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Net income increased 25% to $16 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 This phenomenal growth of Wal-Mart is attributed to its continued focus on customer needs and reducing cost through efficient supply chain management practices.
Wal-Mart grows through volume and market share gains rather than margin expansions.
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Customer Demands
The right products In stock Best value Service and quality
Quick responsiveness to market changes Low inventory Quick replenishment of inventory Effective human resource system Efficient distribution system
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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)
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Employees are your biggest capital investment, so it makes sense to maintain themtheir skills, their morale, and their participation.
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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
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Sell
Storage
Wholesaler
Order
Receive
Select
Pack
Manufacturer (Supplier)
Make Pack
Shipper
Ship Ship Ship
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Receive
Select
Pack
Ship
Receive
Storage
Sell
<48 hours
<48 hours
Wholesaler
Manufacturer (Supplier)
Make Select Tag/ Label Pack
Shipper
Ship
Cross-docking in distribution centers results in product flow from inbound to outbound shipping docks within 48 hours.
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Supplier
Store
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WAL-MART: IMPLICATIONS
Wal-Marts Inventory Management Improvements Have Resulted in Efficiencies Unmatched by the Competition
Inventory in System (Days)
14 30 At Vendor At Warehouse In-Store 1:5.94 1:4.58
Inventory-to-Sales Ratio
30
3 2 3 Wal-Mart KMart
Before New After New System System IT systems have improved Wal-Marts in-stock position and increased vendor responsiveness
Wal-Mart stores replenish inventory twice a week vs. industry standard of once every two weeks
15%
Wal-Mart
Wal-Mart has lowest cost of operations in the retail area, aside from wholesale clubs
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Achieve significant cost advantages by the centralized purchasing of goods in huge quantities 17
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Wal-Marts Procurement
Reduce purchasing costs and offer the best price to the customer. The company directly procured from manufacturers, by passing all intermediaries. Meeting vendors and understanding their cost structure. Transparent process
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The computer systems of Wal-Mart were connected to those of its suppliers. EDI enabled the suppliers to download purchase orders along with store-to-store sales information relating to their products sold.
On receiving information about the sales of various products, the suppliers shipped the required goods to Wal-Marts distribution centers.
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Logistics Management
Fast and responsive transportation system. More than 3500 company owned trucks. Experienced drivers who had driven more than 300,000 accident-free miles, with no major traffic violation.
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Cross-docking
In this system, the finished goods were directly picked up from the manufacturing plant, sorted out and then directly supplied to the customers.
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Inventory Management Reduce unproductive inventory Made full use of its IT capabilities to make more inventories available in the case of items that customers wanted most Employees at the stores had the Magic Wand, a hand-held computer which was linked to in-store terminals through a radio frequency network
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The order management and store replenishment of goods through the Pointof-Sales (POS) system.
Helps to monitor and track the sales and merchandise stock levels on the store shelves.
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Voice-based order filling (VOF) system in all its grocery distribution centers. Each person responsible for order picking was provided with a microphone/speaker headset, connected to the portable (VOF) system that could be worn on waist belt. They were guided by the voice to item locations in the distribution centers.
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Inventory Management ( quick replenishment) Floor area of 40,000 to 200,000 square feet,
movement of goods within the store was an important part of logistics operations.
EDI network with an extranet, accessible to WalMarts thousands of suppliers. Massively Parallel Processor (MPP) computer system to track the movement of goods and stock levels.All information was passed on through an advanced satellite communication system 25
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RFID Technology
(Radio Frequency Identification) Wal-Mart planned to replace bar-code technology with RFID technology. employees need physically scan the bar codes of goods entering the stores and distribution centers, saving labor cost and time.
Wal-Mart expected that RFID would reduce the instances of stock-outs at the stores.
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WAL-MART: IMPLICATIONS
Lessons Learned: The Road to Success Is Paved by Technology and Better Use of People
Economies of Sales: Best Deals Stable Lower Prices Reduced Cost of Sale Predictable Sale Patterns Decreased Chance of Out-of-Stock
Effective IT Systems
Empowered Employees
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