som walmart

7/28/2019 SOM Walmart

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CASE STUDY PRESENTATION ON

WALMART

Service Operations

Management

Presented By,

Deepak C-1201

Submitted to,

Prof.J MSubramanya


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Why

$The worlds largest public corporation by revenue

$ The largest private employer in the world

$ The largest grocery retailer in the USA

$ The largest toy seller in America

$ Each year 93% of the American

households do shopping in some Wal-

Mart store at least once

$ 10400 stores in 27 different countries

Walmart founded by Sam Walton in 1962 has seen an

unprecedented growth in Retail industry


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MISSION STATEMENT


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Customer Demands

Critical Success Factors

(CSF)

SATISFYING CUSTOMER DEMANDS

DEPENDS ON FIVE CRITICAL SUCCESSFACTORS

Quick responsiveness to

market changes Low inventory

Quick replenishment ofinventory

Effective human resourcesystem

Efficient distribution system

The right products

In stock

Best value

Service and quality


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HUB AND SPOKE SYSTEM

In the early 1970s, Wal-Mart centralized itsdistribution system, pioneering the retail hub-and-spoke system.

Distribution center (hub)--->Individual stores

(spoke). Enabled Wal-Mart to achieve significant cost

advantages by the centralized purchasingof goods inhuge quantities.. and distributing them through its own logistics

infrastructure to the retail stores spread acrossthe U.S.

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WAL-MARTS PROCUREMENT

Emphasis on the need to reduce purchasingcosts and offer the best price to thecustomer.

Procurement directly from manufacturerseliminating intermediaries.

Meet vendors and understand their cost

structure. Finalizes a purchase deal only when it is fully

confident that the products being bought isnot available else where at a lower price.

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USING EDI FOR PROCUREMENT

The computer systems of Wal-Mart were connectedto those of its suppliers.

EDI enabled the suppliers to download purchase

orders along with store-to-store sales informationrelating to their products sold.

On receiving information about the sales of various

products, the suppliers shipped the required goodsto Wal-Marts distribution centers.

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LOGISTICS MANAGEMENT

Fast and responsive transportation system.

The distribution centers were serviced bymore than 3500 company owned trucks.

Underscored the need of drivers who werecommitted and dedicated to customerservice.

The company hired only experienced driverswho had driven more than 300,000 accident-free miles, with no major traffic violation.

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CROSS-DOCKING

In this system, the finished goods were directly picked up

from the manufacturing plant, sorted out and then directly

supplied to the customers.

The system reduced the handling and storage of finished

goods, virtually eliminating the role of the distributioncenters and stores.

The manufacturer directly forwarded the goods to a place

called the staging area.

The goods were packed here according to the orders

received from different stores and then directly sent to the

respective customers.


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THE TRADITIONAL SUPPLY CHAIN INCLUDES

INEFFICIENT AND UNNECESSARY STEPS

SelectTag/Label

Ship

Pack

Ship

Select PackReceive

Ship

Manufacturer

(Supplier)

Retailer

Shipper

Wholesaler

Receive PackSelect Storage

Storage

Sell

Order

Individual StoreDistribution Warehouse

OrderOrder

Order

Make


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WAL-MART SIMPLIFIED ITS SUPPLY CHAIN

Ship Receive

Select

Ship

Manufacturer

(Supplier)

Retailer

Shipper

Wholesaler

Receive PackSelect Storage Sell

Individual StoreDistribution Center

Tag/Label

PackMake

Cross-docking in distribution centers results in product flow

from inbound to outbound shipping docks within 48 hours.

Deliverwithin72 hoursof order

POSOrder


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DELIVERY OF MERCHANDISE TO STORES VIA

DISTRIBUTION CENTER

The trucks are checked for trucking manifest.

On matching, delivery truck is instructed to specificunloading dock.

At DC, verification of each item is carried out. IfMerchandise is accepted, pallet label is attached.

Predetermined flow through- inbound delivery truck---->Stores served by DC

Reserve or staple stock flow through- Speciality itemsfrom other DCs to stores served by a particular DC

Reserve Stock- goods are moved from reserve stockarea to order-filling area module for inventoryreplenishment---> merging station---> Sorting---> out


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INVENTORY MANAGEMENT

Invested heavily in IT and communication systems to effectivelytrack sales and merchandise inventories in stores across thecountry.

Wal-Mart set up its own satellite communication system in 1983.

Reduced unproductive inventory by allowing stores to manage

their own stocks through reduced pack sizes and appropriateprice markdown.

Use of IT capabilities to make more inventories available in thecase of items that customers wanted most, while reducing theoverall inventory levels.

Use of Magic Wand, hand held computers linked to in store to

keep track of inventories.

Execution of order management and store replenishment ofgoods with the help of computers through the Point-of-Sales

(POS) system.


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VOICE-BASED ORDER FILLING (VOF)

In 1998, Wal-Mart installed a voice-based order filling(VOF) system in all its grocery distribution centers.

Guided by the voice to item locations in the distribution

centers. The VOF system also verified quantities picked, and

could respond to a variety of requests such asproviding product detail (type, price, barcode number,

etc.) Eliminated mispicks and product labeling costs.

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INVENTORY MANAGEMENT

Pretty Darn Quick Displays-Implementation of PDQ

displays by suppliers helped to directly replace the emptyracks at the stores with fully packed racks .

Retail Link System-Retail suppliers used the retail linksystem to monitor the sales of their goods at stores and

replenish inventories. RLC connected Wal-Marts EDI network with an extranet,

accessible to Wal-Marts thousands of suppliers.

Enabled suppliers to know the performance of their

products. Use of Massively Parallel Processor (MPP) computer

system to track the movement of goods and stock levels.

Real time broadcasting of information through an

advanced Satellite Communication System.


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WAL-MART INVESTS HEAVILY IN INFORMATION

TECHNOLOGY(CONT.)

Various Quick-Response (QR) systems (retail-link) to allow directstore-to-supplier ordering: continuous replenishment

Wal-Mart

Supplier

POS Data

Store

Vendor-managed QR

Supplier Store

Wal-Mart-managed QR

Order

Wal-Mart

Supplier Store

Warehouse Just-in-Time

System DistributionCenter

DistributionCenter

POS Data


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By the mid 1990s, Implementation of Internet-enabledSCM system- Collaborative, Planning, Forecasting andReplenishment (CPFR).

Business practice for business partners to shareforecasts and results data through the Internet.

Helped to reduce inventory costs while at the sametime, enhancing product availability across the supplychain.

Radio Frequency Identification- By 2005, Wal-Martreplaced bar-code technology with RFID technology.

Could reduce its supply chain management costs andenhance efficiency.

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Inventory Management


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WAL-MARTS INVENTORY MANAGEMENT

IMPROVEMENTS HAVE RESULTED IN EFFICIENCIES

UNMATCHED BY THE COMPETITIONInventory-to-Sales Ratio

1:4.58

1:5.94

Sears Roebuck & Co.Wal-Mart

Wal-Mart stores replenishinventory twice a week vs. industrystandard of once every two weeks

Wal-Mart has lowest cost of operations in the

retail area, aside from wholesale clubs

Selling and Operating Expenses

of Sales

KMartWal-Mart

15%

28%

IT systems have improved Wal-Marts in-stock position andincreased vendor responsiveness

Inventory in System (Days)At Vendor

At Warehouse

In-Store

30

30

14

323

After NewSystem

Before NewSystem


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LESSONS LEARNED: THE ROAD TO SUCCESS IS

PAVED BY TECHNOLOGY AND BETTER USE OF

PEOPLE

Economiesof Sales:Best Deals

StrongSupplierRelationships

EffectiveIT Systems

EffectiveDistributionSystems

EmpoweredEmployees

ReducedCost of Sale

In-DepthKnowledgeof Customer/Market

StableLowerPrices

PredictableSalePatterns

DecreasedChance ofOut-of-Stock

IncreasedSalesandProfits


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STATS AS OF 2013

Sales- approximately $444 billion

- If Walmart were a country, it would be the 26th largesteconomy in the world.

No. of employees worldwide- 2.2 million

- If Wal-Mart was an army, it would have the secondlargest military in the world, behind China.

No. of stores-10400 in 27 countries

-Each week, Walmart serves more than 200 millioncustomers

-90 percent of all Americans live within 15 miles of aWalmart.

-Wal-Mart is bigger than Home Depot, Kroger, Target,


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ISSUES OF CONCERN Bill Simon, Walmart US CEO, says that a two-year problem with

keeping store shelved stocked is "getting worse," and a major

threat to its operations.

As a strategy to declutter its stores, in 2011, Walmart pulled out

8500 products from its shelves.

Led to organised chaos.

Sales stagnated

After 6 months, it reversed its decision.

Though sales increased gradually, it often suffered with the

problems of stock outs. Except US, there is no significant contribution to sales from its

operations in rest of the world.

Failed to implement global strategies locally.

Has the decline of worlds largest retailer begun?


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NEVERTHELESS.

Wal-Marts supply chain management strategy has

provided the company with several sustainablecompetitive advantages, including lower productcosts, reduced inventory carrying costs, improved in-store variety and selection, and highly competitive

pricing for the consumer. This strategy has helped Walmart become a

dominant force in a competitive global market.

As technology evolves, Walmart continues to focuson innovative processes and systems to improve itssupply chain and achieve greater efficiency.


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