1 wal-mart company overview using key concepts from managing business process flows presented by:...
TRANSCRIPT
1
Wal-MartCompany overview using key concepts from
Managing Business Process Flows
Presented by:
Casey KellerRick BuonauroAicha Aissaoui
Systems and Operations Management: Wal-Mart
2
Wal-mart FACTS
founded by Sam Walton in 1962
the largest retailer in the world and the second largest corporation in the world (behind Exxon Mobil based on revenue as of 2006)
the largest private employer in the United States and Mexico
the largest grocery retailer in the United States
the largest toy seller in the United States
For the fiscal year ending January 31, 2006, Wal-Mart reported net income of $11.2 billion on $313 billion of sales revenue (3.5% profit margin)
3
Wal-mart & the COMPETITION
To sustain competitive advantage, a firm must ensure that its competition finds it hard to imitate its chosen position.
COMPANY SALES (MIL) FY2006
INDUSTRY AVG. 39,992
Wal-mart 312,427
TARGET 55,363
KOHL’S 14,247
DOLLAR GENERAL 8,941
BIG LOTS 4,534
4
Responsiveness
operations frontier
A
B
C
PriceHigh Low
Wal-mart & the COMPETITION
5
Wal-mart’S PRODUCT ATTRIBUTES
What are the 4 key product attributes??? ….product cost, product delivery-response time, product
variety, product quality
Wal-mart’s product cost? Low
Wal-mart’s product delivery-response time? Low
Wal-mart’s product variety? High
Wal-mart’s product quality? Low - Medium
6
Wal-mart Strategy
WAL-MART STRATEGY & OPERATIONS STRUCTUREEnable everyday low prices and above average profitability by procuring, distributing,
and selling products, when and where needed, at lower costs than any competitor.
Operations Strategy Short Response Times Low Inventory Level
Operations Structure Fast Transportation System Cross Docking Retail Link RFID
7
Process Flow Measures: Wal-Mart
Process Flow Measures
– Flow Time (T) – total time spent by a flow unit within process boundaries
– Flow Rate – number of flow units that flow through a specific point in the process, per unit of time
– Inventory (I)– total number of flow units present within process boundaries
Throughput (R) – average flow rate or average number of flow units that flow through the process, per unit of time
Little’s Law: Average Inventory (I) = Throughput (R) x Average Flow Time (T) or I=RxT
Inventory Turns or Turnover Ratio – number of times inventory is sold and replaced during a specific period, R/I
8
Process Flow Measures: Wal-Mart
Wal-Mart is extremely efficient with low flow times, high flow rates, and low inventory.
As of January 31, 2006:
– Inventory as a percentage of the Balance Sheet was 23.3%, down from 40.1% in 1997
– Inventory Turnover was 7.8, up from 5.3 in 1997
– Days Inventory was 46.8, down from 69.6 in 1997
9
Flow-Time Analysis: Wal-Mart
Wal-Mart’s merchandise replenishment cycle is no more than 48 hrs.
Retail Link – real-time point-of-sales (POS) data transmission
Cross Docking
Fleet of 7,000 trucks in US
Point-of-sale system
captures data in real-time
Data is transmitted to warehouses
for Inv. Mgmt.
Retail Link transmits data to supplier
Orders are generated from previous-day
sales
Merchandise is loaded onto trucks using
cross-docking
Merchandise is delivered to
the store
Merchandise is manufactured
based on historical and real-time data
Merchandise is shipped to warehouses
Customer made a
purchase
The store will re-stock the shelves with merchandise
10
Flow-Time Analysis: Wal-Mart
250 mile radius
Walmart’s Centralized Hub-and-Spoke System of Warehouses and
Distribution Centers
11
Flow-Time Analysis: Cross Docking
Cross docking: take a finished good from the manufacturing plant and deliver it directly to the retail store with little or no handling in between.
12
Flow-Time Analysis: Advantages of Cross Docking
Reduces operating costs.
Increases throughput.
Reduces inventory levels.
Helps in increase of sales space.
Eliminates unnecessary handling and storage of product.
Reduces product damages and product obsolescence.
13
Supplier Management: Retail Link
Retail Link is a decision support system
It is a bridge between Wal-Mart and its suppliers
It is an address you can visit via Internet to retrieve the sales data, inventory data, information on its development
14
Inventory Management
Inventory Management:» Reducing critical activity times
» Eliminating non-value-adding activities
» Moving work from critical to non critical activities
» Redesigning the process to replace sequential with parallel processing
Point-of-sale system
captures data in real-time
Data is transmitted to warehouses
for Inv. Mgmt.
Retail Link transmits data to supplier
Orders are generated from previous-day
sales
Merchandise is loaded onto trucks using
cross-docking
Merchandise is delivered to
the store
Merchandise is manufactured
based on historical and real-time data
Merchandise is shipped to warehouses
Customer made a
purchase
The store will re-stock the shelves with merchandise
15
Inventory Management: RFID
Radio Frequency Identification Automated Data collection based
on an electronics – not a barcode Tag can be imbedded in the
product or stuck on the exterior case or pallet
Reader instead of a barcode scanner
Allows fully automated data collection with the use of portals
Can read many ID tags at a time
16
Inventory Management: How does an RFID work?
17
Inventory Management: RFID
Wal-mart is the most famous retailer implementing RFID in its supply chain management system in January 2005.
It required its top 100 suppliers to use RFID technology at the pallet and case level by January 2005, 200 by January 2006, 300 by January 2007, and so on…
18
Inventory Management: RFID Read Points
WAL-MART STORE READ POINTS
19
Inventory Management: Why RFID?
Reduce the possibility of inventory shrinkage and out-of-stock situation.
Improve fulfillment rates.
Improve the customer service.
Reduce inventory and labor cost.
Eliminate many manual process and improve the operation efficiency.
20
Inventory Management: RFID Study?
Reducing out of stock?
» 8% of all items are out of stock (at any point of time)
» Estimated potential lost sales:– Retailers: 3.4%
– Suppliers: 2.6%
» 26% improvement from no RFID to full RFID
21
Thank you!
THANK YOU! QUESTIONS???
=