Walmart has established an efficient distribution system centered around a hub-and-spoke model with 158 distribution centers across the US. The distribution centers employ cross-docking to directly process incoming goods with little storage, reducing costs and lead times. Walmart's logistics operations include over 7200 company-owned trucks and 53,000 trailers to replenish stores within 200 miles of distribution centers within 48 hours. The company leverages technology like RFID and GPS to increase visibility and efficiency throughout its supply chain.
6. Cross-Docking
Benefits
•
•
•
•
•
Direct processing of materials and supplies when they are received no storing
Massive reduction of distribution costs
Requirements: tight sheduling and accurate inbound product identifications
Reduced lead times improved customer satisfaction and flexbility
Suitable products: perishable goods and ready for sale products
7. Distribution Centers
Service Benefits
•
Spot-Stocking
–
–
•
Full-Line Stoking
–
–
–
•
To support customer requests
For seasonal products
Used by retailers
One-stop shopping experience
Restocking is done in large shipments
Value-Added Services
–
–
–
Postponement of customization
Low inventory
Low risk
8. Location Analysis Techniques
•
Location factor rating
–
–
Ability to consider multiple factors
Subjective
•
Center of gravity technique
•
Service Location Strategy
9. Choosing the right location
Delivery service (customer
expectations vs competition)
Labour force
Type of distribution area
(concentration of demand)
Transport and storage costs
Demand development (shifting
of demand)
Infrastructure (rail, ship, plane,
trucks, etc.)
10. Choosing the means of transportation
•
Concerns about costs
•
Environmental factors
•
Speed
•
Flexibility
11. Choosing a mode of transportation
•
•
•
•
Direct Shipping
Direct Shipping with milk runs
Shipping via Distribution Center
Shipping via Distribution Center with milk runs
14. Strategy
•
„Everyday low price“
•
Effective use of logistics management
•
Effective inventory control
•
Bargaining power over suppliers
•
Global Expansion for new market opportunity
15. Walmart Distribution System
Suppliers
• Vendors =
suppliers
• Delivery to DC
or directly store
• High volume
Wal-Mart
Distribution
Center
• Cross-docking
• Lead time 48
hours
• Hub and spoke
Wal-Mart
Store
Wal-Mart
Shopper
• Items placed on
shelves
• rural and urban
towns
• very low prices
16. Hub and Spoke
•
Pioneers in centralizing their distribution system with the help of hub-and-spoke
system
•
Goods were centrally ordered, assembled at a ‘distribution center’ (hub), from
where they were dispatched to the individual stores (spoke)
•
Lead to significant cost advantages caused by the centralized purchasing of goods
in huge quantities (economies of scale)
•
Cost advantages increased through its own, independent logistics infrastructure
17. Source: Adapted from Garrison Wieland for “Wal-Mart’s Supply Chain,” Harvard
Business Review 70(2; March–April 1992), pp. 60–71.
18. Distribution Centers
•
158 distribution centers
•
each 1 million square feet in size, 5-12 miles of conveyor belts in each, operate 24/7
•
9000 different lines of merchandise
•
each RDC supports 90 – 100 stores within a 200-mile radius
21. Inventory Management
•
Vendor managed inventory
•
Relies on communication between suppliers, DCs and POS in stores
•
POS data is sent directly to 4000 vendors
•
Own satellite communication system
•
Stores manage their own stock
•
Use of IT to reduce inventory levels
22. Wal-Mart Transportation System
•
Fast and responsive system
•
More than 7200 company owned trucks, 53000 trailers, 8000 drivers
•
Experienced drivers committed to customer service
•
Merchandise replacement system in less than 48h
•
Services stores within a 200 mile radius of the DC
23. Reducing transportation costs
•
Efficient vehicle routing resulting in
fuel efficiency and less CO2 emmisions
•
Eliminating empty backhauls
•
Introducing GPS Vehicle Tracking and mobile technologies
24. RFID
•
In efforts to implement new technologies, reduce costs and increase the efficiency, in July 2003, Wal-Mart
asked its top 100 suppliers to be RFID compliant by January, 2005.
•
Wal-Mart replaced bar-code technology with RFID.
•
Because of the implementation of RFID, employees were no longer required to physically scan the bar
codes of goods entering the stores and distribution centers, saving labor cost and time.
•
Wal-Mart expected that RFID would reduce the instances of stock-outs at the stores.
25. Green Transportation at Walmart
•
Fuel saving technologies to make distribution fleet 25% more efficient
•
Load trucks more efficiently
•
Improve routing
•
Alternatively fueled trucks
26. Long-term Goals
•
Reduce stock at the retail stores
•
Minimize costs in the supply chain
•
Support its green initiatives
•
Move towards collaboration and innovation
•
Increase visibility in the distribution chain
27. Discussion
•
What are, in your opinion, the disadvantages of cross-docking in the distribution
network system?
•
How do you think distribution systems will develop in the next 5 years?
•
How have the new IT developments changed supply chains?
Thank you for your attention!