The Wal-Mart Example

The Wal-Mart Textile and Apparel Supply Chain Little-to-No SCM of Dependent Demand. Wal-Mart {}

brokersbrokers The China/Wal-Mart Supply Chain Dynamic/Virtual Supply Chains with Power Imbalances

Supply 68,000 + suppliers 5,000 in China 70% commodity products from China China's 8th largest trading partner Global Procurement Office Manages overseas operations

Company History First Wal-Mart opened in 1962(Rogers) First SAM’S Club opened in 1983(Midwest) First Supercenter opened in 1988(Washington) First international unit opened in 1991(Mexico)

Company History 1996 Wal-Mart enters China through a joint-venture agreement 1997 Wal-Mart becomes largest private employer in the USA, with 680,000 employees worldwide and has its first $100 billion sales year Wal-Mart has 1.3 million employees, making it the largest private employer in the world

Company Overview Wal-Mart is the largest real estate company in the United States, with an entire division devoted entirely to building new stores, selling old stores, and developing shopping centers around its new and existing stores Wal-Mart operates 3 major retail divisions: Wal-Mart Stores USA SAM'S CLUB Wal-Mart International

Company Overview Company Total: 5,246 stores (US$285.2 billion) Wal-Mart Stores USA 3,151 stores (US$191.8 billion) oDiscount Stores: 1,353 oSuper-centers: 1,713 oNeighborhood Markets: 85 SAM'S CLUB (United States): 551 Clubs (US$37.1 billion total) International: 1,587 (US$56.3 billion total)

Company Overview 2004 Wal-Mart reported net income of US$10.3 billion on US$285.2 billion of sales revenue (3.6% profit margin). If Wal-Mart were its own economy, it would rank 23rd in the world, with a GDP between Austria and Saudi Arabia.

Distribution In 1998, Wal-Mart had over 40 distribution centers located at different geographical locations in the U.S. Over 80,000 items were stocked in these centers. Wal-Mart has a dedicated fleet of 2,000 trucks and, on average; stores are replenished twice a week.

Cross Docking Cross-docking is a strategy that Wal-Mart made famous. Wal-Mart delivers about 85 percent of its goods utilizing cross- docking techniques. Cross docking has enabled Wal-Mart to achieve economies of scale, which reduces its costs of sales. Products are delivered to Wal-Mart's warehouses on a continual basis where they are sorted, repackaged, and distributed to stores without sitting in inventory.

Inventory Wal-Mart has an accelerated delivery system by which stores located within a geographical center can receive replenishment within 24 hours. To effectively track sales and inventories Wal-Mart set up its own satellite system. Wal-Mart is able to reduce unproductive inventory by allowing stores to manage their own stocks, reducing pack sizes across many products categories, and timely price markdowns.

Inventory To keep track of inventories employees use hand held computer which is linked to in-store terminals. Wal-Mart also came up with bar coding and radio frequency technology to manage its inventories. Bar coding devices enabled efficient picking, receiving and proper inventory control of the appropriate goods. Easy order packing and physical counting of the inventories.

stores data-link headquarters data-link suppliers data-link DRP

Types of IT Methods Used Point of Sales (POS): This system identifies each item sold, finds its price in a computerized database, creates an accurate sales receipt for the customer, and stores this item-by-item sales information for use in analyzing sales and reordering inventory. Satellite System: links all of the stores to company headquarters, giving Wal-Mart's centralized IT department real-time inventory data. Retail Link: which provides sales data – by item, store, and day- to its vendor. This information extends the cost savings up the supply chain by linking thousands of suppliers to Wal-Mart headquarters

Types of IT Methods Used Texlon Hard held computer: The hand held computer is linked to in- store terminals through a radio frequency network which helped keep track of inventory in stores, deliveries and backup merchandise in stock at the distribution centers. Radio Frequency Identification (RFID): RFID helps track goods throughout the supply chain and ultimately will help them get the right products into the right stores at the right time. Black Haul Betty: which is an interactive telephone voice-response system, via their Transportation or by Electronic Data Interchange (EDI). Suppliers inform Wal-Mart of ready loads for transportation through the “Black Haul Betty”.

Supplier Relationship Wal-Mart chooses suppliers that are geared towards minimizing costs and maximizing efficiency. Wal-Mart has centralized buying at its headquarters, which keeps purchasing costs down. Wal-Mart has avoided supplier power by not allowing any single supplier to have more than 2.4% of its purchases. Wal-Mart approached its suppliers as if they were partners, so by implementing a collaborative planning, forecasting and replenishment (CPFR) program, Wal-Mart began a just-in-time inventory program that reduced carrying costs for both the retailer and its suppliers.

Supplier Relationship Major suppliers such as Procter and Gamble and GE are able to share information with Wal-Mart electronically and have dedicated teams to manage products for Wal-Mart. These key suppliers have vendor managed inventory systems, which reduces Wal-Mart’s inventory costs and allows suppliers to increase sales for their products.

Requirements of Suppliers All suppliers are required to participate in Retail Link because of the benefits it provides All suppliers are required to participate in Electronic Data Interchange (EDI). Is the system of exchanging information-purchases orders, invoices that allows Wal-Mart to improve customer service, lower expenses and increase productivity. Be able to adapt to Wal-Mart lead time requirements. Lead time varies ranging from 60 days to commitments made a year in advance of a selling season.

Requirements of Suppliers All suppliers must be able to ship products in a reasonable amount of time. All apparel suppliers must make arrangements with Consumers’ Testing Lab(CTL) of Boston for testing well in advance of shipment to prevent complications with items that do not meet specifications. As a general rule Wal-Mart has all apparel, electronics and anything that touches food tested by CTL for quality assurance and consumer protection. Some suppliers will RFID tag 100% of their products while some will just tag 2%.

With Price Effect Subsidized by Indirect Government Forces Wal-Mart Price effect SCM effect > 32

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