Supply Chain of Wal-mart
Members:
Chan Man Ching
Chan Mong Tik
Chui Wai Ka
Lam Fei Fei
Man Ka Yu
Agenda
Wal-mart
Background
 Background
mart
 Supply chain of Wal-mart

Wal-mart
Supply Chain
Impact of
Wal-mart
Information of Wal-

Flow chat of the supply chain
Technology used in various stage of SC
 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
 Supply
chain plays an important role
chain:
a method of collaborating horizontally –
among suppliers, retailers, and
customers to create value
Wal-mart Supply Chain Flow Chat
Radio, headphone
Retail Store
Manufacturer
Manufacturer
Distribution center
Bar code, RFID
Retail Store
Point of sale terminal
Retail Store
Manufacturer
Satellite system
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
Retail store 1
Retail store 2
Manufacturer 3
Manufacturer 3
Retail store 3
Trucks outside Wal-mart
 Past----written
instructions
 Now----radio and headphone
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
senser – avoid scanning
codes one by one
 Automatic
RFID Gen1 and Gen2
Generation 1
HF signal
Difficult to penetrate through liquid
and metals
Costly (up to $200 per chip in
early stage)
Basic function
Generation 2
UHF signals
Improve reception (Work with
various materials)
Cost drops to US$0.15 within
near future
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-Mart’s 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-Mart’s 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-Mart’s dollar volume)
to receive orders and interact with WalMart 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:

department’s sales, profitability, and inventory targets,
macroeconomic and market trends, and Wal-Mart’s
overall business focus
Wal-Mart’s 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 China’s 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 labor’s 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
don’t 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