Supply Chain of Wal-mart

Members: Chan Man Ching Chan Mong TikChui Wai KaLam Fei FeiMan Ka Yu

AgendaBackground Information of Wal-mart Supply chain of Wal-martFlow chat of the supply chainTechnology used in various stage of SCImpact of Wal-martWal-mart BackgroundWal-mart Supply ChainImpact ofWal-mart

Background of Wal-mart ~Well known retailer with heavy investment in ITTypes of industry: one stop shopping centerFounder: Sam WaltonYear of establishment: 1962First store: in ArkansasSam Walton

No. of stores: 5311 units globally

Wal-Mart has expanded its business to 10 countries: U.S., Mexico, Brazil, Argentina,Germany,Puerto Rico,U.K. , South Korea, Canada and China.

Rapid growth of Wal-martRevenues: $315,654,000, 000 in 2005Stock value from Aug 1972 to May 2006:

How well is Wal-mart doing?

Why can Wal-mart be so successful?Supply chain plays an important role

Supply chain: a method of collaborating horizontally among suppliers, retailers, and customers to create value

Wal-mart Supply Chain Flow ChatManufacturerManufacturerManufacturerRetail StoreRetail StoreRetail StorePoint of sale terminalSatellite systemBar code, RFIDRadio, headphoneDistribution centerCompany Headquarter

Distribution Center108 centers in USAPlace that various goods are gathered, sorted and delivered to different storeAbout 80% of merchandises shipped from centers24 hours operation

Manufacturer 1Manufacturer 2Manufacturer 3Retail store 1Retail store 2Retail store 3Manufacturer 3

Trucks outside Wal-martPast----written instructionsNow----radio and headphone

English ? Spanish?English ? Spanish?

Trucks outside Wal-martUse both handsKeep contact with the headquarterBehind or ahead the expectation Adjust to any sudden changes

Benefit: Cost

Minilift TrucksInside distribution centersequipped with headphoneComputer give direction to driver in voiceWhat merchandises to transportWhere the merchandises should be carried toWhich truck the merchandises be loadedReport progress, ahead or behind schedule Benefit: productivity and efficiency

Bar Code SystemStandardized bar code systemapplied by every supplierHelps facilitating large scale operationPallets passed through conveyor belt are scanned automaticallyProduct codes are transferred to centralized computer system

Bar Code SystemMatching with the computer database and generate useful informationWhat it is. What quantity it is. Which packing compartment and truck to go. Which store to goProcesses take place simultaneouslySave time and labour sorting merchandisesSmooth logistic processes

RFIDRadio Frequency Identification SystemUse radio waves to identify objectsTags with microchip and antenna built inStore data (type, quantity, manufacturer, expired date)Generate HF signal to transfer dataAllow Wal-mart to keep track of pallets at various stage of supply chain

RFIDSensors in the distribution center detect and receive information from chipsLocate where the pallet is and the condition of ittemperature HumidityAutomatic senser avoid scanning codes one by one

RFID Gen1 and Gen2

RFIDFurther improve logistics efficiencySave time identifying merchandisesConvenience in checking inventoryInformation pre-stored in the chips = convenience of data processing

Point-of-sale terminalsInvested in 1983Simultaneously rang up sales and tracked inventory deductions for rapid re-supply.Electronic scanning of Uniform Product Codes (UPC) - to price-mark merchandise - to ensure accurate pricingSelf-labeling systemThe merchandise replenishment process

Large-scale satellite systemInstalled in 1987to improve communication between storesLink all of the stores to headquarter, giving Wal-Marts central computer system real-time inventory data. Allow sales data to be collected and analyzed daily, and enable managers to adjust immediately.Daily information of individual store can be compared.

CPFR ProgramA Collaborative Planning, Forecasting, and Replenishment program.Just-in-time inventory program began.Advantage: To reduce carrying costs.Less excess inventory.Cost of goods is estimated to be 5 to 10 percent less.

Tailored-made store managementWal-Mart merchandise is tailored to individual markets and individual stores.Store managers choose which products to display and allocate shelf space.A store devote only 10% of its square footage to inventory.Wal-Marts culture stress the key role of associates.Information and ideas are shared at individual stores.

Suppliers = PartnersAs Wal-Mart grew, its relationships with some suppliers evolved into partnershipsSharing information electronically to improve performance.How do they share information?

Information sharingOpen its databasesRetail Link private extranet system: - to see exactly how its products are selling and when it might need to up its production - to give more than 2000 suppliers computer access to point-of-sale dataAdvantages: - Gain more information about the customers. - Shelves will always be stocked with the right items at the right time.

Electronic data interchange (EDI)Enabled an estimated 3600 suppliers (about 90% of Wal-Marts dollar volume) to receive orders and interact with Wal-Mart electronically. Later expanded to include forecasting, planning, replenishing, and shipping applications.

Vendor-managed inventory systemsto replenish stocksWal-Mart transmitted sales data, orders of products, delivery plan and reports of warehouse inventory status to them dailyto plan inventory levels, generate purchase orders, and ship exactly what was neededboth benefited from reduced inventory costs and increased sales

Business planning packetsEach Wal-Mart department developed computerized, annual strategic business planning packets for its suppliers including: departments sales, profitability, and inventory targets, macroeconomic and market trends, and Wal-Marts overall business focusWal-Marts expectations on themSuppliers recommendations

How Wal-mart affects suppliersDomestic Suppliers:Wal-mart imported 18 billion worth of goods from 5,000 Chinese suppliers in 2004Ranked as Chinas 8 biggest trading partner ahead of Russia, Australia and CanadaUsed power to squeeze domestic suppliers profit

How Wal-mart affects suppliersWal-mart Defense :If all of supplier were squeezed dry Wal-mart no suppliersSuppliers found ways to survive do better at what they did before

How Wal-mart affects suppliersWal-mart not only selling foreign imported goods, also encourage the use of domestic American products Buy American Program Retained over 1.7 billion in retail purchases that produced offshore.

How Wal-mart affects dometic workersDomestic workers :Face keen competition from overseas markets,offshore manufacturing Close down of factoriesLoss of jobs

Competition with Wal-martCompetitors cut labors health care benefits and wages

How Wal-mart affects dometic workers Wal-mart Defense:Insist not responsible for the off-shoring of manufacturing

Example :Sanyo ( TV sets producers ) planned to close the plant and move Mexico and Asia.Wal-mart buys the TV sets from Sanyo if they dont moveEventually stay in US

How Wal-mart affects dometic workersDestructive CreationShrinking of manufacturing and labor intensive sectorsTechnical changes substitute unskilled laborCreate new jobs and expansion in services and technology sectorEstimation : 225,000 job loss by outsourcing in the next 15 years < 1.5% of the job available in 2002

How Wal-mart affects dometic workersUnemployment is a structural problem ,rather than a cyclical problem Mismatch of job skills with the market demand Unskilled labors cannot match with increasing skilled labor demand Not loss of job , but cannot find a job matches with their skills

How Wal-mart affects economyReallocation of capital and technology to the foreign marketsLess to employ domestic workers and invest in local economyDecline in labor productivity and real incomes of the country

How Wal-mart affects economymay not necessarily imply a decrease in real income and productivity

For example,Globalization and lower technology cost,Lead to higher American productivity growth added $230 billion extra GDP between 1995 and 2002Equivalent to extra 0.3% points of growth a year

Wal-mart

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