1. Wal-Mart’s
SCM system practices
MIS Case Study
15 March 2013

2. Walmart
 Walmart, an American multinational retail corporation
that runs chains of large department and warehouse
stores
 Established 1962, Arkansan-USA
 Sam Walton- Founder & Mike duke- current CEO
 Successful due to its IT usage in SCM

3. Introduction to case
 1990 –Superseded ‘K-Mart’ rival retail chain as one of the
largest retailing chain in US
 1991- Superseded ‘Sears Roebuck & Company’ and
became the largest retailing chain in US
 In November 2003, Wal-Mart, world’s largest retailer,
planned to replace bar code technology with RFID.
 Objective: To enhance supply chain efficiency
 Expected they could save $8.35 million per year primarily
in labor costs

4. Background Note
 Wal-Mart  known for innovative business practices
 One of the first retailing companies to centralize
distribution system.
 Always among the front runners in employing IT to
manage its supply chain processes.

5. Using IT in supply chain
management
 Using EDI for procurement
- EDI saved time and made procurement efficient.
- Using the bar code scanners, an analysis of daily, weekly,
monthly sales data helped the store manager determine
what products were selling and at what quantity.
- Accordingly, the store manager would place orders in the
manufacturing division.
EDI=Electronic Data Interchange

6. Using IT in supply chain
management
 In 1977, Wal-Mart set up a computer terminal network
(CTN) to establish a communication link between its
stores and the company headquarters
 Real time business operations
 In 1978, Wal-Mart set up its first fully automated
distribution center

7. Using EDI for procurement
 Wal-Mart placed orders for huge quantities of goods
with its suppliers
 Cost of sales worked out to be 2-3 %(very low from
industry average)
 Information of product, manufacturer, price was
recorded on computer system
 That information was passed to centralized data
warehouse

8. Using EDI at Wal-Mart
 Analysis of daily, weekly, monthly sales data helped store
manager to determine which products were sold in
which quantities
 So that they can place purchase order
 Edi also helped suppliers
 Right merchandize at the right time, and have it at right
place at right price

9. Using IT in supply chain
management
Using voice based technologies: Enhancing warehouse
and logistics management
 Wal-Mart could replenish stock at any of its 1525 stores in
US within 24 hours
 Cross-docking
 It enabled the company to receive goods and dispatch
them to stores in lees than a day
 How it works at distribution centers?

10. Using IT in supply chain
management
 It installed voice based order filling(VOF) system in all
distribution centers
 Is consisted portable Voice Recognition Talkman
Terminals(VRTT) and radio module on company’s wireless
LAN
 It eliminated mis-picks and product labeling costs since
VOF didn’t require paper lists labor

11. How to quickly locate &
replenish goods?
 Store ready displays called PDQ(pretty darn quick)
displays
 Time saved per employees were not much but
aggregate time saved was quite good

12. GPS
 GPS system in communication in trucks
 Any truck can be located
 Drivers could activate system by voice and interact with
staff

13. Using IT in supply chain
management
The Retail Link system- Supporting Inventory Management
 Retail link connected EDI network to extranet ,accessible
to all suppliers
 Provided suppliers historical sales data of 24 months,
allowed them to track invoice, can make demand
forecast
 Suppliers could also study competitors products demand

14. Using the Internet in Supply chain
Management
 CPFR (Collaborative Planning Forecasting
Replenishment)
 Real time bases to determine product wise demand
forecast
 Wal-Mart shared past data, customer data,
demographic data, stock positions
 Both forecasted demand individually and then co-
operated
 Reduced inventory cost
 Product availability across supply chain

15.  As a result lead time was cut to 11 days from 21 days
 On-hand inventory was reduced by two weeks
 Sales grew by $8.5 millions in six months
 Later on it was implemented to other stores
 By 1990’s, about 90% of suppliers were doing business
through Retail Link

16. Barriers to CPFR
 Lack of discipline to execute primary phases
 Promotions and new items events are not jointly planned
 Ineffective replenishment in response to demand
fluctuations
 Trading partners focus on traditional supply chain steps
 Scalability and critical mass

17. Recent Supply Chain
Initiatives
 2001- Global Procurement Division[Shenzhen, China
 Exchange of sales and inventory data
 Best deal procurement from any part of world
 Strategy Employed
 Identify generic products
 Enhance product quality
 reduce cost by collaborating
2001- copy paper – increased sales
[ 46% in UK, 94% in Federal Republic of Germany,
38% in Canada, 25% in US]

18. Recent Supply Chain
Initiatives
 October 2002- Asked suppliers to replace VAN-EDI to
Web based EDI
 Direct online communication between trading partners
 No transaction costs
 Highly secured
 Saved millions[ VAN-EDI cost $200 Billion]
 No licensing fees
 July 2003 – Asked suppliers to place RFID tags on goods,
packed in pallets and crates
VAN-EDI = Value Added Network-EDI
RFID = Radio Frequency Identification

19. Benefits from RFID
 Drastic decrease in Stock out situations
From $400 million to $1.2 billion for P&G
 Lesser labor requirements
Almost $6.34 billion yearly
 Decrease in merchandise thefts
Almost $2 billion
 Real time tracking of consumption patterns
 Would help enhance JIT Inventory management system
 Decrease in stock levels by around 25%[IBM]
Total savings expected to be 8.34 billion per year

20. Problems
 An estimated cost of $20 million to suppliers
50% of this is integration of system with software and
modification in soft wares
 Not a proven technology
 Not compatible with liquids and metal packaging

21. THANK YOU -Neel Patel [AM 1012]
-Sagar Morakhia [AM
0912]
-Prajita Chowdhary [AM
0212]
-Krutik Patel [AM 1412]