Supply Chain of Wal-mart

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

Manufacturer
Manufacturer
Manufacturer
Retail Store
Retail Store
Retail Store
Point of sale terminal
Satellite system
Bar code, RFID
Radio, headphone
Distribution center
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
Manufacturer 3
Retail store 1
Retail store 2
Retail store 3
Manufacturer 3
Trucks outside Wal-mart
Past----written instructions
Now----radio and headphone

English ?
Spanish?
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
Improve reception (Work with
various materials)

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

Cost drops to US$0.15 within
near future
Basic function
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 Wal-
Mart 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