Walmart SecB Group 3 Nitin Updated

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261Presentation to Prof M.K. Srivastava July 10, 2014

Sec B Group 3

Manu Mehrotra 13P084

Mitul Jain 13P086

Mohamad Hasan 13P087

Nitin Dangwal 13P094

Piyush Beriwala 13P097

Shivtosh Kumar 13P111




$ 477.3Billion

2.2 mn

85%self-sourcing

10130worldwide

3%

2OOMillion times

per week




Sam Walton dies

TIMELINEWALMART

1940

1970

1984

1992

1997

2002

Present

640 stores clockingsales of $ 4.5bn

Walton opens firststore at Newport,

Arkansas

Expansion mode –Open First

Distribution Center

Global Expansion

Walmart becomes theworld’s largest company

Revenue: $ 477.3 bn




Vendor

WorkingCapital

Costs

CustomerValue

Creation

EmployeeCosts

CostSavings

Cross-Docking

Logistics




PROCUREMENT

PHILOSOPHY

Best Price toCustomer

Lowest Price Negotiate forCustomer

ToughBargainer

BypassIntermediaries

Local & Regional Vendors

Long Term Relationship

Understand Cost Structure

Assist cost cut down

OBJECTIVE

Extended Supply

ChainChain Optimization

procurement is actual buying of the product from the sourced supplier




PROCUREMENT STRATEGYLakewood

Engg

Wal-Mart2nd TierSupplier

2nd TierCustomer

1st TierCustomer

Lakewood Engg - fan manufacturer

1990s, a 20-inch box fan costs $20

Wal-Mart pushed the manufacturer tolower the price

By 2003, the price on the fan in a Wal-Mart store had dropped to about $10

Centralized Purchasing

In 2010 –offered its own fleet services

The benefits passed down to customer

Suited for India Entry Strategy –LocalProcurement




SHIPPINGSHIPPING COSTS ROUGHLY 3%

Competitors’ cost is 5% APPROX

AGILEREPLENISHMENT WITHIN

TWO DAYIndustry average is around 5 days

WAREHOUSES85% OF INVENTORY OWN

SUPPLIEDIndustry average is 50-65%

BACKBONE42 DISTRUBTION CENTERS INUSHub & Spoke Model –expanding around

DC –expanding around DC

HUGEEACH WAREHOUSE OVER AMILLION SQUARE FEETEquivalent to area of 500 football fields

INVENTORY12 MILES OF CONVEYORBELTSMoves 5.5 billion cases of merchandise

DISTRIBUTION SYSTEM




MANAGING DISTRIBUTION SYSTEM

• Fewer Links•Worked directly with manufacturers•Big Box Concept

• Collaboration•Synchronized demand forecasting -CPFR

•VMI – Vendor Managed Inventory• Cross Docking•Direct Transportation to the Supplier

• Supplier Relation Management•Set up Communication and relationship network with suppliers

• Leveraging Technology•Universal Product Code & Retail Link System –Database

•Global Satellite System•Hand held systems for real time information tracking




WALMART’S LOGISTICS• Fast and responsive transportation

system serviced by more than 3000trucks

• Stores are replenished twice a week

• Coordinator at the distribution centreschedules the dispatches (driving time& time to travel)

• Unloading at the dock only atscheduled time.




CROSS DOCKING• Cross docking is used by Wall Mart makes

– Distribution process more efficient

– Timely distribution of freight

– Better synchronization with the demand

– Leads to efficient use of transportation assets

• The distribution centres essentially acts as a high throughput sortingfacility for several suppliers and customers.

• Cross Docking leads to minimization of warehousing and economiesof scale in outbound flows (from the distribution centres to thecustomers).

• Costly inventory function of a distribution centres becomes minimal,while still maintaining the value-added functions of consolidationand shipping.

• Inbound flows (from suppliers) are thus directly transferred intooutbound flows (to customers) with little, if any, warehousing.

• Cross docking changed the practice from Supply Chain (retailer pushingproducts) to Demand Chain (customer pulling products)




TYPES OF CROSS DOCKINGOpportunistic Cross Docking:

• Goods are directly shipped from the manufacturer to the retail customer, without storing them in the warehouseor distribution centres.

• Takes advantage of real-time information exchanges among various distribution and fulfilment systems

• Identifies when an inbound shipment or part of shipment can be used to fulf il an outstanding order by directlyrouting the inbound merchandise to the staging or shipping docks for an outbound order.

Flow-through Cross Docking

• Constant inflow and outflow of goods from the distribution centre

• Used for products that have consistent demand, that are perishable or difficult to store in a warehouse

Manufacturing Cross Docking

• This procedure involves the receiving of purchased and inbound products that are required by manufacturing.




Distributor Cross Docking

• Manufacturer Delivers the goods directly to large retailer

• Consolidates inbound products from different vendors into a mixed product pal let, which is then delivered to theretailer

• Reduce Warehouse cost and lead time for delivery of goods

• Disadvantages

– Relatively high transportation cost

– Delay in deliveries if transportation is not fast and responsive

Pre Allocated Cross Docking

• The Goods are pre allocated i.e they are packed and labelled by the manufacturer to be delivered directly to thecustomer

• Requires close coordination and cooperation between manufacturer, warehouse and store




INVENTORY MANAGEMENTHeavy investment in IT and communications systems to effectively tracksales and merchandise inventory in stores

Set up its own satellite communication system in 1983

Stores managed their own stock reducing pack sizes and timely price

markdownUse of IT to make more stock available of items which customer wants

more

POS System: To monitor and track sales and merchandise stock level on thestore shelves

Use of bar coding and radio frequency which enabled efficient picking,

receiving and proper inventory control of the appropriate goods




• In 1991, Wal-Mart had invested approximately $4 billion to build a retail linksystem.

• More than 10,000 Wal-Mart retail suppliers used the retail link system tomonitor the sales of their goods at stores and replenish inventories.

• Details of daily transactions (~10 million per day) were processed through thissystem

• The suppliers could find out how their product was performing vis-a-vis

competitors’ products in a particular product category

15

RETAIL LINK SYSTEM




• By the mid 1990s, Retail Link had emerged into an Internet-enabled SCM systemwhose functions were not confined to inventory management alone, but alsocovered collaborative planning, forecasting and replenishment (CPFR)

• In CPFR, Wal-Mart worked together with its key suppliers on a real-time basis byusing the Internet to jointly determine product-wise demand forecast.

• CPFR is defined as a business practice for business partners to share forecasts andresults data through the Internet, in order to reduce inventory costs while at thesame time, enhancing product availability across the supply chain.

• Though CPFR was a promising supply chain initiative, it was hard to implement

16

CPFR




• In 1998, Wal-Mart installed a voice-based order filling (VOF) system in all itsgrocery distribution centers.

• Each person responsible for order picking was provided with amicrophone/speaker headset, connected to the portable (VOF) system thatcould be worn on waist belt.

• They were guided by the voice to item locations in the distribution centers

• The VOF system also verified quantities picked, and could respond to a varietyof requests such as providing product detail (type, price, barcode number, etc.)

18

VOICE-BASED ORDER FILLING (VOF)




RFID SMALL THING LARGE VALUE• Automatic Non-Line of Sight

Scanning

• Ability to scan multiple objectssimultaneously

• Encompasses more informationthan previous technologies andcan be updated dynamically

• Extremely Durable – can endureharsh environment

• Enhanced Visibility – “Always-on” technology




WAL-MART initiated RFID tech in 2003, making it mandatory for top its 100 suppliers

INVENTORY

VISIBILITY • Tracking of products

from supplier to POS

• Reduces Theft,misplacement &misrouting

• RFID can trackreturned goods throughthe supply chain and

prevent counterfeit

AUTOMATED

DATA CAPTURE• Reduce paperwork,

labor cost

• Real time datatransmission to beused for warehouse &inventorymanagement, financial

and other enterprisesystems.

AUTOMATING

SUPPLY CHAIN• VMI: Supplier can

keep track of itsproducts andautomaticallyreplenish inventory

• Reduced Bullwhipeffect

LOW EVERYDAY

PRICES• Increase efficiency of its suppliers

• Minute to minute information – whento make, ship and display products

• Automatic alert to manufacturer atlow inventory

• Supplier need not keep excessinventory in its warehouse

• Automatic invoicing and payment• Reduce inventory and order

processing cost

RFID “its not about TECHNOLOGY, its about DATA” (LEACH, 2004)




WALMART initiated RFID tech in 2003, making it mandatory for allits suppliers

INVENTORY

VISIBILITY • Tracking of products

from supplier to POS

• Reduces Theft,misplacement &misrouting

• RFID can trackreturned goods throughthe supply chain and

prevent counterfeit

AUTOMATED

DATA CAPTURE• Reduce paperwork,

labor cost

• Real time datatransmission to beused for warehouse &inventorymanagement, financial

and other enterprisesystems.

AUTOMATING

SUPPLY CHAIN• VMI: Supplier can

keep track of itsproducts andautomaticallyreplenish inventory

• Reduced Bullwhipeffect

LOW EVERYDAY

PRICES• Minute to minute information –

whn to make, ship and displaymore products at stores

• Automatic alert to manufacturerat low inventory

• Supplier need not keep excessinventory in its warehouse

• Automatic invoicing and

payment• Reduce inventory and order

processing cost

RFID

Out-of-Stock items replenished three times faster

Reduced stock out situations by 30%10% reduction in manual orders

Total savings expected to be $8 billion per year




Green Supply ChainSave Enviroment Save Money

• Environmental Impact

• Closed Loop –ReverseSupply Chain




TO BE SUPPLIED BY 100%

RENEWABLE ENERGY

Global Green house GasStrategy

Alternative Fuels

Global Logistics

Energy Efficient Designs

TO CREATE 0 WASTEOperations and Internal

Procurement

Packaging

Recycle, Refurbish,Reuse

TO SELL PRODUCTS THAT SUSTAI

PEOPLE & ENVIRONMENT

Sustainable Agriculture

Work closely with suppliers to ensureenvironmental friendly products

Increased transparency in supply chain

Green Supply Chain• In 2005, WALMART initiated “Business Sustainability Strategy”

• Goal is to reduce the company’s impact on environment

• An important outcome was that its supply chain efficiency increased dramatically –lowering down costs




Green Supply Chain

• To source 95% products from factories certified by Walmart for safe environmentalpractice

• 60% increase in truck fleet efficiency, compared to 2005

• 16% reduction in plastic bag waste (approx 4.8 billion bags)

• In 2009, unveiled GreenWRECS tool – to assess chemical composition of productson its shelf and screen them for chemical ingredients that have adverseenvironmental impact.

• It also announced the development of Sustainable Product Index- to drive productinnovation, and acting as a source of information on sustainability of a product

• Global initiative to drive the production or procurement of 7 billion kWh of RenewableEnergy by the end of 2020 – saving $ 1 billion every year in energy costs




LEAGILE SUPPLY CHAIN OF WALMART

Inventory optimization

Transportation optimization

LE

AN

AG

ILE

+

Cross Docking : Cross Docking is anagile method in which the Inter-store

transfer of goods takes place ondemand

Responsive & Cost Efficient




Save Money, Shop Smart Only at Walmart

Walmart SecB Group 3 Nitin Updated

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