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Wal-Mart’sSCM system practicesMIS Case Study15 March 2013
Walmart Walmart, an American multinational retail 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Introduction to case 1990 –Superseded ‘K-Mart’ rival retail chain as one of the largest retailing chain in US 1991- Superseded ‘Sears Roebuck & Company’ and became the largest retailing chain in US In November 2003, Wal-Mart, world’s largest retailer, planned to replace bar code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 chainmanagement 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 chainmanagement 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 chainmanagementUsing 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 chainmanagement It installed voice based order filling(VOF) system in all distribution centers Is consisted portable Voice Recognition Talkman Terminals(VRTT) and radio module on company’s wireless LAN It eliminated mis-picks and product labeling costs since VOF didn’t 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 staff
Using IT in supply chainmanagementThe 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 chainManagement 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 co- operated 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 1990’s, 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 Ineffective replenishment in response to demand fluctuations Trading partners focus on traditional supply chain steps Scalability and critical mass
Recent Supply ChainInitiatives 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 ChainInitiatives 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