5. About the company Incorporated on Oct 31 ’69 in Bentonville, Arkansas Wal-Mart has 8,500 stores in 15 countries, under 55 different names. Walmex, Asda, Seiyu, Best Price etc. Largest retailing company in the world. Focused on improving sales, constantly reducing cost, adopting efficient distribution and logistics management systems and using IT.
6. Company strategy Wal-Mart's corporate management strategy involves selling high quality and brand name products at the lowest price (EDLP). Its strategy is to sell goods at low process, outsell competitors, and to expand. The company reduces costs by: Use of SCM systems. Communication technologies; Retail link Negotiates directly from manufacturers, eliminating the middleman.
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8. EDLP enablers Process Differentiation For functional products which have predictable demand & low margin, SC has to be efficient & low cost. For Innovative products which have unpredictable demand & high margin, SC has to be flexible & responsive. Vendor Collaboration Level of collaboration depends upon Investment Capabilities Product Volume Value to Wal-Mart Vendor Managed Inventory (VMI) IT Capabilities BarCode, Satellite Communication System, RFID, POS System, Retail Link Information available to vendors on time Vendors can thus improve supply chain and lower costs
10. Firm Infrastructure: The national headquarter takes care of orders, and every local store has to report to headquarter. Every associate is challenged to reduce the cost of doing business. These savings are passed to the customer in low prices. Human resources: Almost 60% of all managers in Wal-Mart stores started as hourly associates. The employees are encouraged to communicate openly, offer new ideas, take risks, strive for excellence and have fun. Two basic rules of Wal-Mart. These are: Rule 1: The customer is always right Rule 2: If the customer happens to be wrong, refer rule 1.
11. Technology: Technology forms a very important part of Wal-Mart's value chain. Wal-Mart utilizes various technologies in its SC The “just-in-time” inventory management reduces overhead costs associated with stocks. Thus enabling EDLP Procurement: The national HQ procures goods for all its stores, directly from manufacturers bypassing all intermediaries. A central information system manages bar codes of all products. Wal-Mart works together with suppliers as a result, packaging is reduced and distribution systems are streamlined to lower the total cost of the product.
12. Logistics: The company uses the retail last-in, first-out (LIFO) method for the Wal-Mart stores segment. Wal-Mart’s logistics infrastructure is fast and responsive transportation system. Vast fleet of company owned trucks Use of a logistics technique known as cross docking. Marketing: The majority of sales in the stores account for nationally advertised merchandise. The company both sells their own brands and licensed brands. Service: All Wal-Mart stores maintain uniform prices, except where lower prices are necessary to meet local competition. Bank credit card programs is available in all stores.
16. RFID Radio Frequency Identification system; requires minimum human intervention to carry out tasks ranging from billing to materials tracking & SCM. Provides real-time info to allow manufacturers get better readings of customers & markets. Helps retailers provide right products at right places at right times; maximizing sales and profits. Consists of small wireless device which can store good amount of data & can virtually be tagged to anything.
18. Logistics Management Cross Docking: Finished goods directly picked up from manufacturing site of supplier, sorted out & directly supplied to customers. Reduces handling & storage of finished goods, eliminating role of distribution centers & stores. Because of cross-docking, system shifted from supply chain to demand chain; instead of retailers pushing products into the system, customers could pull products, when & where they required.
19. Inventory management Point of Sale RFID Massively Parallel Processor (MPP): To track movement of goods & stock levels across all distribution centers &stores. Retail Link allowed suppliers to work with company's buyers to manage inventory in the stores-forecasting, planning, producing & shipping products. Faster replenishment Product mix tuned to needs of local customers Lower inventory costs
35. Decision and analysis software – BI solution-offered through Retail Link E-commerce- Kosmix acquisition
36. McFarlan’s Grid High Support Procurement & Distribution Inventory Strategic RFID Impact on Business Operation Factory Function specific applications Turnaround Point of Sales Low High Low Impact on Strategy
44. Sources of Competitive advantages Own transportation system: Resulted in cost savings and ability to deliver products in to various stores within 48 hours Usage of IT in SCM Inventory tracking using information available in barcode. POS scanning: Which helped in managing the products at supplier’s end. RFID tags: Enabled to keep track of the inventory throughout the supply chain.
45. Contd.. Having it’s own transportation system: Valuable Yes Helps to reduce the costs and generate profits Rare No Other domestic players also have their own transportation system Inimitable No Exploitation by the Organization Yes
46. Contd.. Usage of IT in SCM: Valuable Yes Helps to reduce the costs and generate profits, ease in operations Rare Yes IT is a differentiating factor Inimitable No Exploitation by Organization Yes, First mover advantage.
47. Conclusion By using technology in managing its supply chain Wal-Mart has made its SC efficient and low cost. The continuous replenishment system is strategic for Wal-Mart in different parts of the organization, environmental relationships and operations. At the business level At the Firm level Environmental relationship
48. At the business level: IS is used to help the firm become a low-cost producer, differentiate products and serve new markets. Low-cost: The system can replenish inventory with lightning speed. Because of the system Wal-Mart spends less on inventories of goods. Therefore Wal-Mart spends a lot less money to pay for overhead than their competitors. Differentiate new products: The system also allows the store to adjust to the customers’ demands. Serve new markets: Using this information system, Wal-Mart can offer their customers to access Wal-Mart’s sales and inventory data using the World Wide Web.
49. At the firm level: IS can be used to achieve new efficiencies or to enhance services by tying together the operations of disparate business units so that they can function as a whole or promote the sharing of knowledge across business units. Environmental relationships: The system offer employees and employers an efficient way of organizing the store. That means that by using the system they get available time, which they can spend on other things they need to do.
Hinweis der Redaktion
Wal-Mart's overall business strategy is to provide Every Day Low Prices (EDLP) to customers. Aside from every day low prices, a complementary element to their strategy is the variety of product offerings at Wal-Mart retail outlets. a very important element to their business strategy is product availability when products are demanded by customers.Through continuous supply chain cost control, Wal-Mart is able to maintain low prices for customers.Asset utilization is another goal for Wal-Mart, but facility, private fleet, and information technology utilization are again primarily focused on lowering costs.Information technology investments are directed towards improving efficiencies across the extended supply chain from vendors to stores, and thus the use of information technology supports the EDLP business strategy
Two types of productsFunctional:Predictable DemandLow MarginSupply Chain is efficient and low costInnovativeUnpredictable DemandHigh MarginCost and probability of stocking out are higherSupply chain should be flexible and responsiveVendor CollaborationLevel of collaboration depends uponInvestment CapabilitiesProduct VolumeValue to Wal-MartVendor Managed Inventory (VMI)
Vast fleet of company owned trucks which allows the company to ship goods from distribution centers to stores within two days and replenishes the stores shelves twice a week. Use of a logistics technique known as cross docking. In this system the finished goods were directly picked up from the manufacturing plant of a supplier sorted out and directly supplied to customers. The system reduced handling and storage costs.
Wal-Mart started investing in IT resources early on as it realized that integration, coordination and disintermediation of its supply chain was very important to pursue its business strategy of cost leadership and yet maintain margins to earn profits. The following diagram shows how Wal-Mart has continuously invested in IT in order to develop resources that are rare, valuable, inimitable and non-substitutable and attain a sustainable competitive advantage.
The system orders a lot of the product when customers buy much of the item, and doesn’t order the product when none wants to buy it.
The replenishment system in Wal-Mart registers sales at terminals all over the USA. The bar code of each item is next sent to a central computer at the headquarters. This computer collects orders from all Wal-Mart stores and then transmits them to suppliers.
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