A PROJECT REPORT ON

SUPPLY CAHIN MANAGEMENT AT

PRESENTED BY - NILESH
LATHIGARA
ROLL NO.-521159889
SEMESTER-IV(MBA)

CONTENTS
INTRODUCTION TO SUPPLY CHAIN MANAGEMENT
LEVELS OF SUPPLY CAHIN MANAGEMENT
HISTORY-WAL-MART
WAL-MART INTRODUCTION AND ITS BUSINESS PROCESS
SUPPLY CHAIN MANAGEMNT AT WAL-MART
PROCUREMENT AND DISTRIBUTION
LOGISTICS MANAGEMENT
INVENTORY MANAGEMENT
COMPETITIVE ADVANTAGE AND BUSINESS MODELS USED AT WAL-MART
RFID IN WAL-MART
EFFICENCY IN SUPPLY CHAIN WITH RFID
CONCLUSION
LIST OF REFERENCES
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INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

Supply Chain Management is the discipline which encompasses

the end to end business activities carried out in any business,
independent of the manufacturing or service sectors. It is the
synchronization of a network of facilities and distribution options
that performs procurement of materials, processing the materials
into finished products, and distribution of the products to
customers. SCM is seen as involving five fundamental processes.
These include planning, sourcing, making, delivering, and
returning.

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INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

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Typical supply chain showing interrelations between all involved parties.

SCM subsists in both service and manufacturing environments. A typical

supply chain consists of many interactions between suppliers,
manufacturers, distributors, retailers, with the vital goal of providing either
a service or a product to customers. This also works in reverse with the
customer at the head of the process when returning a product.

SCM is used as a means to assimilate planning, purchasing, manufacturing,

distribution, and marketing organizations that normally do not work
together to achieve a common goal. Each works toward goals specific to
their own organization that accomplish narrow objectives. SCM is a way of
integrating these varying functions so that they work together to make best
use of the benefits for all involved.

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LEVEL OF SUPPLY CHAIN MANAGEMENT

Three Levels of SCM

Strategic

Strategic SCM covenants with future planning than looking

at market evaluation, capacity issues, new products, and
technology changes. This is accomplished at the
executive management level.

Tactical
Operational

Tactical SCM involves a shorter planning cycle.

It is more concerned demand planning, inventory planning, and supply planning.

This is determined at a less senior level than Strategic SCM.
Operational SCM is current planning activities measured in at most weeks.
Operational SCM involves the mainstream of the operations. It includes
demand fulfillment, scheduling, production, transport, and monitoring.
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The complete goal of SCM is to optimize supply chains in an endeavor to

provide more accurate and time sensitive information that can be used to
improve process times and cut costs. Supply chains have been around for
decades and a constantly being improved. The newest opportunity for
improvement is the introduction of Radio frequency identification (RFID)
tags. RFID technology will provide real-time information that will allow
manufacturers to get better readings of customers and markets thus further
improving supply chains. RFID will help retailers provide the right
products at the right places at the right times. Finally, maximizing sales and
profits.

Wal-Mart has been leading the charge with RFID technology. Having the
largest retailer adopt and begin to use RFID technology has given strong
backing to the technology and will only further and quicken the expansion
of RFID. They have begun requiring all their major suppliers to implement
RFID technology on all products supplied to Wal-Mart.
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One example of what Wal-Mart has done with SCM and its suppliers is
that of its relationship with Proctor & Gamble.
These two have built a software system that hooked Proctor & Gamble up
to Wal-Marts distribution centers. This system would then monitor supply
levels and when products run low, automatic alerts are sent out to require
the shipment of more products to that distribution center.

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HISTORY-WAL-MART

1962: Company founded with opening of first Wal-Mart in Rogers, Ark.

1967: WAL-MART's 24 stores total $12.6 million in sales.
1970: WAL-MART opens first distribution center and home office in Bentonville,
Ark.
1977: WAL-MART makes first acquisition, 16 Mohr-Value stores in Michigan and
Illinois.
1978: Hutcheson Shoe Company acquired
1983: U.S. Woolco Stores acquired.
1990: WAL-MART becomes nation's No. 1 retailer.1990McLane Company of
Temple, Texas acquired.
1997: WAL-MART replaces Woolworth on the Dow Jones Industrial Average.
2003: WAL-MART named by FORTUNE magazine as the most admired company in
America.
2005: WAL-MART had $312.4 billion in sales, more than 6,200 facilities around the
world, including 3,800 stores in the United states and 3,800 international units

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Wal-Mart is one of the leading Fortune 500 companies, which is spread across the
globe. It is perhaps the largest retail chain which deals with everything from food to
consumer electronics. In terms of the revenue generated, it leads the fortune 500
companies like GE and Microsoft. Simply put, it has everything a homemaker can
ever think of. Affordable price range coupled with aggressive online and market
strategy has led to wide acceptance for Wal-Mart in towns and cities alike. WalMart is probably the only largest fortune 500 corporations in the world, which
directly services the common man.

Supply chain management has been the foundation to Wal-Marts success and
remains their chief competitive advantage in the retail/department store industry.
Their distribution system is generally regarded as the most efficient and they have
an approach to supply chain management that has long emphasized visibility
through the sharing of information with their suppliers.
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Operations
Wal-Mart operations are comprised of three business segments:
Wal-Mart Stores
SAMS CLUB
Wal-Mart International
Wal-Mart Stores segment is the largest segment, which accounted for
approximately 67.3% of their 2005 fiscal sales. This segment consists of
three different retail formats, all of which are located in the United States.
This includes the following sections:
Super-centers, which average approximately 187,000 square feet in size and
offer a wide variety of products and a full-line supermarket;
Discount Stores, which average approximately 100,000 square feet in size
and offer a wide variety of products and a limited stock of food products;
and Neighborhood Markets, which average approximately 43,000 square
feet in size and offer a full-line supermarket and a limited variety of general
merchandise.
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WAL-MART INTRODUCTION AND ITS BUSINESS PROCESS

SAMS CLUB segment consists of membership warehouse clubs in the

United States which accounted for approximately 13.0% of 2005 fiscal
sales. SAMS CLUBs in the United States average approximately 128,000
square feet in size.
Wal-Mart International operations are located in Argentina, Canada,
Germany, South Korea, Puerto Rico and the United Kingdom, the
operations of joint ventures in China and operations of majority-owned
subsidiaries in Brazil and Mexico. This segment generated approximately
19.7% of 2005 fiscal sales. Here, it operates several different formats of
retail stores and restaurants, including Super-centers, Discount Stores and
SAMS CLUBs.
For the fiscal year ending January 31, 2005, Wal-Mart topped $10 billion in
net income for the first time in their history and added almost $29 billion in
sales.

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WAL-MART INTRODUCTION AND ITS BUSINESS PROCESS

Business Model

A Business model is crucial to any successful business. Wal-Mart is

no exemption. Wal-Mart has always been revolutionizing and
enlightening its business model to suite its organizational goals and
also meet customer requirements, and so has managed to stay on top
year after year. Wal-Mart has employed a mixed-business model for
its business for the same.

To understand the Business models used by Wal-Mart, firstly it is

important to know the factors, which go in defining those models,
and how does it relate to Wal-Mart specifically.

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Market Strategy of Wal-Mart

Wal-Mart stresses primarily on their Everyday Low prices (EDLP)
pricing philosophy, in which they price items at a low price every day
that builds & maintains customers trust in their pricing. Since they
employ both the clicks and bricks and bricks and mortar methods to
market their products, consumers get to choose their products either the
traditional way or online anytime of the day. Though Wal-Mart has not
advertised in Advertising, as many of its competitors do, the trust people
have built on the Wal-Mart brand has taken them far from their
competitors.

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WAL-MART INTRODUCTION AND ITS BUSINESS PROCESS

Organizational Development
Wal-Mart has restructured its business into two parts to handle specific
organizational needs.
Specialty Division
Tire & Lube Express
Wal-Mart Optical
Wal-Mart Pharmacy
Wal-Mart Vacations.
Wal-Mart's Used Fixture Auctions
Wal-Mart Alaska Bush Shopper
Retail Division
Wal-Mart Stores
Super centers
SAMS CLUBS
Neighborhood Market
InternationalWAL-MART.com
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SUPPLY CHAIN MANAGEMENT AT WAL-MART

Supply chain management at Wal-Mart can be described in 3 sections.

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Procurement and Distribution

Wal-Marts process of procurement involves reducing its purchasing costs as far as
possible so that it can offer best price to its customers. The company procures goods
directly from the manufacturers, bypassing all intermediaries.
Wal-Mart has distribution centers in different geographical places in US. Wal-Marts
own warehouses supplies about 80% of the inventory. Each distribution center is
divided in different groups depending on the quantity of goods received. The
inventory turnover rate is very high, about once every week for most of the items.
The goods to be used internally in US arrive in pallets & imported goods arrive in
re-usable boxes.
The distribution centers ensured steady flow & consistent flow of products.
Managing the center is economical with the large-scale use of sophisticated
technology such as Bar code, hand held computer systems (Magic Wand) and now,
RFID. Every employee has access to the required information regarding the
inventory levels of all the products in the center.
This enables Wal-Mart to satisfy customer needs quickly & improve level of
efficiency of distribution center management operations.

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LOGISTICS MANAGEMENT

This involves fast & responsive transportation system. More than 7000 company
owned trucks services the distribution centers. These dedicated truck fleets enables
shipping of goods from distribution centers to the stores within 2 days and replenish
the store shelves twice a week. The drivers hired are all very experienced & their
activities are tracked regularly through Private Fleet Driver handbook. This
allows the drivers to be aware of the terms & conditions for safe exchange of WalMart property, along with the general code of conduct.

For more efficiency, Wal-Mart uses a logistics technique called Cross Docking. In
this system, finished goods are directly picked up from the manufacturing site of
supplier, sorted out and directly supplied to the customers. This system reduces
handling & storage of finished goods, virtually eliminating role of distribution
centers & stores. Because of cross-docking the system shifted from supply
chain to demand chain which meant, instead of retailers pushing the products
into the system, the customers could pull the products, when & where they
required.

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LOGISTICS MANAGEMENT

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INVENTORY MANAGEMENT

Wal-Mart ensures that unproductive inventory is as less as possible, by

allowing the stores to manage their own stocks, thereby reducing pack sizes
across many categories and timely price markdowns. Wal-Mart makes full
use of its IT infrastructure to make more inventories available in case of
items that customers wanted most, while reducing overall inventory. By
making use of Bar-coding & RFID technologies, different processes like
efficient picking, receiving & proper inventory control of the products along
with easy packing and counting of the inventories was ensured.

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Wal-Mart owns the Massively Parallel Processor (MPP), largest & the
most sophisticated computer system in private sector, which enables it to easily
track movement of goods & stock levels across all distribution centers and
stores. For emergency backup, it has an extensive contingency plan in place as
well.
Employees use Magic Wand, which is linked to in-store terminals through a
Radio frequency network, to keep track of the inventory in stores, deliveries
and backup merchandise in stock at the distribution centers. The order
management and store replenishment of goods is entirely executed with the
help of computers through Point of Sale (POS) system.
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INVENTORY MANAGEMENT

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COMPETITIVE ADVANTAGE AND BUSINESS MODELS USED AT WAL-MART

Competitive Advantage

Wal-Mart has been an undisputed leader in offering the markets

lowest prices to consumers. It has always given a price match
guarantee, and has challenged other stores to offer lesser prices and
has agrees to reimburse the difference, the difference of price if any.
No other store could meet this and Wal-Mart has been leading the
pack for years.

Market Opportunity

Wal-Mart employs a combination of two Business Models viz.

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COMPETITIVE ADVANTAGE AND BUSINESS MODELS USED AT WAL-MART

B2B Single firm network Business Model

SAMS CLUB segment of Wal-Mart supports small businesses. Its main
focus in this segment is to create its own network of trusted partners to
coordinate supply chains and provide exceptional value on brand-name
merchandise at Members Only prices.
B2C E-Tailor Business Model
Wal-Mart uses clicks and bricks methodology to provide millions of its
customers online version of its retail store,

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RFID IN WAL-MART
Wal-Mart had initiated its plan to employ RFID technology in its supply chain
in June 2003. Subsequently Wal-Mart reinforced its plans and actively asserted on
defining the RFID standards it will be implementing.
The specification of the following RFID components was laid out in November
2003.

EPC (Electronic Product Code) specification

Type of Chip that would be installed

The Distribution centers that will accept RFID tagged products

After the defining phase, Wal-Mart specified the RFID requirements to its suppliers
that they should comply with:

EPC: 96-bit with a Global Trade Identification number

TAGS: Should operate in UHF spectrum (868 MHz to 956 MHz)

The TAG will carry the 96-bit serial number and will be field-programmable, that
will allow the suppliers to write serial numbers to the tags while being applied to the
products.
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RFID IN WAL-MART

EPC compliant tags in UHF band consists of two main parts:

EPC data format on the chip

Class0 or Class1 communication protocol
Class0 is a factory programmable tag
Class1 provides the capability to the end users to write serial
number on it
Wal-Mart planned to implement Class1 Version2, a globally
accepted protocol that incorporates both specification of Class0
and Class1.

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EFFICENCY IN SUPPLY CHAIN WITH RFID

The various components of Supply Chain are: Procurement, Distribution, Logistics

and Inventory Management.

Since the core of Wal-Mart business is perpetual improvement in its Supply Chain
implementation, it believes in no-compromise on implementing an innovative IT
infrastructure and strong communication system as they are they the important links
in the chain for a smooth functioning of the complete system.

Wal-Mart tapped RFID technology with an aim to increase the efficiency of its
supply chain. This is because RFID implementation will enhance transparency of
their supply chain and hence will help them minimize cost and labor and will
strengthen inventory control.

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EFFICENCY IN SUPPLY CHAIN WITH RFID

According to Venture Development Corporation,

With Wal-Mart selling over $245 billion worth of goods in fiscal year 2003, a
1% improvement in the out-of-stock issue could generate nearly $2.5 billion in very
profitable sales.
In current systems, you may know there are 10 items on the shelf, and that
information is compiled in an enterprise planning software system. With RFID, you
know there are 10 items, their age, lot number, and expiration date and warehouse
origin. "It's like knowing there are 1,000 people in a city," says Cohen. "With RFID,
you know their names."
From the above studies it indicates that employing RFID technology will help in
implementing a seamless supply chain and hence yield profits.

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EFFICENCY IN SUPPLY CHAIN WITH RFID

The recent studies show that 130 major suppliers ship merchandise to Wal-Mart
distribution centers with about 5.4 million tags. Wal-Mart expects to increase RFID
implementation by adding another 200 suppliers that are projected to supply to
another 1000 stores.
At present, Wal-Mart is at a nascent state of implementing RFID. In addition to
strengthening the Supply Chain, the largest retailer is also looking into different
dimensions where RFID can be helpful. As a pilot test, Wal-Mart is working on the
data collected by RFID to analyze the consumer behavior.
According to Venture Development Corporation, the major implementation
milestones of RFID at Wal-Mart are to expand Regional and domestic
implementation of RFID throughout 2005. These include Regional Distribution
Centers, Grocery Distribution Centers and Sams Club Distribution Centers in Texas.
And, by 2006, Wal-Mart aims to mandate RFID implementation for all its suppliers.

Limitations and Challenges of RFID

Many issues still exist about the implementation of RFID that even Wal-Mart may
have trouble addressing despite their decision to move forward with the new
technology.
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EFFICENCY IN SUPPLY CHAIN WITH RFID

Current challenges in RFID implementation are:

1. Global standards: A single global RFID standard is highly unlikely to evolve.

Like barcodes, standards for RFID will probably vary between many regions of the
world. Multinationals like Wal-Mart may need to implement a variety of RFID
standards and technologies across their global organizations.
2. Technology problems: Problems such as signal distortion, reader accuracy and
speed, and tag transmission capabilities persist making RFID still not practical for
widespread use. Some of the major technical limitations are:
Read-range distances are not sufficient to allow for consumer surveillance:
Most of the RFID tags currently in use have read ranges of fewer than 5 feet. The
read range of the RFID tags depends on the antenna size, transmission frequency, and
whether they are passive or active.
Limited information contained on tags: Although some researchers on RFID
support this aspect of the technology by pointing out that the tags associated with
most consumer products will contain only a serial number.

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However, this number can reveal a lot of information, which is generally used as a
reference number that corresponds to information contained on one or more Internetconnected databases. This means that the data associated with that number is
theoretically unlimited, and can be augmented as new information is collected.
Defective and poorly performing RFID tags: RFID tag manufacturers continue
to produce faulty tags. Failure rates in early RFID pilots have been as high as
30%. Unfortunately, "relatively high reliability" is unacceptable if an RFID
mandate calls for a 100% read rate.
Damaged RFID tags: Since tag reading happens automatically without line of
sight and no human interaction, it can be difficult to know when certain tags are
not read. This becomes a serious issue for business applications built around
RFID if 100% read rates are implicit as part of the core business application
design.
Data management: Lack of development of right information management tools to
manage the data effectively, is making it difficult to realize the full potential of RFID
in generating a wealth of information. Companies planning to adopt RFID face
technical concerns related to effective data capture (or reading), and to data volume
(in database management and transmission).
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Cost: Any developing technology is associated with high costs and so is RFID,
which is highly expensive to implement. Individual tags cost about 30 cents each;
this will drop to between one and five cents per tag once billions are being
produced. And depending on functionality, tag readers can cost anywhere from
several hundred to several hundred thousand dollars.

Industry Standards: Many privacy advocates are insisting the companies to state
their intended use of the technology due to lack of industry standards regarding the
use of personal information that could be encoded on the chips.

Privacy and civil liberties: One major confrontation for RFID technology would be
to deal with the threats to consumer privacy and civil liberties. RFID tags can be
embedded into/onto objects and documents without the knowledge of the individual
who obtains those items.

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RFID Practices that should be prohibited:

Merchants must not force their customers into accepting RFID tags in the
products they buy.
o

RFID must not be used to track individuals absent informed and written
consent of the data subject. Human tracking is inappropriate, either directly
or indirectly, through clothing, consumer goods, or other items.

RFID should never be employed in a fashion to eliminate or reduce

anonymity. For instance, RFID should not be incorporated into currency.

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CONCLUSION

What Should Wal-Mart Do?

Wal-Mart should redefine the scope of its RFID mandate by narrowing
the scope of products to those with limited amounts of metal and liquid.
Suppliers would not be affected with a narrower focus on high-priced
products like prescription drugs, apparel, and DVDs etc. It gives additional
time for vendors and suppliers to perfect tag reliability for all products.
Forrester recommends that Wal-Mart use its influence to help create a
buying consortium, giving suppliers the collective power to cut tag costs.

What Should Suppliers Do?

Suppliers should use their initial knowledge to shape mandates by WalMart and other retailers. In addition to addressing the challenges they are
facing in implementing RFID with Wal-Mart, suppliers should create an
internal RFID lead position with direct access to the CEO.

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BIBLIOGRAPHY

Website List

www.walmart.com
www.google.co.in
http://www.authorstream.com
www.scribd.com

Books

Introduction to Supply chain management

E-Supply chain management technologies and management

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THANK YOU

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