SUPPLY CHAIN

MANAGEMENT
SML - 843
ARSHAD EJAZ (2013SMF6527)
PUNEET KAUSHIK (2013SMF6813)
SUMAN MANDAL (2013SMF6799)
NABILUR RAHMAN (2013SMF6634)
Wal-Mart Changes Tactics to Meet International Tastes
Wal-Mart Stores is finding out that what plays in Peoria isnt necessarily a
hit in suburban Sao Paulo
Tanks of live trout are out; sushi is in
American footballs have been replaced by soccer balls
American-style jeans price at $19.99 have been dropped in favor of $9.99 knock-
offs
Adapting to local tastes may have been the easy part
Three years after embarking on a blitz to bring everyday low price to the
emerging market of Brazil and Argentina
Wal-Mart is finding the going tougher than expected
However Wal-mart produced red ink
Brutal competition
Dont achieve efficiency through economies of scale
Own mistakes

DEEP POCKET
Wal-Mart has revised its merchandising in Brazil and Argentina and made other changes
4 newest stores are smaller than the initial outlets in San Paulo and Buenos Aires
It located at Mid size cities where competition isnt so force
8 stores are planned to open in both Argentina and Brazil next year, doubling the number now in each
country

Wal-Marts global expansion drive, which is targeting not only South America but also China Indonesia
The markets of China and Indonesia are promising and pitfalls
The growth is dwindling in America

A SMALL OPERATION SO FAR
The six-year-old international operation is relatively tiny
It accounted for only 4.8 percent of Wal-Marts 1996 sales
Most of the companys international revenue comes from Canada

Mr. Glass expects international growth to account for a 1/3 of War-Marts
annual increase in sales and profits within three to five years
LOSSES FORECAST
SA, expect Wal-Mart to lose $20 million to $30 million in Brazil this year,
on top of an estimated $48 million in losses since starting up in South
America in 1995
Some store in Buenos Aires, a few shoppers are in the store during peak
hours one Sunday
Little difference between the goods at Wal-Mart and those at near by
Carrefour
Competitors chain supermarket supply fresh meat
Carrefour drives Hard bargains with its suppliers, can afford to play low-
ball because it has the critical mass that War-Mart lacks here
Carrefour holds down overhead by stocking far-narrow selection of
merchandise
Ex) Carrefour in La Plata, Argentina, stocks 22,000 items, while the Wal-
Mart next door carries 58,000 items


DISTRIBUTION PROBLEMS
Wal-Marts effort to stock such a wide variety of merchandise is hurting
it
Squeezing out costs in the supply chain is crucial to its EDL pricing formula
Bumper-to-bumper traffic of San Paulo

The biggest issue Wal-Mart is shipping product on time and getting on
the shelf
Wal-Mart recently built a warehouse in Argentina and Brazil to reduce
distribution problem
VARIOUS MISTAKES
Wal-Marts troubles in South America stem partly from its own mistakes
Some goods are useless in San Paulo
Ex) Live trout, American footballs, Cordless tools
Wal-Mart brought in stock-handling equipment that didnt work with
standardized local pallets
Installed a computerized bookkeeping system that failed to take into
account Brazils wildly complicated tax system


PROBLEMS CALLED TEMPORARY
Wal-Marts Mr. Glass characterized the missteps are regarded as
temporary problems and inevitable in entering a new market.

Other than a need to expand, what other reasons
would Wal-Mart have for opening stores globally?
Diversify its market because it reduces risk against poor market conditions
Decrease if not eliminate competitions
Reach out to more customers
Increase revenue
Increase operating expenditure
Increase bottom line
Add more values
Take advantage of low cost countries
Utilize effective labor sources from around the world
Develop unique logistics network
Develop optimal and efficient supply chain across global
Why would it be beneficial for Wal-Mart
to have suppliers in different countries?
Allow Wal-Mart to buy from low cost country and to take advantage of
savings/profits that come out of it
Wal-Mart could implement strategic sourcing program where it would buy
goods from low cost country such as China then import them to Industrial
country such as US or Canada for sale
Increase potential source region which can play important role in creating
optimal logistics network
Wal-Mart can simplify its offering to customer by buying from supplier in
same region
Why would Wal-Mart want strong
centralized control of its stores?
Obtain demand forecast to its warehouse and to its suppliers giving ability
adjust production and inventory to meet the demand
Warehouse gets the ability to collect and extract data from each store on its
entire inventory, forecasts, demographic, markdown, returns and market
basket by item and day
The warehouse not only contains data of Wal-Mart but its competitor as
well
The data is accessible by Wal-Mart employees and over 3000 approved
suppliers
Wal-Mart and its suppliers are able to save million of dollars on inventory
and reduce cost by forecasting accurately
What pitfalls and opportunities other than those mentioned in The Wall
Street Journal article would Wal-Mart face over the next few years?
Wal-Mart will face a tremendous challenge in North America due to U.S.
economy under recession
As a result, Wal-Mart may end up closing door to poorly operated stores and
it may even decrease number of new store to be open
It may even face higher operating cost due to increase is oil prices
Wal-Mart could possibly invest in other countries. In past Wal-Mart took a
strategic plan to invest in South America.
Wal-Mart could also invest in other regions of world such as Europe, Africa
and even Asia where the population is all time high
As the largest retailer in the world, Wal-Mart had long been able to spot
consumer trends before its rivals and adjust its merchandising accordingly
What are the sources of risks faced by the global supply
chain and how can the firm mitigate the various risks?
Fluctuating exchange rates
Change relative value of production and profit
Operating exposure
Customer reactions
How a firm adjusts prices in various market
Competitor reactions
Competitors relative cost decrease more, a firm can be underpriced in the
market
Government reactions
Intervene to stabilize currencies or even directly support endangered firms
by providing subsidies or tariffs
What are the sources of risks faced by the global supply
chain and how can the firm mitigate the various risks?
Continued.
Speculative Strategies
A company bets on a single scenario, with often spectacular results if
the scenario is realized, and dismal ones if it is not
Hedge Strategies
A company designs the supply chain in such a way that any losses in part
of the supply chain will be offset by gains in another part
Flexible Strategies
Enable a company to take advantage of different scenarios
Typically, flexible supply chains are designed with multiple suppliers and
excess manufacturing capacity in different countries
Factories are designed to be flexible, so that products can be moved at
minimal cost from region to region as economic conditions demand
What are the sources of risks faced by the global supply
chain and how can the firm mitigate the various risks?
Continued(2).
Production shifting
Flexible factories and excess capacity and suppliers can be used to shift
production from region to region to take advantage of current
circumstances
Information sharing
Information can be used to anticipate market changes and find new
opportunities
Global coordination
Having multiple facilities worldwide provides a firm with a certain amount of
market leverage that it might otherwise lack(Ex 8-2 253p)
Political leverage
The opportunity to move operations rapidly gives firms a measure of
political leverage in overseas operations
governments are lax in enforcing contracts or international law, or present
expensive tax alternatives, firms can move their operations