WALMART:SUPPLYCHAIN

MANAGEMENT

K.VARUN
123511
BACKGROUND
Types of industry: one stop shopping center
Founder: Sam Walton

Year of establishment: 1962

First store: Rogers in Arkansas

 The US-based Wal-Mart ranked first in the global
Fortune 500 list in the financial year 2001-02
earning revenues of 219.81 billion.

Wal-Mart is the largest retailing company in the world.

The company is much bigger than its competitors in
the US - Sears Roebuck, K-Mart, JC Penney and
Nordstrom combined.
 THETRADITIONALSUPPLYCHAININCLUDES
INEFFICIENTANDUNNECESSARYSTEPS
DistributionWarehouse IndividualStore
Retailer

Order Order
Order

Tag/
Receive Select Pack Select Storage Sell
Label

Storage

Wholesaler
Order

Receive Select Pack

Manufacturer
(Supplier)
Make Pack

Shipper
Ship Ship Ship
WALMART:BUSINESSPROCESS

WALMARTSIMPLIFIEDITSSUPPLYCHAIN
DistributionCenter IndividualStore
Retailer

POS
Order

Receive Select Pack Ship Receive Storage Sell

<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.
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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.

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INVENTORYMANAGEMENT
(QUICKREPLENISHMENT)
SincethefloorareaofanyWalMartstore
variedbetween40,000to200,000square
feet,movementofgoodswithinthestore
wasanimportantpartoflogistics
operations.

WalMartmadesignificantinvestmentsin
ITtoquicklylocateandreplenishgoods
atthestores.

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INVENTORYMANAGEMENT
(RETAILLINKSYSTEM)
In1991,WalMarthadinvested
approximately$4billiontobuildaretail
linksystem.

Morethan10,000WalMartretail
suppliersusedtheretaillinksystemto
monitorthesalesoftheirgoodsatstores
andreplenishinventories.

Detailsofdailytransactions(~10million
perday)wereprocessedthroughthis
system.
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INVENTORYMANAGEMENT
(RETAILLINKSYSTEM)
RetailLinkconnectedWalMartsEDInetwork
withanextranet,accessibletoWalMarts
thousandsofsuppliers.

Thesupplierscouldfindouthowtheirproduct
wasperformingvisaviscompetitorsproductsin
aparticularproductcategory.

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WALMART:BUSINESSPROCESS

WALMARTINVESTSHEAVILYININFORMATIONTECHNOLOGY(CONT.)

VariousQuickResponse(QR)systems(retaillink)toallowdirectstoretosupplier
ordering:continuousreplenishment

VendormanagedQR
Distribution
WalMart
Center

Supplier POSData Store Order

WarehouseJustinTime Supplier Store

System
Distribution
WalMart WalMart
Center
managedQR

POSData
Supplier Store
RFIDTECHNOLOGY
(RADIOFREQUENCYIDENTIFICATION)
Ineffortstoimplementnewtechnologiesto
reducecostsandincreasetheefficiency,in
July2003,WalMartaskeditstop100
supplierstobeRFIDcompliantbyJanuary,
2005.

WalMartplannedtoreplacebarcode
technologywithRFIDtechnology.

Thecompanybelievedthatthisreplacement
wouldreduceitssupplychainmanagement
costsandenhanceefficiency.
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RFIDTECHNOLOGY
(RADIOFREQUENCYIDENTIFICATION)
BecauseoftheimplementationofRFID,
employeeswerenolongerrequiredto
physicallyscanthebarcodesofgoods
enteringthestoresanddistribution
centers,savinglaborcostandtime.

WalMartexpectedthatRFIDwould
reducetheinstancesofstockoutsatthe
stores.

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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.