DRIVERS AND METRICS OF SUPPLY CHAIN

@ WAL-MART

AGENDA
Overview of Wal-Mart
Competitive strategy of Wal-Mart
Logistics management
Cross functional drivers

Benefits reaped

Wal-Marts History
Started in 1962 by Sam Watson
By 1967 Wal-Mart had 19 stores and sales
of $ 9 million
From 1970 to 1985 Wal-Marts number of stores increased from 32
to 859
In 2004 Wal-Mart had 1568 discount centers, 1251 supercenters
and 525 Sams club

Products/Services
Wide variety of general merchandise
36 departments

apparel,
health & beauty aids,
household needs,
electronics,
jewelry

Pharmacy Department, Tire & Lube Express, garden center,

snack bar or restaurant, Vision Center and One-Hour Photo
Processing

Competitive Strategy
Reliable
Low cost retailer
Efficiency
Responsiveness

Logistical drivers
Facilities
Inventory
Transportation

Facilities
40 Regional distribution centers
Each with over 1 million sq feet in size
Centrally located
Increasing efficiency

Inventory
Cross docking
Allowing stores to manage their own stock
Magic Wand and Point of sales system

Transportation
Runs its own fleet
Hired only experienced drivers

Cross-Functional drivers
Information
Sourcing
Pricing

Information
Significant investment on technology
Used EDI (Electronic Data Interchange) system
efficiently
Implemented RFID (Radio Frequency Identification)
by 2005

EDI
WM pioneered the use of technology in the Retail
industry.
It gave over 3200 vendors the POS data for
inventory position from approx 2000 stores.
This fine-tuning allowed WM to reduce the SKUs by
25%, while the sales kept on increasing

.EDI
The integration with the suppliers was not easily
copied by the competitors. The competitors lost out
in the race
In August 2002, WM made it mandatory for the
suppliers to use EDI over Internet using AS2
software from Isoft
The software was very cheap costing just $300 for a
supplier to connect with WM

.EDI
So, there existed a large gap between WM and its
competitors. So WM possessed substantial
advantage in information on supply and demand
By November 2003, 98% of the job was over

RFID

(Source: http://en.wikipedia.org)

RFID uses tags that transmits radio signals

The tracking of inventory became more precise
and fine tuned

RFID
There was a huge reduction of labor involved in the
activities such as manual scanning of bar codes etc.
This was implemented by November 2005.
The estimated cost saving on this was to the tune of
$8 billion.

Sourcing
Large orders
Economies of scales
30 days credit
Direct procurement from manufacture

Pricing
Every day low pricing

Always Low Price, Always

Benefits Reaped
Strengthening relationship
Was very quick to pass on a learning among the
other WM stores.
Low transportation cost
Good bargaining power

Wal Mart

Source: Competing on capabilities by Stalk, Evans and Shulman, HBR, 1992

References
ICFAI ICMR Case collection
Wal-Mart Supply chain Strategy by P.Mohan Chandran

www.wikipedia.com
www.wal-mart.com
Strategic Management and competitive advantage by
Barney and Hesterly

Thank You