Wal-Marts

SCM system
practices
MIS Case Study
15 March 2013

Walmart

Walmart, an Americanmultinationalretail
corporation that runs chains of large department and
warehouse stores
Established 1962, Arkansan-USA
Sam Walton- Founder & Mike duke- current CEO
Successful due to its IT usage in SCM

Introduction to case
1990 Superseded K-Mart rival retail chain as one of
the largest retailing chain in US
1991- Superseded Sears Roebuck & Company and
became the largest retailing chain in US
In November 2003, Wal-Mart, worlds largest retailer,
planned to replace bar code technology with RFID.
Objective: To enhance supply chain efficiency
Expected they could save $8.35 million per year
primarily in labor costs

Background Note

Wal-Mart known for innovative business practices

One of the first retailing companies to centralize
distribution system.
Always among the front runners in employing IT to
manage its supply chain processes.

Using IT in supply chain

management
Using EDI for procurement
EDI saved time and made procurement efficient.
Using the bar code scanners, an analysis of daily, weekly,
monthly sales data helped the store manager determine
what products were selling and at what quantity.
Accordingly, the store manager would place orders in the
manufacturing division.

EDI=Electronic Data Interchange

Using IT in supply chain

management

In 1977, Wal-Mart set up a computer terminal network

(CTN) to establish a communication link between its
stores and the company headquarters
Real time business operations
In 1978, Wal-Mart set up its first fully automated
distribution center

Using EDI for

procurement

Wal-Mart placed orders for huge quantities of goods

with its suppliers
Cost of sales worked out to be 2-3 %(very low from
industry average)
Information of product, manufacturer, price was
recorded on computer system
That information was passed to centralized data
warehouse

Using EDI at Wal-Mart

Analysis of daily, weekly, monthly sales data helped

store manager to determine which products were sold
in which quantities
So that they can place purchase order
Edi also helped suppliers
Right merchandize at the right time, and have it at
right place at right price

Using IT in supply chain

management

Using voice based technologies: Enhancing warehouse

and logistics management
Wal-Mart could replenish stock at any of its 1525
stores in US within 24 hours
Cross-docking
It enabled the company to receive goods and dispatch
them to stores in lees than a day
How it works at distribution centers?

Using IT in supply chain

management

It installed voice based order filling(VOF) system in all

distribution centers
Is consisted portable Voice Recognition Talkman
Terminals(VRTT) and radio module on companys
wireless LAN
It eliminated mis-picks and product labeling costs
since VOF didnt require paper lists labor

How to quickly locate & replenish

goods?

Store ready displays called PDQ(pretty darn quick)

displays
Time saved per employees were not much but
aggregate time saved was quite good

GPS

GPS system in communication in trucks

Any truck can be located
Drivers could activate system by voice and interact
with staf

Using IT in supply chain

management

The Retail Link system- Supporting Inventory

Management
Retail link connected EDI network to extranet
,accessible to all suppliers
Provided suppliers historical sales data of 24 months,
allowed them to track invoice, can make demand
forecast
Suppliers could also study competitors products
demand

Using the Internet in Supply chain

Management

CPFR (Collaborative Planning Forecasting

Replenishment)
Real time bases to determine product wise demand
forecast
Wal-Mart shared past data, customer data,
demographic data, stock positions
Both forecasted demand individually and then cooperated
Reduced inventory cost
Product availability across supply chain

 As a result lead time was cut to 11 days from 21 days

On-hand inventory was reduced by two weeks
Sales grew by $8.5 millions in six months
Later on it was implemented to other stores
By 1990s, about 90% of suppliers were doing
business through Retail Link

Barriers to CPFR

Lack of discipline to execute primary phases

Promotions and new items events are not jointly
planned
Inefective replenishment in response to demand
fluctuations
Trading partners focus on traditional supply chain
steps
Scalability and critical mass

Recent Supply Chain

Initiatives
2001- Global Procurement Division[Shenzhen, China
Exchange of sales and inventory data
Best deal procurement from any part of world
Strategy Employed
Identify generic products
Enhance product quality
reduce cost by collaborating
2001- copy paper increased sales

[ 46% in UK, 94% in Federal Republic of

Germany, 38% in Canada, 25% in US]

Recent Supply Chain

Initiatives
October 2002- Asked suppliers to replace VAN-EDI to
Web based EDI
Direct online communication between trading partners
No transaction costs
Highly secured

Saved millions[ VAN-EDI cost $200 Billion]

No licensing fees

July 2003 Asked suppliers to place RFID tags on

goods, packed in pallets and crates
VAN-EDI = Value Added Network-EDI
RFID = Radio Frequency Identification

Benefits from RFID

Drastic decrease in Stock out situations
From $400 million to $1.2 billion for P&G
Lesser labor requirements
Almost $6.34 billion yearly
Decrease in merchandise thefts
Almost $2 billion
Real time tracking of consumption patterns
Would help enhance JIT Inventory management system
Decrease in stock levels by around 25%[IBM]
Total savings expected to be 8.34 billion per year

Problems

An estimated cost of $20 million to suppliers

50% of this is integration of system with software and
modification in soft wares
Not a proven technology
Not compatible with liquids and metal packaging

THANK YOU

-Neel Patel [AM 1012]

-Sagar Morakhia [AM
0912]
-Prajita Chowdhary
[AM 0212]
-Krutik Patel [AM 1412]