OPRE 3320.

501 Group 7
Vincent James Haytham Dablouk Bruno Porto Maia Yang Lei

 Company & Division

Wal-Mart Stores is an American multinational retail corporation that runs chains of large discount department stores and warehouse stores. The company is the world's second largest public corporation, according to the Fortune Global 500 list in 2013, the biggest private employer in the world with over two million employees, and is the largest retailer in the world (Wikipedia). Walmart is a family-owned business, controlled by the Walton family, who own over 50 percent of Walmart.It is also one of the world's most valuable companies. Today, Wal-Mart operates more than 11,000 retail units under 69 banners in 27 countries.

Executive Summary
Wal-Mart is considered a success story without precedent. Founded by Sam Walton in 1962 in Bentonville, Arkansas, Wal-Mart stores offered customers abroad range of goods. In its first year, Wal-Mart Stores accumulated $700,000 in sales, which increased to $5.4 million by 1974. In 1980, Wal-Mart became the youngest U.S. retail company, and the only regional retailer to exceed $1 billion in net sales. In 2002, Wal-Mart's revenue equaled 2.3% of U.S. gross domestic product. Wal-Mart's key strategy lay in its Everyday Low Prices (EDLP) which it achieved through aggressive bargaining with suppliers, its efficient distribution system and inventory control as well as its unique culture. Wal-Marts superior processes in supply chain and IT have ensured that it was able to provide the customers with 7 % lower prices than its competitors. Wal-Mart was able to achieve a leadership status in the retail industry because of its efficient supply chain management practices. Areas where Wal-Mart manages the supply chain: Procurement & DistributionWal-Mart procured goods directly from manufacturers, bypassing all

intermediaries. It was a tough price negotiator which will only purchased when it was fully assure that the products bought were not available elsewhere at a lower price. Logistic management Cross- Docking system. Distribution centers were serviced by own Wal-Mart's trucks. Drivers had to report their hours of service every day.
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Hiring only experienced drivers for trucks.

Distribution systemBarcode Technology. Establish long -term relationships Hand-Held computer system. Procured goods directly from manufacturers.

Vision/mission
Wal-Mart's advertised mission statement and its advertising slogan are the same: "We save people money so they can live better (Walmart.com)" In addition to this mission statement, the company looks to its founder, Sam Walton for a company purpose: If we work together, well lower the cost of living for everyonewell give the world an opportunity to see what its like to save and have a better life. In order to fulfill its mission, Wal-Mart has developed some unique, policies, principles, rules, processes and procedures, the sum total of which form the Wal-Mart stores corporate culture: Open Door Policy - Managers' doors are open to employees at all levels Sundown Rule - Answering employee, customer, and supplier questions on the same day the questions are received Grass Roots Process - Capturing suggestions and ideas from the sales floor and front lines 3 Basic Beliefs & Values - Respect for the Individual, Service to our Customers, Striving for Excellence 10-Foot Rule - Making eye contact, greeting, and offering help to customers who come within 10 feet Servant Leadership - Leaders are in service to their team Wal-Mart Cheer - An actual structured chant that was created by founder Sam Walton to lift morale every morning

 Company Structure
From its humble beginnings as a small discount retailer in Rogers, Ark., Wal-Mart has opened thousands of stores in the United States and expanded internationally. Through this model of expansion, which brings the right store formats to the communities that need them, Wal-Mart is creating opportunities and bringing value to customers and communities around the globe. Today, Wal-Mart operates more than 11,000 retail units under 69 banners in 27 countries. Wal-Mart employs 2.2 million associates around the world 1.4 million in the U.S. alone. Locations at a glance Total retail units on Oct. 31, 2013 Walmart U.S. Sam's Club Walmart International 11,096 4,156 630 6,310

Wal-Mart currently operate four primary store formats in the U.S., each custom tailored to its neighborhood. Walmart SupercenterWal-Mart Supercenters offer a one-stop shopping experience for electronics, apparel, toys and home furnishings with the added convenience of a grocery store with fresh produce, bakery, deli and meat and dairy products. Most Supercenters are open 24 hours, and may also include specialty shops such as pharmacies, banks, hair and nail salons, name-brand restaurants, vision centers or health clinics. Walmart Discount StoreSince Sam Walton opened his first discount store in Rogers, Ark., in 1962, Wal-Mart have built hundreds across the U.S. Smaller than a Supercenter, discount stores employ about 200 associates and offer electronics, apparel, toys, home furnishings, health and beauty aids, hardware and more in about 106,000 square feet of open, brightly lit space.

Walmart Neighborhood MarketWalmart Neighborhood Markets were designed in 1998 as a smaller-footprint option for communities in need of a pharmacy, affordable groceries and merchandise. Each one is approximately 38,000 square feet and employs up to 95 associates. Walmart ExpressThe Walmart Express format was created in 2011 to offer low prices, convenient shopping, and Wal-Marts smallest footprint yet, an ideal format for urban and rural areas that lack access to larger stores. Walmart Express stores are about 15,000 square feet and offer groceries, general merchandise and even pharmacies. Sams ClubFirst Sam's Club opened in 1983 to meet a growing need among customers who wanted to buy merchandise in bulk. Since then, Sam's Club has grown rapidly, opening more than 600 clubs in the U.S. and 100 clubs internationally. Walmart became an international company in 1991, and it operates in 26 countries outside the United States. With more than 800,000 associates and over 6,000 stores internationally, Wal-Mart leverage its global resources to meet local needs. Walmart International is currently the fastest growing part of Wal-Marts business and is led by President & CEO Doug McMillon.

 Supply Chian Diagram

http://mi021.wordpress.com/2013/03/24/walmart-master-of-the-supply-chain/

Major Customers-End Customers

The average US Wal-Mart customer's income is below the national average, and analysts recently estimated that more than one-fifth of them lack a bank account, twice the national rate(Jones 2011). In 2006, Wal-Mart expanded its US customer base, by change to a new strategy that is designed to "reflect each of six demographic groups African-Americans, the affluent, empty-nesters, Hispanics, suburbanites and rural residents."A new slogan unveiled after that: "Saving people money so they can live better lives". This reflects the three main groups into which Wal-Mart categorizes its 200 million customers: "brand aspirationals","price-sensitive affluents" and "value-price shoppers".

 Order processing
The order management and store replenishment of goods were entirely executed with the help of computers through the Point-of-Sales (POS) system Through this system, it was possible to monitor and track the sales and merchandise stock levels on the store shelves In 1998, Wal-Mart installed a voice-based order filling (VOF) system in all its grocery distribution centers Each person responsible for order picking was provided with a microphone/speaker headset, connected to the portable (VOF) system that could be worn on waist belt They were guided by the voice to item locations in the distribution centers

Wal-Mart provides the product, as well as pricing and availability information, to the customer. The customer transfers funds to Wal-Mart. Wal-Mart convey point-of-sales data as well as replenishment order via trucks back to the store. Wal-Mart transfers funds to the distributor after the replenishment. The distributor also provides pricing information and sends delivery schedules to Wal-Mart. Similar information, material, and fund flows take place across the entire supply chain. Wal-Mart trains employees on how to problem solve and develops each employee to focus on pleasing the customer. The slogan of "satisfaction guaranteed" is something that Wal-Mart says it takes seriously. Wal-Mart says it trains employees to ask customers if they need assistance or tutorials on how a particular product functions. Wal-Marts Delivery system procedures1. Create walmart.com account 2. Check your address 3. Shop online 4. Reserve your delivery time

 Procurement
Wal-Marts process of procurement consists of reducing its purchasing costs as much as possible so that it can offer best price to its consumers. The company procures goods directly from the manufacturers, bypassing all intermediaries. Wal-Mart has distribution centers in many different geographical places in the United States. Wal-Marts own warehouses provide about 80% of the inventory. Each distribution center is split in different groups contingent on the quantity of goods received. (Wohl, J., & Kellehe 2009).The inventory turnover rate is extremely high, approximately once every week for the majority of the items. The goods to be used internally in the US arrive in pallets and imported goods arrive in reusable boxes. The distribution centers ensure steady flow and consistent flow of products. Managing the center is economical with the large-scale use of modern technology such as the bar code, hand held computer systems (Magic Wand) and now, RFID. Every employee has access to the essential information regarding the inventory levels of all the products in the center. They make two scans- one for identifying the pallet, and other to identify the location from where the stock had to be collected. Bar codes & RFID are employed to label different products, shelves and bins in the center. The hand held computers direct employee to the location of the specific product. The quantity of the product needed from the center is entered in the hand held computer, which updates the information on the main central server. The computers also allowed the packaging department to get accurate information such as storage, packaging and shipping, thus saving considerable time in unnecessary paperwork. This also facilitates supervisors in monitoring their employees closely in order to guide them and give instructions. This enables Wal-Mart to fulfill customer needs swiftly and enhance the level of efficiency of distribution center management operations.

Inventory
Considering the quick expansion of Wal-Mart stores, it was vital to have an incredibly good communication system. For this to happen, Wal-Mart set up its own satellite communication system in 1983. This allowed the management to monitor each

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and every activity going on in a particular store at any point of time and analyze the course of action to be taken depending on how the things panned out. Wal-Mart ensures that unproductive inventory is reduced to the fullest extent possible, by allowing the stores to manage their own stocks, thereby decreasing pack sizes across many categories and timely price markdowns. Wal-Mart makes full use of its IT infrastructure to make more inventories available in case of items that customers wanted most, while decreasing overall inventory. By making use of Bar-coding & RFID technologies, different processes like efficient picking, receiving and proper inventory control of the products along with easy packing and counting of the inventories was ensured. Wal-Mart owns the Massively Parallel Processor (MPP), the largest and most complex computer system in private sector, which allows it to easily track movement of goods and stock levels across all distribution centers and stores. As an emergency backup, it has an extensive contingency plan in place as well. Employees use Magic Wand, which is linked to in-store terminals through a Radio frequency network, to keep track of the inventory in stores, deliveries and backup merchandise in stock at the distribution centers. The order management and store replenishment of goods is fully executed with the help of computers through Point of Sale (POS) system. Wal-Mart also makes use of high-tech algorithm to forecast the quantities of each item to be delivered, based on inventories in the store. A Centralized inventory database lets the personnel at the store to discover the level of inventories and location of each product at a given time. Additionally, it shows the location of the product like distribution center or transit on the truck. When the goods are unloaded at the store, the inventory system is immediately updated.

Manufacturing
Its supply chain strategy has four key components: vendor partnerships, cross docking and distribution management, technology, and integration. Walmarts supply chain begins with strategic sourcing to find products at the best price from suppliers who are in a position to ensure they can meet demand. Walmart establishes strategic partnerships with most of their vendors, offering them the potential for long-term and high

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volume purchases in exchange for the lowest possible prices. Suppliers then ship product to Walmarts distribution centers where the product is cross docked and then delivered to Walmart stores. Cross docking, distribution management, and transportation management keep inventory and transportation costs down, reducing transportation time and eliminating inefficiencies. Technology plays a key role in Walmarts supply chain, serving as the foundation of their supply chain. Walmart has the largest information technology infrastructure of any private company in the world. Its state-of-the-art technology and network design allow Walmart to accurately forecast demand, track and predict inventory levels, create highly efficient transportation routes, and manage customer relationships and service response logistics

In terms of location, Wal-Mart has traditionally taken advantage of developing countries lower labor costs to settle manufacturing plants there. However, they have recently pledged to turn to the U.S. for their manufacturing needs once realizing it was becoming more profitable doing so due to the rising wages in emerging economies such as China. Wal-Mart guarantees this move wasnt motivated by patriotism, and won't purchase American goods if its means higher prices. Wal-Marts traditional Every Day Low Prices policy will be kept intact thanks to its strategy of keeping manufacturing costs low. Hampton Products International, a supplier of locks and door hardware to retailers including Wal-Mart, decided to bring their manufacturing back home in 2008. This move proved to be a successful one. Over the past six years, the price of producing a door hardware part in China has risen 24 percent to $2.20 from $1.77, because of the Chinese currency's appreciation and increased labor costs. Throw in transport costs and U.S. tariffs, and that product, shipped to the United States today, would cost about $2.53. By moving production back to the United States, Hampton can make the part today for just $2.16, a nearly 15 percent saving even including the amortized investment in its new American plant (Chandran 2010). In addition to production costs, Wal-Mart can reduce its inventory costs if it orders locally since goods spend less time in transit, and the short distance that products travel allows the retailer to better stock its shelves as soon as consumer trends come and go.

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 Logistics Facilities Network

Every year, Walmart moves millions of products from manufacturers to Walmarts distribution centers, and from distribution centers to the shelves in the stores. Wal-Marts highly-automated distribution centers, which operate 24 hours a day and are served by Wal-Marts truck fleet, are the foundation of its growth strategy and supply network. The companys hub-and-spoke distribution network utilizes a system of manufacturer storage with customer pickup. No inventory is stored at Wal-Marts distribution centers. Wal-Marts fleet of 6,500 dedicated trucks and over 50,000 trailers. (SC Digests editorial staff, 2011). They are used to pick up goods directly from manufacturers warehouses, thus eliminating intermediaries and increasing responsiveness. A regional distribution center can have up to 12 miles of conveyor belts, which can move hundreds of thousands of cases through the facility each day. There are 9 disaster distribution centers, strategically located across the country and stocked to provide rapid response to struggling communities in the event of a natural disaster. Each distribution center is more than 1 million square feet in size, and uses more than 5 miles of conveyor belts to keep products moving to our stores 24 hours a day. Every distribution center supports 90 to 100 stores in a 200-mile radius.

http://www.transportationfortomorrow.com

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 Transportation methods
Walmarts distribution operation is one of the largest in the world. The main method they are using to transport is by trucks. Walmart logistics has a fleet of 6,500 tractors, 55,000 trailers and more than 7,000 drivers (SC Digests editorial staff, 2011). It ensures Walmart to move goods to and from distribution centers because of its private fleet of trucks and skilled truck drivers. Walmarts truck drivers fleet is one of the largest and safest fleets, and every year they drive 700 million miles to make millions of deliveries to its stores and clubs. Each driver averages around 100,000 miles annually, thats like driving around the world 4 times! Together with the truck drivers, Walmart constantly working to ensure that it is moving merchandise in responsible, sustainable ways. Drivers follow the most efficient routes to their destinations, and work to minimize the number of empty miles they drive (SC Digests editorial staff, 2011). This way, Walmart uses less fuel, drive fewer miles, and maximizes the merchandise it delivers while minimizing its environmental impact. Just last year, Walmart drivers logged 28 million fewer miles while transporting 65 million more cases. Those improvements avoided nearly 41,000 metric tons of carbon emissions, which is the equivalent of taking 7,900 cars off the road.

Information systems
The Information Systems Department has around 3000 societies that work in the David Glass Technology Center located in Bentonville, Arkansas. Wal-Marts IS Department is very hierarchal. It includes a Business Analyst, Senior Business Analyst, Manager, Senior Manager and levels below them. The department of the information system is very structured and formal (Wilgum 2009). It is so structured that they track the time spent on projects down to fifteen minute increments. Doing this keeps them on track for budget and productivity metrics. Jane data center is the data center of Wal-Mart which has a capacity of 460 terabytes of data. Which is a huge capacity of data available in the internet. And it has

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helped Wal-Mart become the biggest retailer in the world, and to the corporation's growing secrecy since founder Sam Walton's death in 1992 (Walmart 2012). To the power of data, Jane data center is considered a mysterious icon. It helped Wal-Mart to become the biggest retailer in the world. When Wal-Mart constructed its primary data center at corporate headquarters in 1989, it wasn't a secret, it was the largest poured concrete structure in Arkansas at the time, and Walton himself ordered a third story. According to the econometric society, Wal-Mart deals with the following data: Store openings data which included the opening dates of Wal-Mart stores and Supercenters. Also the data that Wal-Mart dealt with included distribution center opening which show Opening dates of General Distribution Centers and Food Distribution Center. Moreover, Wal-Mart dealt with Model Calculations data which include Gauss Programs and Gauss Data sets that calculate sales, operating profits, and distribution miles for any given configuration of Wal-Mart stores in any given year.

Universal bar code and RFIDThe universal bar code was established after Wal-Mart pushed the retail industry , which made manufacturers adopt common labeling. The bar allowed retailers to generate all kinds of information, creating a shift of power from manufacturers to retailers. Also Wal-Mart became very good at using the information behind the bar code and is considered a pioneer in developing sophisticated technology to track its inventory and cut the fat out of its supply chain. No one has used the technology as efficiently as Wal-Mart. The famous retail store Wal-Mart recently showed that it is investing more in technology , dealing more with sales and production tracking. Wal-Mart now requires its suppliers to provide microchips which will service radio frequency identification, or RFID, which will greatly enhance the systems created by bar codes.

Transaction process system (TPS)This information system ordinarily automates routine and repetitive tasks that are very important to the operation of Walmart. The input of TPS is raw data; the processing involves with the summarizing, recording, and merging the data and the output is in the form of report (Wilgum 2009).One example of TPS is Point-of-Sale when you check-out

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the product at Walmart, the cashier has to scan the product with the bar code that the input of system; it has many benefits to Wal-Mart, they are: Ensure accurate pricing Improve efficiency Reduce Shrinkage Improve communications Management information system (MIS)MIS is the system provides the actual performance report of Walmart that use in middle management, which created based on the data from TPS.

Uniqueness
Fewer LinksWal-Marts supply chain innovation began with the company removing a few of the chains links. In the 1980s Wal-Mart began working directly with manufacturers to cut costs and more efficiently manage the supply chain. From 1993 to 2001, Wal-Mart grew from doing $1 billion in business a week to $1 billion every 36 hours (Johnbagamery 2012), growth that was attributed as much to supply chain management as to customer service. VMIUnder a Wal-Marts supply chain initiative called VMI - vendor managed inventory manufacturers became responsible for managing their products in Wal-Marts warehouses. As a result, Wal-Mart could expect close to 100 percent order fulfillment on merchandise. CollaborationWal-Mart implemented the first companywide use of Universal Product Code bar codes, in which store level information was immediately collected and analyzed, and the company devised Retail Link, a mammoth Bentonville database. Through a global satellite system, Retail Link is connected to analysts who forecast supplier demands to

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the supplier network, which displays real-time sales data from cash registers and to Wal-Marts distribution centers (Uni of San Francisco Online 2011). In recent years Wal-Mart has used radio frequency identification tags (RFID), which use numerical codes that can be scanned from a distance to track pallets of merchandise moving along the supply chain. Even more recently the company has begun using smart tags, read by a handheld scanner, that allow employees to quickly learn which items need to be replaced so that shelves are consistently stocked and inventory is closely watched.

Competition
In North America, Wal-Mart's primary competition includes department stores like Kmart, Target, ShopKo and Meijer, Competitors of Wal-Mart's Sam's Club division are Costco, and the smaller BJ's Wholesale Club chain operating mainly in the eastern US. Wal-Mart's move into the grocery business in the late 1990s also set it against major supermarket chains in both the United States and Canada. Some retail analysts see regional grocery store chain WinCo Foods as serious competition for Walmart. Several smaller retailers, primarily dollar stores, such as Family Dollar and Dollar General, have been able to find a small niche market and compete successfully against Wal-Mart for home consumer sales.In 2004, Wal-Mart responded by testing its own dollar store concept, a subsection of some stores called "Pennies-n-Cents."

Current/Future Challenges

Online salesWalmart facing a new challenge is how to goose Wal-Marts online sales, which account for about $5.15 billion, or 2 percent, of total annual sales, according to Kantar Retail, a London-based consulting firm. More and more Wal-Mart customers are shopping at Amazon (Carson 2010). The future of shopping is e-commerce market, as the e-commerce market is getting crowded to enter. How to get market share from e-commerce giants such as Amazon and Ebay is their biggest challenge.

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Going aboardWal-Mart will continue to grow overseas. Sales outside the U.S. are about 25% of the company's $408 billion in sales. But It was difficult for Walmart to expand their territory. Wal-Mart pulled out of Germany in 2006 with a $1 billion loss. Germany has the world's fifth-largest GDP. The same year, the world's largest retailer sold its South Korean stores and left that market. Wal-Mart has also struggled in Japan for years( Mclntyre 2010). In sum, the company's efforts to break into several of the world's largest retail markets have been a failure. Still, the success in Canada, Mexico and Britain shows there are significant business opportunities outside the U.S.How to expand overseas is the ultimate challenge that Walmart have to face.

Recommendations for Potential Improvement

Based on the challenges Walmart will face or current facing, We suggest Walmart to keep their low prices strategy to attract more lower class customers. At the same time, continue to Conquering foreign markets, especially Asian-Pacific ones with careful consideration of the strategies and approaches, because theyve failed once. Walmart also needs to keep improving their logistics since they are constantly delivering from distribution center to local stores. That is a big part of their supply chain and they could minimize cost by analyzing their strategy and look for different ways to transport product.

Summary
Supply chain management is a complex process involving the intricacies of top of the end management practices. Every successful company has its own ways to improve their Supply chain process, Wal-Mart is no different. It has been working hard on improving their supply chain process and done some remarkable works, and that is why Walmart being the world 2nd largest retailer in term of sales. Walmart is doing well domestically. But they still need to make more efforts to approach towards enhancing their associates and building relationship, so that it helps the company to further expand globally. Improvement of their supply chain process

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always calls necessarily. Continuous improvements and learning, emphasizing on different strategy will not only make them successful domestically but also globally.

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