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Walmart

1.) General Information


Founded in 1962 by Sam Walton in Rogers, Arkansas (USA), Walmart has become nowadays
the top selling company worldwide, according to the Fortune Global 500 list. Frequently
asking its customers and store associates about improvement, it got where it is now. Walmart
is a retail store chain operating worldwide, with its main focus on the US market. Having
more than 2 million employees, Walmart is the biggest private employer. The companys
philosophy is to offer its products at the lowest price along with a high availability (high
responsiveness) in its 11600 stores worldwide. Its operation is divided into supercenters,
Sams Clubs, e-commerce sites other other formats which enable them to serve to their
customers. Their purpose remains clearly to save the peoples money to live a better life. By
expanding, they always try to
reach as much customers as
possible. At Walmart, customers
can buy almost anything they are
looking for. A store is grouped
into 13 departments including Food, Electronics and Clothes, just to mention a few of them.
2.) Supply Chain Management
Wal-Mart always believed that it was negotiating on behalf of the customer and the best price
was passed on to the customer. Wal-Marts advantage created a snowball effect in which
increasing purchase volume lead to more choice for the customer and lower prices, leading to
mores purchase volume. This price leverage was backed by systems and processes in place
that enable Wal-Mart to take its scale advantages to the next level to achieve unmatched
success.
Supply chain partnerships
In order to find the best price from suppliers who are in the capacity to meet demand, the
company establishes a strategy partnership. Wal-Mart invited its major suppliers to codevelop
profitable supply chain partnerships. These partnerships are intended to amplify product flow
efficiency and, in turn, Wal-Marts profitability offering them long-term contracts and high
volume purchase.

Cross Docking
Wal-Mart uses cross docking as its principal logistical strategy in order to make the
distribution process more efficiently. Cross docking involved eliminating the distribution
center and the retail store but direct delivery to customer after picking and sorting the
products directly from the supplier.
Technology
Wal-Mart uses a computer systems that connect them with their suppliers called EDI
(electronic data interchange). This systems allows suppliers to download purchase orders
relating to their products, once receiving the information they ship the required goods to WalMarts distribution centers
In 1998, Wal-Mart installed a voice-based order filling (VOF) system in all its grocery
distribution centers. Every worker who is responsible for order picking has a microphone
headset that is connected to the VOF system; they were guided by the voice to item locations
in the distribution center.
3.) Driver and Metrics
Facilities:
The Walmart network is split up into distribution centers, supercenters, Sams Clubs and
neighborhood markets. At a distribution center, all the ordered products arrive from the
suppliers. These centers are divided into different categories regarding their product segment,
e.g. a fashion distribution center. Larger loads are split into smaller loads and sent to the retail
outlets. The intended goods are sorted out for the different locations. Walmart uses the system
of Cross-Docking: Loads are unloaded from an incoming truck and then directly loaded onto
the outbound truck with no storage.
Inventory:
As mentioned before, by using Cross-Docking, Walmart doesnt have big inventory stores.
However, the markets use an intelligent inventory system to be able to satisfy its customer
needs. In special cases, Walmart also offers pre-ordering.
Transportation:

Walmart directly ships its products from the manufacturer to its facilities with its own fleet of
trucks. They use Hub and Spoke system. It means that Walmart orders in huge quantities and
distributes them on its own, just as mentioned. The whole system is designed on speed. The
unloading process is carried out with equally spaced intervals (2 hours). And the lead time at
Walmart is about 48 hours. In comparison, other companies have 5 days.
Pricing:
They invest in price to bring everyday low prices (EDLP) to more customers around the
world. EDLP earns trust with customers because theyre driven to keep our cost structure low.
That commitment to price is central to their brand regardless of the format. With their
merchant mindset, they partner with suppliers to increase product innovation and bring
exciting new brands to their stores, such as Russell, Avia and Calphalon. Also, they work hard
to improve quality and execution, making great strides in areas such as produce and meat.
And, their price investments are driving sales by providing a lower-priced basket relative to
the market and building customers trust in their EDLP promise. Advancements in logistics
and store operations continue to reduce costs and improve productivity. For instance,
optimized transportation routes and distribution center mechanization are driving supply chain
efficiencies. They believe they can drive cost savings by sourcing closer to the point of
consumption. As a result Walmart products are priced 20% less than its competitors and have
a standard markup of 30%.
Information:
In 1977, Walmart set up a computer terminal network (CTN) to establish a communication
link between its stores and the company headquarters. Now, the company has the largest IT
infrastructure of any private company in the world, their technology and network design
allows them to accurately forecast their demand. Also, they have a communication and
relationship network with suppliers that helps to improve material flow with minimal
inventory.
The Universal Bar Code or Universal Product Code was established after Wal-Mart pushed
the retail industry, which made manufacturers adopt common labeling. That allowed retailers
to generate all kinds of information, creating a shift of power from manufacturers to retailers.
Also the company became very good at using the information behind the bar code, it is used

to analyze he store level information. The key is the


power of the information that is hidden in the ubiquitous
bar code.
Some ITs systems they use are:
a) Radio Frequency Identification (RFID)
Moreover, no other company
has

used

technology

as

efficiently as Wal-Mart and it


has continued investing more
in

technology,

dealing

more with

sales

and

production

tracking.

Wal-

Mart now

requires

its

suppliers

to

provide

microchips which will service radio frequency identification, or RFID, which will greatly
enhance the systems created by bar codes. RFID contains a silicon chip that holds a
unique string of numbers identifying the item to which it is attached, the signal of an
RFID does not have to be read directly by a scanner, it only needs to be in the vicinity of
an RFID reader. In that way, Wal-Mart will be able to have instant information on which
products are selling and which products are not well-received, in other words it will be
used to manage inventory. This knowledge will be powerful when deciding which
products to purchase from its suppliers.
b) Transaction process system (TPS)
Using this information system you avoid some things that would be repetitively and
important in your company, in other words it automates routine and repetitive tasks as
Point-of-Sale, preparing a payroll, billing customers. The input of TPS is raw data;
the processing involves with the summarizing, recording, and merging the data and the
output is in the form of report. It had many benefits for Wal-Mart, it:
Ensure accurate pricing
Improve efficiency
Reduce Shrinkage
Improve communications

The use of bar code scanners made it easier were its unnecessary to put a price on every
item (but still important for consumer protection).This reduced costs so much. The
process involve with the calculating number of product multiple with the price of
product and the output is in the form of receipt.
c) Management information system (MIS)
MIS is the system provides the actual performance report of the company that use in
middle management, which created based on the data from TPS.
d) DSS
The effectiveness of decision makers rather than on increasing the efficiency of data
storage and retrieval, is on improving in all categories and types of DSS focus. Some of
the benefits are:
-

Improves individual productivity

Improves the decision quality and speed up problem solving.

Improves interpersonal communications.

It improves decision making skills

It increases the level of control

e) Electronic Date Interchange (EDI)


It is used by this company for: Forecasting, planning, replenishing, shipping applications
and it also helps suppliers as it provides them the historical sales data of 24 months so
they can make demand forecast. This IT save time and made procurement efficient.
f) ERP
It is used to manage the data from demand planning and strategy planning to produce an
optimal supply planning
g) GPS:
This is used in the trucks used by the company to move their products, to know their
position and is used as a system of communication in the trucks, drivers activate the
system by voice and interact with staff.
As a result of all the information available for this company, it uses pull and push system, it
uses the push system because it is based on the downstream demand forecast and it uses the
pull system because it tells its manufacturers what to produce and how to produce.
Sourcing:

Outsourcing is the utilization of a third-party provider who is specialized in the area to


perform functions or manufacture products that are considered non-core to the business and
previously handled in-house. The benefits of outsourcing are saving costs, improving quality
with concentrating core business, enhancing knowledge and capacity for innovation, and
accessing to talented and expertise workforce.
Because of affluent manpower and high efficiency, Walmart has searched suppliers in China
who can give cheaper prices. Compared with US manufactured products, it is cheaper and
Walmart chose to manufacture their private label products in China. More than 70% of its
products are Made in China and Walmart has planned to increase the import the products from
their Chinese suppliers to achieve its strategic goal saving people money.
Wal-Mart's motto is to cut out the middle man, and his profit margin, and go direct and until
recent years refused to use packaged applications instead of home-grown apps for IT part. Yet
it was reported evaluating a business process outsourcing (BPO) contract in India potentially
worth up to $500 million over next few years for procurement, logistics and inventory,
payroll, and more in 2009.
4.) Operational Planning in Sales of Wal-Mart
Wal-Mart continues to grow and its success is due to the strategic management planning, but
also for its implementation of these strategic plans. In other words, operational planning has
been an important key to success.
Wal-Mart starts to generate traffic and sales through:
Aggressive mass marketing is sharing the message aggressively with customers by
providing flexibility and convenience.
Better traffic and sales in major categories of products with a relevant assortment locally.
Deepening the price, at the right price at the right time.
Win in holiday season
-Serving customers each time throughout the season.
-Low prices, wide range and number of 1 share of voice.
One of the reasons why the company is in the lead as the largest selling business is derived
from the company efficiency in logistics. The use of technology and inventory management
systems helps keep product prices at a discount shoppers can buy and maintain their
portfolios.
Due to declining commodity prices this generates lowest possible profit margins of the
company, but Wal-Mart has the opportunity to enter the banking industry, as each month Wal-

Mart currently receives about $ 140 million in payment by debit card, credit card, wire
transfer and checks. By incorporating operational plans, the company can establish its own
bank, this would help Wal-Mart in saving cash in processing electronic payments from third
parties.
5.) Efficiency
Application of technology
Investment Wal-Mart in technology has helped the company establish a more efficient
management of the supply chain Retail Link offers providers access to sales data in real time
on the products they supply, to maintenance inventory at each level of the store.
Wal-Mart began the mandate of RFID (radio frequency identification) to allow tracking
inventory in order to increase rates in stock at store level and the cost is reduced. Also,
through AS2 EDIINT which is an electronic exchange of data via the Internet, which allows
data transport safer. It also allows Wal-Mart and the counterparty to exchange documents in a
real time environment, this also allow integrated supply chain, reducing inventory costs of
Wal-Mart.
6.) Solutions to Supply Chain Management of Wal-Mart
1. PROBLEM: Low flexibility of capacity
Walmart officials said the chain is holding more inventory for certain items at its
distribution centers rather than in store back rooms in efforts to improve flexibility across its
supply chain. The most important reason is that the total inventory growing at the rate of 2.2
percent, significantly slower than the 4.8 percent gain in revenues in the quarter. Then, WalMarts report says the shortages made were blamed on employee cuts that hampered
restocking.
SOLUTION: My opinion about the solutions is if Walmart is going to be out-of-stock on 8
percent to 10 percent of its product anyway, it may as well hold inventory centrally and clean
out the backroom.

2. PROBLEM: Pricing & Management (Competitive changes)


Wal-Mart is making a lot of efforts to re-invent its stores which recently faced a series of
problems in the supply chain, many times lost the price war, and struggled with management
issues.

The main problem was related to grocery items, which customers found less fresh than in
other stores or found them non-existent since often the shelves were bare empty due to clogs
in the supply chain. Moreover, grocery prices were often less appealing than those offered by
the competitors. (The fresh and chilled food division is critical to Walmart)
SOLUTION: Walmart will have to cope with fierce competition coming from other retailers
which had been very aggressive on both pricing and product selection and expanded their
business as Walmart was sliding down. In addition, Walmart must solve its inventory flow
from the backroom to shelves. Because this flow gets often clogged, some items aren't sold
although they could, or others go easily out-of-stock although they shouldn't.
Another plan to boost sales is related to cutting prices on fresh food that is near to its
expiration date.
Finally, Walmart should be more aggressive when negotiating shelf prices, which can be a
major problem for all retailers that base their business on bargains, because Walmart had to
quickly come to its senses since many competitors had beaten it in the price war.
3. PROBLEM: Environmental Contamination
One of the things that Walmart has a lot of problems its the environmental contamination, in
fact there is a lot of notices where Walmart its one of the biggest pollution contributors,
here its an press article about this topic:
Wal-Mart has a track record of violating the Clean Water Act
In 2001, the Justice Department & the EPA brought enforcement action against Wal-Mart for
Clean Water Act violations at 17 locations in Texas, New Mexico, Oklahoma &
Massachusetts. Wal-Mart was fined $1 million in civil penalties as a result of this case.
The State of Connecticut & the Pennsylvania Department of Environmental Protection have
also taken legal action against Wal-Mart for water quality violations. Richard J. Blumenthal,
the Connecticut Attorney General prosecuting the water quality violations at Wal-Mart stores
across Connecticut issued a statement saying,
"To be a serious statewide polluter at 11 stores gives Wal-Mart a very dubious distinction as
an environmental lawbreaker. Stormwater contamination at every one of these sites creates a
serious threat to water quality & public health. These contaminants may include fertilizer,
pesticides, oil, & other dangerous pollutants that flow across Wal-Mart's parking lots into
public water supplies. Creating this clear & present environmental danger is legally
irresponsible & reprehensible."
Source: http://www.catawbariverkeeper.org/our-work/wal-mart

So we see that to assure the quality of its products, and adding a huge social cost for the
countries that are suppliers for Walmart.
SOLUTION: Walmart should take part about this, leaving (or at least reducing) the fertilizers
and guarantying the water quality, taking in count that they are contaminating public water
supplies. But we should no worry about this, in fact, in the present Walmart its taking action
about this, signing a commitment that specifies that Walmart its going to reduce the fertilizers
pollution on grain crops.
Last year, Walmart the nations largest grocer, commanding a third of the market
asked many of its top suppliers to submit fertilizer optimization plans. This new fertilizer
program is part of Walmarts commitment to reduce 20 million metric tons of greenhouse
gases from its supply chain by 2015, a commitment EDF helped the company to develop.
Walmart analyzed its greenhouse gas footprint and found that for half of its top 100 products,
fertilizer use was the biggest GHG hotspot.
Source:
https://www.edf.org/media/edf-launches-initiative-reduce-fertilizer-pollutioncommodity-grain-crops

4. PROBLEM: Working Force Low Wages.


Walmart is so large and powerful that exerts a powerful force on low wages and working
conditions not only in retail, but throughout their supply chain stores, manufacturers, and
other producers, with other major chains always trying to keep pace in the race from the back.
The unions have not been able to decipher, and almost certainly not be the way that Walmart
used to exploit and abuse workers. Workers, often supported by, but union members are
actively bringing complaints about violations of workplace safety, wages, and other laws to
government agencies responsible for monitoring employers. And the government is finding
much merit in these allegations. In fact, if you look at the patterns, it is quite clear that the
violation of law is one of the most important strategies Walmart to reduce costs and increase
profits.
SOLUTION: They not only have to increase the wages for the working force, but not only do
this, but when they do this, they have to do it on the big way, not about the quantity of money
that they are adding to the wage, instead they have to make it public, in a way that its know by
all the press, in a way that its seems that its doing a good job, in fact they already started to
do this.

Walmart Wages On The Rise Nationwide

...According to recent reports, Walmart workers will likely see their hourly wages rise, and
those raises will not just be limited to minimum wage workers.
Starting next month, the nations largest physical retailer has announced raise wages in an
attempt to remain competitive in an increasingly job-rich labor market and to combat its
endemic turnover.
Though Walmart had initially announced in February a move to a $10 per hour minimum
wage, the company amended that position this week to note that those employed by Walmart,
as of Dec. 31, would see a 2 percent pay increase. Estimates put the effect of that increase as
reaching 1.2 million American workers between Walmart and Sams Club locations
Source: http://www.pymnts.com/news/retail/2016/walmart-wages-on-the-rise-nationwide/