Supply Chain of Walmart

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Supply Chain of Wal-mart

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

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Agenda

• Background Information of Wal-mart
• Supply chain of Wal-mart
• Flow chat of the supply chain
• Technology used in various stage of SC
• Impact of Wal-mart

Wal-mart Background
Wal-mart Supply Chain
Impact of Wal-mart
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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
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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.
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Rapid growth of Wal-mart

• Revenues 315,654,000, 000 in 2005
• Stock value from Aug 1972 to May 2006

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How well is Wal-mart doing?
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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

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Wal-mart Supply Chain Flow Chat
Radio, headphone
Retail Store
Manufacturer
Retail Store
Distribution center
Manufacturer
Bar code, RFID
Point of sale terminal
Retail Store
Manufacturer
Satellite system
Company Headquarter
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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

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Manufacturer 1
Retail store 1
Manufacturer 2
Retail store 2
Manufacturer 3
Retail store 3
Manufacturer 3
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Trucks outside Wal-mart

• Past----written instructions
• Now----radio and headphone

English ? Spanish?
English ? Spanish?
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Trucks outside Wal-mart

• Use both hands
• Keep contact with the headquarter
• Behind or ahead the expectation
• Adjust to any sudden changes
• Benefit Cost

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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

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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
  

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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

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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
  

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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
  

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RFID Gen1 and Gen2
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RFID

• Further improve logistics efficiency
• Save time identifying merchandises
• Convenience in checking inventory
• Information pre-stored in the chips convenience
  of data processing
  

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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

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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.
  

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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.
  

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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.
  

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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?

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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.
  

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Electronic data interchange (EDI)

• Enabled an estimated 3600 suppliers (about 90 of
  Wal-Marts dollar volume) to receive orders and
  interact with Wal-Mart electronically.
  
• Later expanded to include forecasting, planning,
  replenishing, and shipping applications.
  

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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
  

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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

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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

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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

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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.
  

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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

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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

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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 2002
  

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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
  

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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

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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

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Wal-mart

• Q A