Subject Title: Student Name: Enrolment No: Wal-Marts Supply Chain Management Practices Using IT/Internet to manage the

e supply chain (OPER028) Q-a) Wal-Mart used information technology (IT) comprehensively in managing all the functions of the supply chain. Explain how the company used IT in procurement, warehouse & logistics management, and inventory management. What benefits did the company reap by using IT? Wal-Mart employed the most advanced IT tools and applications in all supply chain functions, starting from demand forecasting, procurement, logistics, distribution and inventory management. The company focused on bringing efficiency to every function of the supply chain so as to offer its customers products at the lowest possible prices. Wal-Mart has been proactive in using the Internet as a ubiquitous communication infrastructure to drive mega-efficiencies. It had always been the first mover in the retailing industry to embrace new technologies for managing the supply chain processes. Technology helped them to buy the right merchandize at the right time, and have it in the right place at the right price. Beginning in the late 1970s, Wal-Mart employed an advanced logistics technique known as cross docking. It enabled the company to receive goods and dispatch them to the respective stores/customers in less than a day, thus minimizing inventory storage and handling costs. Use of IT in Procurement Wal-Mart used EDI (Electronic Data Interchange) to save time and made its procurement process more efficient. Wal-Mart placed orders for huge quantities of goods with its suppliers. By placing bulk orders, Wal-Mart could negotiate the best prices for goods and got significant discounts. The bar code scanners placed at the check-out counters in each store scanned and processed the bar-codes on each product moving out of the store. The information, including the type of the product, its manufacturer and its price was recorded on the computer systems at the store. The information was instantly passed on to the centralized data warehouse through satellite links. An analysis of the daily, weekly and monthly sales data helped the store manager determine what products were selling and in what quantities. Accordingly, the store manager could place the purchase order with the merchandizing division at the headquarters. 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-Mart's distribution centers. By planning its purchases well, Wal-Mart was able to stock goods in right quantities and avoided over stocking at the stores.

Use of IT in Warehouse & Logistics management Over the decades, Wal-Mart had gained significant expertise in warehouse and logistics management. Its fully automated distribution centers and its own dedicated fleet of trucks helped Wal-Mart ship inventories at much lower costs compared to its competitors. In the late 1980s, Wal-Mart started employing IT-enabled tools and techniques to further enhance its warehouse and logistics management capabilities. At the distribution centers, the bar-codes on the goods entering the centers were scanned, following which they were sorted out according to the orders received from the individual stores. This process ensured that the inventory stayed at the stores for very little time and also enabled quick replenishment of goods at the stores. In 1998, Wal-Mart installed a voice-based order filling (VOF) system in all it grocery distribution centers. The system consisted of portable voice recognition Talkman terminals (VRTT) and a built-in speed spectrum radio module that communicated over the company's wireless local area network (LAN). By installing the VOF system, Wal-Mart eliminated mispicks and product labelling costs since the system did not require paper lists and labels to be affixed on the goods for locating them. Wal-Mart made significant investments in IT to quickly locate and replenish goods at the stores. The company asked its suppliers to ship goods in store-ready displays called PDQ (pretty darn quick) displays. Goods were packed in attractive PDQ displays that arrived at the stores ready to be boarded on the racks. Wal-Mart's employees could directly replace the empty racks at the stores with fully packed racks, instead of refilling each and every item at the racks, thus saving valuable time. Though at the individual store level, the time saved per employee was not much, the aggregate time saved considering all the stores and its employees was quite substantial. Wal-Mart equipped all drivers of the company-owned trucks with the latest mobile systems to ensure round-the-clock real-time connectivity with them. In the mid-1990s, Wal-Mart installed advanced global positioning system (GPS)' technology-based communication/tracking systems in its trucks. Drivers could activate the system by voice, and interact with the staff at the distribution center/stores. The system enabled the company's satellite network to locate any truck anywhere in the US and neighbouring countries. It also delivered computer-generated instructions to the concerned order-picking staff in the center/stores through headsets.

Use of IT in inventory management In 1987, Wal-Mart installed a satellite communication system (SCS), believed to be the largest privately managed system in the US, at an estimated cost of $750 million. The system established virtual communication links between all Wal-Mart stores and distribution centers with the company headquarters, through a two-way voice and data and one-way video communication (from headquarters to stores).

By employing IT extensively in its supply chain processes over the decades, Wal-Mart emerged as a leading player in the retailing industry. The company's efforts at strengthening its SCM systems by installing advanced IT tools proved to be highly beneficial. Wal-Mart was able to achieve just-in-time inventory replenishment in a majority of its stores across the US.

Q-b) Briefly describe the process followed by the company to implement collaborative planning, forecasting, and replenishment (CPFR). Why do you think the company was not able to widen the supplier base willing to implement CPFR? Advanced inventory management system called 'Retail Link' launched in 1990, was the first step towards implementing CPFR. Retail link connected Wal-Mart's EDI network with an extranet, accessible to Wal-Marts thousand suppliers. Retail Link connected Wal-Mart's EDT network with an extranet, was accessible to Wal-Mart's thousands of suppliers. It provided suppliers with historical sales data of their products for past 24 month period; allowed them to track the status of their invoice; conduct further analysis of the data, and make demand forecasts for their products for the next twelve-month period. The analytical software in the retail link system enabled the manufacturers to get data relating to their products, as and when they required. They could find out how their product was performing vis-a vis competitors' products in a particular product category. Wal-Mart initially launched CPFR as a pilot project with Warner-Lambert (Lambert), with its Listerine product line in 1996. The pilot project was conducted in a Lambert plant and three Wal-Mart distribution centres. Both Wal-Mart and Lambert separately developed their projected demand for Listerine for a six-month period and exchanged demand forecasts and actual sales information. Using the CPFR software they arrived at a common forecast. The results were quite encouraging. Lambert was able to increase the stock position of Listerine from 87% to 98%. The encouraging results of the pilot project prompted Wal-Mart to extend CPFR to other key suppliers, including Sara Lee Corporation and P&G. Wal-Mart's CPFR implementation with apparel maker Sara Lee also yielded good results. The pilot was conducted on 23 branded women underwear items, which were distributed to an estimated 2,400 Wal-Mart stores. On the basis of a jointly developed forecast, the inventories were replenished. Following the pilot, the sales of Sara Lee branded apparel at Wal-Mart increased by 35% in 41 weeks. In the same period, the inventory turnover increased by 30%. A 23% reduction in the inventories at the store level was also observed. The overall impact was an increase in the Gross Margin Return on Investment19 (GMROI) by 49%. Following the success of CPFR pilot projects, Wal-Mart decided to extend the benefits of CRER to its thousands of suppliers through its web-enabled Retail Link system. To further enhance the existing CPFR, in October 2002, Wal-Mart asked its 14,000 suppliers to switch over from the existing Value Added Networks EDI (VAN-EDI) to web-enabled EDI. However, while implementing it, the suppliers had to adhere to a set of new data transmission protocols, called EDI-INT and AS2, in order to ensure security of transactions. Following the meeting in November 2003 with its top suppliers, Wal-Mart outlined the plan for implementing RFID. The company planned to implement RFID in phases. The suppliers, initially, would not be required to put tags on each and every item shipped to Wal-Mart. Instead, they had to tag the pallets and crates in which the goods were packed. To begin with, Wal-Mart required its suppliers to ship the tagged pallets and crates to three distribution

centres in Texas, US, which catered to about 150 stores. By the year-end, they had to extend it to all the 102 distribution centres. While Wal-Mart was pretty confident of implementing RFID, not all the suppliers were clear about what they ought to do. They were left with no other option but to comply with WalMart's requirements as they could not afford to lose their business with Wal-Mart. The reason for the company not able to widen the supplier base willing to implement CPFR was the huge investments in time and money for implementing CPFR. In order to implement, a significant amount of time had to be spent on developing forecasts and analysing sales data. To add to that not many suppliers new about the implementation process of RFID and it was an unproven technology.