1 wal-marts supply chain a business success. 2 wal-mart is the worlds largest retail company

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1 Wal-Marts Supply Chain A Business Success Slide 2 2 Wal-Mart is the Worlds Largest Retail Company Slide 3 3 Slide 4 4 Slide 5 5 Ranked first in the Global Fortune 500 list in 2001-2002 financial year Slide 6 6 History of Wal-Mart The companys founder is Sam Walton. The companys founder is Sam Walton. He was born in 1918 at Oklahoma. He was born in 1918 at Oklahoma. In 1940, he worked for the famous retailer, J C Penney. In 1940, he worked for the famous retailer, J C Penney. Slide 7 7 History of Wal-Mart Walton gave up the job and decided to set up his own retail store. Walton gave up the job and decided to set up his own retail store. He purchased a store franchise in Arkansas. He purchased a store franchise in Arkansas. Offering significant discounts on prices, he became successful and acquired a second store in 3 years. Offering significant discounts on prices, he became successful and acquired a second store in 3 years. Slide 8 8 History of Wal-Mart By 1969, Walton had established 18 Wal- Mart stores. By 1969, Walton had established 18 Wal- Mart stores. By late 1970s, the retail chain had established a pharmacy and an auto service center. By late 1970s, the retail chain had established a pharmacy and an auto service center. In 1980s, Wal-Mart continued to grow due to huge customer demands in small towns. In 1980s, Wal-Mart continued to grow due to huge customer demands in small towns. Slide 9 9 History of Wal-Mart Wal-Mart was offering low prices, customer satisfaction guaranteed, and hours that were realistic for the way people wanted to shop. Wal-Mart was offering low prices, customer satisfaction guaranteed, and hours that were realistic for the way people wanted to shop. Open all night, for university students By 1984, there were 640 Wal-Mart stores in U.S. By 1984, there were 640 Wal-Mart stores in U.S. Slide 10 10 History of Wal-Mart Wal-Mart suffered a setback in 1992, when Walton died. Wal-Mart suffered a setback in 1992, when Walton died. But it continued its growth in the 1990s, focusing on overseas stores. But it continued its growth in the 1990s, focusing on overseas stores. 1992, Mexico (joint venture with Cifra) 1994, Canada (acquired 122 Woolco stores from Woolworth) 1997, Germany (acquired 21 store of Wertkauf) Korea, Brazil, and so on. Slide 11 11 The Diffusion of Wal-Mart Video Slide 12 12 History of Wal-Mart This phenomenal growth of Wal- Mart is attributed to its continued focus on customer needs and reducing cost through efficient supply chain management practices. This phenomenal growth of Wal- Mart is attributed to its continued focus on customer needs and reducing cost through efficient supply chain management practices. Slide 13 13 Hub and Spoke System In the early 1970s, Wal-Mart became one of the first retailing companies in the world to centralize its distribution system, pioneering the retail hub-and-spoke system. In the early 1970s, Wal-Mart became one of the first retailing companies in the world to centralize its distribution system, pioneering the retail hub-and-spoke system. Under the system, goods were centrally ordered, assembled at a massive warehouse, known as distribution center (hub), from where they were dispatched to the individual stores (spoke). Under the system, goods were centrally ordered, assembled at a massive warehouse, known as distribution center (hub), from where they were dispatched to the individual stores (spoke). Slide 14 14 Hub and Spoke System The hub and spoke system enabled Wal-Mart to achieve significant cost advantages by the centralized purchasing of goods in huge quantities.. The hub and spoke system enabled Wal-Mart to achieve significant cost advantages by the centralized purchasing of goods in huge quantities.. and distributing them through its own logistics infrastructure to the retail stores spread across the U.S. Slide 15 15 Wal-Marts Procurement Wal-Mart emphasized the need to reduce purchasing costs and offer the best price to the customer. Wal-Mart emphasized the need to reduce purchasing costs and offer the best price to the customer. The company directly procured from manufacturers, by passing all intermediaries. The company directly procured from manufacturers, by passing all intermediaries. Slide 16 16 Wal-Marts Procurement Wal-Mart finalizes a purchase deal only when it is fully confident that the products being bought is not available else where at a lower price. Wal-Mart finalizes a purchase deal only when it is fully confident that the products being bought is not available else where at a lower price. Slide 17 17 Wal-Marts Procurement Wal-Mart spends a significant amount of time meeting vendors and understanding their cost structure. Wal-Mart spends a significant amount of time meeting vendors and understanding their cost structure. By making the process transparent, the retailer can be certain that the manufacturers are doing their best to cut down costs. By making the process transparent, the retailer can be certain that the manufacturers are doing their best to cut down costs. Slide 18 18 Using EDI for Procurement The computer systems of Wal-Mart were connected to those of its suppliers. The computer systems of Wal-Mart were connected to those of its suppliers. EDI enabled the suppliers to download purchase orders along with store-to-store sales information relating to their products sold. EDI enabled the suppliers to download purchase orders along with store-to-store sales information relating to their products sold. On receiving information about the sales of various products, the suppliers shipped the required goods to Wal-Marts distribution centers. On receiving information about the sales of various products, the suppliers shipped the required goods to Wal-Marts distribution centers. Slide 19 19 Wal-Mart and China Video Slide 20 20 Logistics Management An important feature of Wal-Marts logistics infrastructure was its fast and responsive transportation system. An important feature of Wal-Marts logistics infrastructure was its fast and responsive transportation system. The distribution centers were serviced by more than 3500 company owned trucks. The distribution centers were serviced by more than 3500 company owned trucks. Slide 21 21 Logistics Management Wal-Mart believed that it needed drivers who were committed and dedicated to customer service. Wal-Mart believed that it needed drivers who were committed and dedicated to customer service. The company hired only experienced drivers who had driven more than 300,000 accident-free miles, with no major traffic violation. The company hired only experienced drivers who had driven more than 300,000 accident-free miles, with no major traffic violation. Slide 22 22 Cross-docking To make its distribution process more efficient, Wal-Mart also made use of a logistics technique called cross-docking. To make its distribution process more efficient, Wal-Mart also made use of a logistics technique called cross-docking. In this system, the finished goods were directly picked up from the manufacturing plant, sorted out and then directly supplied to the customers. In this system, the finished goods were directly picked up from the manufacturing plant, sorted out and then directly supplied to the customers. Slide 23 23 Cross-docking The system reduced the handling and storage of finished goods, virtually eliminating the role of the distribution centers and stores. The system reduced the handling and storage of finished goods, virtually eliminating the role of the distribution centers and stores. The manufacturer directly forwarded the goods to a place called the staging area. The manufacturer directly forwarded the goods to a place called the staging area. The goods were packed here according to the orders received from different stores and then directly sent to the respective customers. The goods were packed here according to the orders received from different stores and then directly sent to the respective customers. Slide 24 24 Inventory Management Wal-Mart invested heavily in IT and communication systems to effectively track sales and merchandise inventories in stores across the country. Wal-Mart invested heavily in IT and communication systems to effectively track sales and merchandise inventories in stores across the country. With the rapid expansion, it was essential to have a good communication system. With the rapid expansion, it was essential to have a good communication system. Hence, Wal-Mart set up its own satellite communication system in 1983. Hence, Wal-Mart set up its own satellite communication system in 1983. Slide 25 25 Inventory Management Wal-Mart was able to reduce unproductive inventory by allowing stores to manage their own stocks, reducing pack sizes across many product categories, and timely price markdowns. Wal-Mart was able to reduce unproductive inventory by allowing stores to manage their own stocks, reducing pack sizes across many product categories, and timely price markdowns. Instead of cutting the inventory across the board, Wal-Mart made full use of its IT capabilities to make more inventories available in the case of items that customers wanted most, while reducing the overall inventory levels. Instead of cutting the inventory across the board, Wal-Mart made full use of its IT capabilities to make more inventories available in the case of items that customers wanted most, while reducing the overall inventory levels. Slide 26 26 Inventory Management Employees at the stores had the Magic Wand, a hand-held computer which was linked to in-store terminals through a radio frequency network. Employees at the stores had the Magic Wand, a hand-held computer which was linked to in-store terminals through a radio frequency network. These helped them to keep track of the inventory in stores, deliveries, and backup merchandise in stock at the distribution centers. These helped them to keep track of the i