Supply Chain of Wal-mart

Members:
Chan Man Ching
Chan Mong Tik
Chui Wai Ka
Lam Fei Fei
Man Ka Yu

Agenda
Wal-mart
Background

Background Information of Wal-

mart
Supply chain of Wal-mart

Wal-mart
Supply Chain

Impact of
Wal-mart

Flow chat of the supply chain

Technology used in various stage of SC

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
Holdings

Target Corp

Costco

No. of
Employees

1,800,000

1,330,001

338,000

60,500

Revenue 05'

312.65B

49.12B

52.62B

55.68B

Operating
Margin

5.93%

3.83%

8.22%

2.79%

Profit
Margin

3.60%

1.75%

4.58%

1.93%

Inventory
Turnover

7.47

3.92

5.98

11.54

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

Manufacturer

Distribution center
Bar code, RFID

Retail Store

Point of sale terminal

Manufacturer

Satellite system

Retail Store

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
from centers
24 hours operation

Manufacturer 1

Manufacturer 2

Retail store 1

Retail store 2

Manufacturer 3

Manufacturer 3

Retail store 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

and generate useful information

What it is. What quantity it is. Which packing

compartment and truck to go. Which store to
go

Processes take place simultaneously

Save time and labour sorting

merchandises
Smooth logistic processes

RFID
Radio Frequency Identification System
Use radio waves to identify objects
Tags with microchip and antenna built

in

Store data (type, quantity, manufacturer,

expired 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

detect and receive information from

chips
Locate where the pallet is and the
condition of it

temperature
Humidity

Automatic senser avoid scanning

codes one by one

RFID Gen1 and Gen2

Generation 1

Generation 2

HF signal

UHF signals

Difficult to penetrate through liquid

and metals
Costly (up to $200 per chip in
early stage)

Basic function

Improve reception (Work with

various materials)

Cost drops to US$0.15 within

near future
Additional functions ( Better security,
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-Marts 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-Marts 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-Marts dollar volume)

to receive orders and interact with WalMart 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:

departments sales, profitability, and inventory targets,

macroeconomic and market trends, and Wal-Marts
overall business focus

Wal-Marts expectations on them

Suppliers recommendations

How Wal-mart affects suppliers

Domestic Suppliers:
Wal-mart imported 18 billion worth of

goods from 5,000 Chinese suppliers in

2004
Ranked as Chinas 8 biggest trading
partner ahead of Russia, Australia and
Canada
Used power to squeeze domestic
suppliers 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

imported goods, also encourage the

use of domestic American products
Buy American Program
Retained over 1.7 billion in retail
purchases that produced offshore.

How Wal-mart affects dometic workers

Domestic workers :
Face keen competition from overseas
markets,
offshore manufacturing
Close down of factories
Loss of jobs
Competition with Wal-mart
Competitors cut labors health care benefits
and wages

How Wal-mart affects dometic workers

Wal-mart Defense:
Insist not responsible for the off-shoring of
manufacturing
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
dont 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

Q&A