Post on 23-Dec-2015
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Wal-Mart: Supply Chain Management
• Background
• Business Process Redesign: Process, IT
• Implications: Process, IT
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Wal-Mart Is the Largest and Fastest Growing Discount Department Store
• 1992 revenues totaled $43.9 billion:- Increased 35% from previous year, whereas competitors’ growth rates averaged only 10%
• Net income increased 25% to $1.6 billion
• Operations include growing chain of stores, including discount department stores, wholesale clubs, food stores, wholesale distributor of books and pre-recorded music, and grocery distribution services
• First discount department store chain to expand internationally:- Joint venture with CIFRA, Mexico’s largest retailer
• 18% market share of $250 billion discount department store industry:- KMart, the next largest competitor, has 13.8%
- Analysts estimate that by the year 1995, Wal-Mart will drive all competitors, aside from KMart and Target, out of business
WAL-MART: BACKGROUND
Source: Annual report.
Wal-Mart grows through volume and market share gains rather than margin expansions.
Wal-Mart grows through volume and market share gains rather than margin expansions.
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Stronger Competitors and More Powerful Suppliers Are Challenging Wal-Mart in Quickly and Effectively Responding to Customers
WAL-MART: BACKGROUND
Customer Demands:
• The right product
• In stock
• The best value
• Service and quality
• Improved operations
• Foreign competition
• Industry consolidation
• Intense price competition
Competitors:
TargetKMart
• Improved operations
• Powerful brand management
• Industry consolidation
Suppliers:
Wal-Mart
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Customer DemandsCustomer Demands
Critical Success Factors (CSF)
Critical Success Factors (CSF)
Satisfying Customer Demands Depends on Five Critical Success Factors
• Quick responsiveness to market changes
• Low inventory
• Quick replenishment of inventory
• Effective human resource system
• Efficient distribution system
• Quick responsiveness to market changes
• Low inventory
• Quick replenishment of inventory
• Effective human resource system
• Efficient distribution system
• The right products
• In stock
• Best value
• Service and quality
• The right products
• In stock
• Best value
• Service and quality
WAL-MART: BUSINESS PROCESS
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Wal-Mart Fulfills the Customer-Satisfaction Critical Success Factors
• Customer demand “pulls” product through the supply chain
• Tracking product movement at individual stores by market traits (e.g., size, color)
• Investment in IT ensures timely analysis of sales/customer/market information and trends
• Formal and informal cooperation among stores, distribution centers, and suppliers
Quick Responsivenessto Market Changes
Low Inventory
Quick Replenishment
Effective HR System
Efficient Distribution System
CSF
WAL-MART: BUSINESS PROCESS
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Wal-Mart Fulfills the Customer-Satisfaction Critical Success Factors (cont.)
• Direct high-level and long-term relationship with suppliers enabled by high information sharing:
- Some vendors directly manage distribution warehouse inventory of their products
• Efficient transportation system
• Investment in IT (e.g., EDI, Quick Response, Radio frequency terminals)
CSF
WAL-MART: BUSINESS PROCESS
Quick Responsivenessto Market Changes
Low Inventory
Quick Replenishment
Effective HR System
Efficient Distribution System
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• All employees are considered “associates”
• Extensive training and support
• Stock-ownership program
• Profit-sharing
“Employees are your biggest capital investment, so it makes sense to maintain them—their skills, their morale, and their participation.”
“Employees are your biggest capital investment, so it makes sense to maintain them—their skills, their morale, and their participation.”
CSF
Wal-Mart Fulfills the Customer-Satisfaction Critical Success Factors (cont.)
WAL-MART: BUSINESS PROCESS
Quick Responsivenessto Market Changes
Low Inventory
Quick Replenishment
Effective HR System
Efficient Distribution System
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• Highly automated distribution centers (e.g., laser-guided conveyor belts)
• A fleet of 2,000 company-owned trucks
• High leverage of supplier relationships:
- Some suppliers ship goods “sales floor ready”
CSF
Wal-Mart Fulfills the Customer-Satisfaction Critical Success Factors (cont.)
WAL-MART: BUSINESS PROCESS
Quick Responsivenessto Market Changes
Low Inventory
Quick Replenishment
Effective HR System
Efficient Distribution System
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The Traditional Supply Chain Includes Inefficient and Unnecessary Steps
Select Tag/Label
Ship
Pack
Ship
Select PackReceive
Ship
Manufacturer (Supplier)
Retailer
Shipper
Wholesaler
Receive PackSelect Storage
Storage
Sell
Order
Individual StoreDistribution Warehouse
OrderOrder
Order
Make
WAL-MART: BUSINESS PROCESS
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Wal-Mart Simplified Its Supply Chain
Ship Receive
Select
Ship
Manufacturer (Supplier)
Retailer
Shipper
Wholesaler
Receive PackSelect Storage Sell
Individual StoreDistribution Center
Tag/Label PackMake
WAL-MART: BUSINESS PROCESS
Cross-docking in distribution centers results in product flow from inbound to outbound shipping docks within 48 hours.
Cross-docking in distribution centers results in product flow from inbound to outbound shipping docks within 48 hours.
Deliver within72 hours of order
POSOrder
<48 hours<48 hours
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Wal-Mart Invests Heavily in Information Technology
• Inventory Tracking and Management System at distribution centers:- Identifies every product and its location in the warehouse
- Integrated with some 8.5 miles of laser-guided conveyor belts
- Lasers read the bar code on every product box and route them to appropriate loading dock
• Electronic Data Interchange (EDI):- For electronic transmission of POS data, purchase orders, invoices, advance shipment
notice, etc. between Wal-Mart headquarters, suppliers, distribution centers, and individual stores
• Merchandising Artificial Intelligence System:- To adjust vendor merchandise assortments based on the need of each particular store
- State-of-the-art satellite communication network which supports data, voice, and video
WAL-MART: BUSINESS PROCESS
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Wal-Mart Invests Heavily in Information Technology (cont.)
• Various Quick-Response (QR) systems (retail-link) to allow direct store-to-supplier ordering: “continuous replenishment”
Wal-Mart
Supplier
POS Data
Store
Vendor-managed QR
Supplier Store
Wal-Mart-managed QR
Order
Wal-Mart
Supplier Store
Warehouse Just-in-Time System
DistributionCenter
DistributionCenter
WAL-MART: BUSINESS PROCESS
POS Data
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Wal-Mart’s Inventory Management Improvements Have Resulted in Efficiencies Unmatched by the Competition
WAL-MART: IMPLICATIONS
Inventory-to-Sales Ratio
1:4.58
1:5.94
Sears Roebuck & Co.Wal-Mart
• Wal-Mart stores replenish inventory twice a week vs. industry standard of once every two weeks
• Wal-Mart has lowest cost of operations in the retail area, aside from wholesale clubs
Selling and Operating Expenses of Sales
KMartWal-Mart
15%
28%
• IT systems have improved Wal-Mart’s in-stock position and increased vendor responsiveness
Inventory in System (Days)
At Vendor
At Warehouse
In-Store
30
30
14
323
After New System
Before New System
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Lessons Learned: The Road to Success Is Paved by Technology and Better Use of People
Economiesof Sales:
“Best Deals”
Economiesof Sales:
“Best Deals”
StrongSupplier
Relationships
EffectiveIT Systems
EffectiveDistribution
Systems
EmpoweredEmployees
ReducedCost of Sale
ReducedCost of Sale
In-DepthKnowledge
of Customer/Market
In-DepthKnowledge
of Customer/Market
StableLowerPrices
StableLowerPrices
PredictableSale
Patterns
PredictableSale
Patterns
DecreasedChance of
Out-of-Stock
DecreasedChance of
Out-of-Stock
IncreasedSalesand
Profits
WAL-MART: IMPLICATIONS
DOCUMENT ID
Comments:
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B&W Pres 44
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35mm Slides 44:
Title:
Project No.:Client Name:
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