Management Information
System for
Gloria Garza, Tracy Li, Wesley Thomas, Brianna
Vela, Destiny Zavala
History and Overview
 Created in 1964 by Sam Walton
 Public corporation that runs large discount department
stores and warehouses
 Is the world’s largest and most profitable retailer
 Wal-Mart operates so well that many companies like
General Electric look up to its business model
 Competitors include: Target, K-mart
 Biggest competitor is Dollar General
World wide influence
Why Wal-mart?
 Their success
 The efficiency of its business
process
 They’re pioneers in computer
systems
 IT has been a very important
factor in Wal-Mart’s growth
 One of the best inventory
systems
Business Model
Key
activities
Key
Partnership
Customer
Relationship
Value
Proposition
Customer
segment
Key
Resources
Distribution
channel
Cost
structure
Revenue
streams
Value proposition
 The core of the business model is:
 Their business model is based on cost leadership.
Key Resources
 3 categories:
1. Physical resources
2. Human resources
3. Company Culture: Continuous self-improvement, discipline
and loyalty
Key Partnership
 Close buyer-supplier relationship
 Wal-mart has a strong negotiation power
Wal-Mart's Business Process
What is a Business process?
Tasks or activities companies use to produce goods or
services.
There are 3 fundamental processes:
1. Procurement
2. Production
3. Fulfillment
 Wal-mart has : Procurement and fulfillment process.
Procurement Process
 Steps taken to acquire necessary materials
 For Wal-Mart these materials are already finished products
that they will retail
 6 steps in the procurement process:
1.
2.
3.
4.
5.
6.
Purchase requisition
Purchase order
Packing List
Goods receipt document
Vendor Invoice
Vendor Payment
Purchase requisition
 Wal-mart uses Vendor Managed inventory.
 What is it?
A type of business model.
It is the vendor who monitors the inventory and decides
when inventory is running low.
 Customer trusts the vendor to manage the
inventory
 Supplier has control over the size and the time of the
deliveries
How it works…
 Vendor
I. Monitors customers’ inventory:
 Customers call/fax/e-mail
Remote telemetry units
 Set levels to trigger call-in
II. Controls inventory replenishment & decides:
When to deliver
 How much to deliver
 How to deliver
Fulfillment process
Supplier to Wal-Mart
SALES
1.Receive customer inquiry
2.Create & send quotation
3.Receive customer purchase order
4.Create sales order
Warehouse
5.Prepare shipment
6.Send Shipment
Accounting
7.Create & send invoice
8.Receive Payment
Vendor Inventory Management
Continuous Replenishment Process
(CRP)
History
 Between Wal-Mart and P&G, CRP is best-known as the vendormanaged inventory program.
 In 1987, P&G and Wal-Mart pioneered in Continuous
Replenishment Process (CRP).
 P&G makes the main inventory replenishment decisions for
Wal-Mart.
 P&G monitors Wal-Mart’s inventory levels (physically or via
electronic messaging) and makes periodic resupply decisions
regarding order quantities, shipping, and timing.
 Transactions customarily initiated by Wal-Mart (like purchase
orders) are initiated by P&G instead.
Consignment
 “The process of a supplier placing goods at a customer
location without receiving payment until after the
goods are used or sold”.
 Traditional practice: a customer pays for goods within a
set time period after receiving them (often 30 days).
 The supplier receives nothing until it is used or sold.
This could result in a serious cash flow problem for the
supplier if goods continue to be produced but money is
not collected.
Advantages of VMI
 Customer
Less resource for inventory management
Assurance that product will be available when required
 Vendor
More freedom in when & how to manufacture product
and make deliveries
More uniform utilization of resources
Better coordination of inventory levels at different
customer
 Better coordination of deliveries to decrease
transportation cost
Pitfalls of Vendor Managed
Inventory
1. EDI problems: Extensive EDI testing should be done to validate
the data being sent. Is the distributor sending all the data that
should be sent? Is each field populated with the correct data?
2. Acceptance: It's not enough to just sell the concept to senior
management; all employees who are involved must be willing
participants and fully understand this new way of doing business.
3. Promotions/Events: Lots communication need to be involved.
Anything that adds or takes away from the normal ordering
pattern must be properly communicated.
4. Customer Base: communication between large customers
and manufacturers. Any large customers, either gained or lost,
must be communicated to the manufacturer. The distributor
must guide the manufacturer on how this will affect sales.
5. Over/Obsolete Stock: An agreement must exist between the
manufacturer and the distributor on what to do if an overstock
does occur (or in the case of an ordering error). Also, both
parties must agree on how to handle obsolete stock.
6. Time: Both parties involved must understand that this is a
learning process. Errors will occur. You will probably not have a
perfect process in place from day 1
Applications of VMI
 Chemical Industry
Air products distribution
Carbon black distribution
 Petrochemical industry
Gas stations
 Automotive Industry
Parts distribution
 Consumer Products
Department and grocery stores
Inputs and Outputs in the Retail Link
System
Retail Link system
 Introduced in Wal-Mart in 1991
 It is a system that keeps track of and stores all of
Walmart's sales data in order to more effeciently run
their business
 The RLS is connected to each store and warehouse to
keep track of inventory.
Input information from barcodes, registers, and
warehouse managers
Output response in form of shipping out more
inventory or holding inventory in store
RLS continued…
 Walmart also allows other companies to register for
access to their RLS in order to see how their product
is selling in Walmart stores
Input info from barcodes, registers, and
warehouse managers to 3rd party companies
Output response from the companies (if they
should keep selling through Walmart, how they
should adjust prices, etc.)
Wal-Mart barcode transaction/RDFI
transaction
Barcode transaction/RFID transaction
 What is it?
A systematic way of handling the flow of material in Wal-mart’s
inventory.
Uses RFID (radio frequency identification)
 What does it do?
The barcode scanning allows Wal-mart employees to know how
much inventory is in their store.
Barcodes allow employees to known when materials are needed
and how many more of each item they need.
Bar code process
When you purchase something at Wal-Mart the barcode is
checked at the checkout counter:
Network passes the scanned information to the database.
Subtracts purchase from the total inventory in the supply
chain.
Automatically directs store replenishment and supplier
purchase transaction.
Barcode label printed at the distribution center tells the
order clerk to pull that product from the storage bin and
replace it on the conveyor.
Barcode reader automatically routes product along the
conveyor to a truck that will deliver it to the appropriate.
Questions