IS560 Enterprise System

Supply Chain Management

Presentation to Mr. Starinsky & IS 560 Class

Prepared by:

Lucy Chen
Jianjun Huang
Don Janjaroen
Mollie Limprana
Thomas Pinkowski
Cynthia Saving

March 15, 2004

Agenda

 Wal-Mart Background
 What is Supply Chain Management
 Supply Chain Technology at Wal-Mart
 Benefit of SCM to Wal-Mart
 Best of Breed Practice
 Benefits of SCM to others

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Wal-Mart Background

About Wal-Mart

Wal-Mart is a global retail organization, in the business of serving customers.

In the United States, their operations are centered operating retail stores and
membership warehouse clubs. International, they are centered on retail stores,
warehouse clubs and restaurants. Their business is to offer customers quality
merchandise at low prices. Wal-Mart mission is to be the place where prices
are low and value and customer service are high everyday.

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Wal-Mart Background

Background on the Wal-Mart's SCM

Wal-Mart has established critical strategies in multiple functional

areas to hit its goals for supply chain management excellence:

 Financial
 Operations
 Logistics Processes
 People

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Wal-mart Background

Wal-Mart's Financials
Wal-Mart’s Net sales (in millions) for the three fiscals years ended January 31,
2003 as follows:

Total Company Increase

Fiscal Year Wal-Mart Stores SAM’S CLUB International Other Total Company from Prior Fiscal Year

2003 $ 157,121 $ 31,702 $ 40,794 $ 14,907 $ 244,524 12%

2002 139,131 29,395 35,485 13,788 217,799 14%

2001 121,889 26,798 32,100 10,542 191,329 16%

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What is Supply Chain Management

Supply Chain ….

“encompasses all activities

associated with the flow and transformation
of goods from the raw materials through to the end user.
Material and information flow both up
and down the supply chain.”

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What is Supply Chain Management

Supply Chain Management ….

“is the integration of these activities

through improved supply chain relationships,
to achieve a sustainable
competitive advantage.”

Handfield, R & Nicholas Jr., E 1999, Introduction to Supply Chain Management, Prentice Hall, New Jersey

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What is Supply Chain Management
Management beyond the borders of an organization

Upstream
The upstream business partners are the external organizations
that supply products or services to an organization.
    

Downstream
The downstream supply chain is the organizations external
distribution channels, processes, and functions that the product
passes through on its way to the end customer.

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What is Supply Chain Management

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What is Supply Chain Management
Elements of the Internal Supply Chain
SCM includes the management of organization’s internal components in the supply
chain:
Product
Design

Production Order
Scheduling Management

Internal
Distribution SCM Purchase
Management Management

Inventory Logistics
Management Management

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What is Supply Chain Management
Information System in Supply Chain Management

 Centralization of information flow Order management

 Total visibility of resources and processes
 Data interchange between partners within supply chain
 Data capture:
 Monitoring of processes
 Events happening across the supply chain
 Automated forecasting, planning, scheduling

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What is Supply Chain Management
Supplier Relations

In SCM, the single most important ingredient is supplier relationships. It is

important that the relationships are managed well, which each party involved have
mutual confidence in other members of the partners in the supply chain. These types
of inter-organizational relationships are called strategic alliances. A strategic
alliance is a process wherein participants willingly modify basic business practices to
reduce duplication and waste while facilitating improved performance.[1]    

[1] Schmitz, J., Frankel, R., & Frayer, D., 1995, ‘ECR Alliance: A Best Practice Model,’ Joint Industry Project on Efficient Consumer Response, 1995.

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Supply Chain Technology at Wal-Mart
Retail Link

 Provides communication between Wal-Mart and suppliers.

 Manages purchase orders and invoices.
 Provides suppliers with sales and inventory data at every store.

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Supply Chain Technology at Wal-Mart

Data Warehouse

 101 terabytes
 Largest of any Fortune 500 company
 2 years worth of sales transaction history
 Transactions available in data warehouse the next day
 120,000 trend analysis queries every week from vendors

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Supply Chain Technology at Wal-Mart

Vendor Involvement

 Wal-Mart success depends on vendors’ analysis.

 Wal-Mart expects vendors to lower prices over time.
 Vendors often need to make technology and business process
changes to use Retail Link effectively.
 Largest vendors have employees stationed at Wal-Mart corporate
headquarters.

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Benefit of SCM to Wal-Mart
Retail Link system
 More than 10,000 Wal-Mart suppliers use Retail Link to monitor
sales of their goods at the store level and replenish inventories as
needed.
 Integrates into one of the largest data warehouses around, with
more than 100 terabytes of information.
 Make daily transactions details (more than 10 million daily)
available to every Wal-Mart store by 4 a.m. the next day.

Today, over 7,000 suppliers access Retail Link and get answers to any question at
any time. Averages 120,000 of these complex trend analysis questions each week.

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Benefit of SCM to Wal-Mart
Through Retail Link, suppliers/vendors can retrieve:

 Purchase Orders
 Sales performance data
 Determine how many of their products were sold at Wal-Mart the
previous day
 Examine the effects of markdowns or returns on their inventory
 Access reports on sales over a period of up to two years, as well as
sales forecasts for their products for up to one year

 Inventory levels
 Invoice status

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Benefit of SCM to Wal-Mart

“It’s really all about service to our customers. Our investment

in this technology helps our supplier partners and Wal-Mart
buyers provide customers with what they want: the right
product in the right store at the right price.”
---- Tom Coughlin, President and CEO of the Wal-Mart

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Benefit of SCM to Wal-Mart
Benefit of SCM to Wal-Mart

 Increasing visibility into all business transaction on a timely basis

 Streamlining the physical pick pack process leading to reduced errors

and redundant labor

 Eliminating charge backs and fines by retailer compliance and permitting

access to all data from EDI through shipping

 Keeps inventory costs down

 Quickly and effectively predict the needs of customers in different areas

and from different backgrounds

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Best of Breed Practice
Wal-Mart's Best of Breed practice on SCM

 Wal-Mart was one of the first retailers that seriously invest in it's IT
infrastructure. This gave Wal-Mart stronger foundation in information
technology comparing to competitors.

 Initially developed its own information system (Retail Link), then later
outsourced it to third party. Wal-Mart understands it needs best. Develop
what they want first, after everything is on the track, outsource it to third
party.

 The system itself is relatively user-friendly. Wal-Mart's partner doesn't

need time to learn to use new application. Data can be easily exported to
standard formats like Excel or Access
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Best of Breed Practice
Wal-Mart's Best of Breed practice on SCM
 Relevant information is available to its partner.
This information will help its partner make a production planning according to current
trend. This relationship is based on a trust that partner will not release these information
to competitors.

 The system is dynamic and adjust quantity of orders according to

current situation.
Bottled water, gasoline container was almost emptied from Wal-Mart's shelves on
September 11 and flags sold out on September 12. Wal-Mart's system was able to detect
change in buying pattern and trigger orders to restock accordingly.

 Wal-Mart must be able to get most up-to-date information out of the

system to do be able to do proper prediction.
It keeps looking for a better way to track its inventory. (RFID)

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Best of Breed Practice
Wal-Mart's Best of Breed Practice on SCM

 Always Low Prices concept. All items must be at lowest price possible.

 The goal is to reduce costs in various ways:

 Wal-Mart uses technology to manage its inventory and replenishment system.
 Relevant information is available to everyone which greatly helps suppliers and Wal-
Mart do various planning. Wal-Mart itself can use pricing knowledge to make a bargain
with supplier. On the other hand, supplier knows how well its product sells and able to
plan the production accordingly.

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Best of Breed Practice

 Wal-Mart has high expectation on its suppliers.

 No early or late shipment is acceptable.
 Wal-Mart does not do a business with business partner that does not
meet its requirement.
 Levi's had to invest a large amount of money to improve the
supply chain system according to Wal-Mart requirement.

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Benefits of SCM to others

Benefits of SCM to other businesses and organizations can be viewed as

Streamlined inventories and

Cost and Financial reduced costs
Reduced errors and redundant
labor
Increased visibility of all business
Retailers
transaction
Manufacturers Improved return on inventory
Improvements investment
Distributors Optimized transportation costs,
routes, and load times
Increase cost savings from
outsourcing for low cost materials
E.g. Dell and Intel have created an
increasingly streamlined supply chain
model with mass-customization and
customer-direct capabilities.

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Benefits of SCM to others

Benefits of SCM to other businesses and organizations can be viewed as

Improved forecast accuracy as well

Processes as resource and distribution planning
Improved manufacturing and
replenishment cycle time
Enhanced manufacturing scheduling
 Manufacturers
 Construction companies Increased effectiveness of planning
and decision making
 Automotive industry Improvements
Improved overall efficiency in
production
Enhanced a seamless multi-channel
shopping
Reduced supplier base
E.g. Cisco uses the Internet to enable
deep process integration of all levels of
the extended supply chain.

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Benefits of SCM to others

Benefits of SCM to other businesses and organizations can be viewed as

Reduced out-of-stock situations

Services Improved order fill rates

Increased ship-complete and on-time

percentages
 Retailers
 Service companies E.g. Wal-Mart uses the replenish
Improvements model to keep their shelves full and
penalize their suppliers for late
shipment.

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Questions ?

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