion]
No licensing fees
July 2003 – Asked suppliers to place RFID tags on goods,
packed in pallets and crates
VAN-EDI = Value Added Network-EDI
RFID = Radio Frequency Identification
19. Benefits from RFID
Drastic decrease in Stock out situations
From $400 million to $1.2 billion for P&G
Lesser labor requirements
Almost $6.34 billion yearly
Decrease in merchandise thefts
Almost $2 billion
Real time tracking of consumption patterns
Would help enhance JIT Inventory management system
Decrease in stock levels by around 25%[IBM]
Total savings expected to be 8.34 billion per year
20. Problems
An estimated cost of $20 million to suppliers
50% of this is integration of system with software and
modification in soft wares
Not a proven technology
Not compatible with liquids and metal packaging