SUPPLY CHAIN MANAGEMENT OF WALMART

INDEX
Topics Page No.

Executive Summary 3

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Company Profile 4

Wal-Mart in India 6

Introduction 10

Literature Review 11

Managing the Supply Chain 14

Wal-Mart’s Supply Chain Strategies 17

Objectives 23

Key discussion and Analysis 20

Conclusion 22

Bibliography 23

EXECUTIVE SUMMARY
The case discusses in detail the supply chain management practices of Wal-Mart and explains
how the company employed IT/Internet to enhance the efficiency of each function of supply
chain including procurement, warehouse and logistics management, inventory management
and demand forecasting. The case focuses particularly on some of the important technologies
used by the company and their benefits including EDI, voice-based tools and applications and
the Retail Link system.

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The case examines the supply chain management practices at Wal-Mart, the leading retailer in
the world. The case explains in detail how Wal-Mart managed various components of the
supply chain including procurement, distribution, logistics and inventory management. It covers
how the use of innovative IT tools has helped the company in improving the efficiency of supply
chain. The case concludes with a discussion on the benefits reaped by Wal-Mart due to its
efficient and effective supply chain management system.

The case also examines the use of Internet-based technologies by Wal-Mart in implementing
collaborative planning, forecasting and replenishment (CPFR), global sourcing and EDI-INT.
Finally, the case describes Wal-Mart's plans to implement Radio Frequency Identification (RFID)
technology, its benefits and the problems being faced by the suppliers to implement it.

The report covers the literature behind Supply chain and Supply chain management. The
various objectives and analysis of Supply chain management are covered in the report. There
are many elements which form a backbone of Supply chain management. Efforts are been
made to explore these dimensions with the help of retail giant “Wal-Mart”. The report also
covers the evolution of Wal-Mart with Supply chain management technology at its behest.
Efforts are been made to understand different processes that Wal-Mart uses in its Supply chain
management

COMPANY PROFILE
Total Company Data Sheet - March 2010

Retail Units Worldwide 8,431

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U.S. Retail Units 4,363

Wal-Mart discount stores 804
Supercenters 2,766
Neighborhood Market 182
Market side 4
Supermercado 2
Sam’s Club 605

Wal-Mart International Retail Units 4,068

Company History

First Wal-Mart opened in 1962 (Rogers, AR)

First Sam’s Club opened in 1983 (Midwest City, OK)

First Supercenter opened in 1988 (Washington, MO)

First International unit opened in 1991 (Mexico City)

First Neighborhood Market opened in 1998 (Bentonville, AR)

First Market side stores opened in 2008 (Chandler, Gilbert, Mesa and Tempe, AZ)

First Supermercado store opened in 2009 (Houston, Texas)

Company Sales Territory:

Wal-Mart Stores, Inc. (NYSE: WMT) serves customers and members more than 200 million
times per week at 8,400 retail units under 55 different banners in 15 countries.

Total Associates:

United States – more than 1.4 million

Internationally -- 664,000
Total Associates -- more than 2 million worldwide

Net Sales For the fourth quarter FY 2010, $112.8 billion, a 4.6 percent increase over the same
period last year.

FYE 1/31/10: $405.0 billion, a 1 percent increase over the previous year

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Community Involvement: In 2009, Wal-Mart Stores, Inc. and its Foundation gave $467 million
in cash and in-kind donations. Internationally, Wal-Mart gave $45 million in cash and in-kind
gifts to charitable organizations, bringing total 2009 giving to $512 million.

International Data Sheet - March 2010

Wal-Mart International Units 4,068 total units

Market Retail Units Date of
Entry
Mexico 1,472 November 1991
Canada 317 November 1994
Brazil 436 May 1995
Argentina 44 August 1995
China (*) 283 August 1996
United Kingdom 371 July 1999
Japan 371 March 2002
Costa Rica 170 September 2005
El Salvador 77 September 2005
Guatemala 164 September 2005
Honduras 55 September 2005
Nicaragua 55 September 2005
Chile 253 January 2009
India 1 May 2009

Sales Territory: Wal-Mart Stores, Inc. or “Wal-Mart” serves customers and members more than
200 million times per week at more than 8,400 retail units under 55 different banners in 15
countries, including the United States. Wal-Mart employs more than 2.1 million associates
worldwide.

Total International Associates: 664,000

Total International Sales:

Fourth quarter International net sales were $29.6 billion, an increase of 19.5 percent from last
year. The increase in International net sales includes our Chilean operations (acquired in
January 2009) and a $1.9 billion positive impact from currency exchange rate fluctuations. On a
constant currency basis, International net sales were up 11.9 percent to $27.7 billion from last
year’s fourth quarter results of $24.8 billion.

Reported International operating income for the fourth quarter included a currency exchange
rate benefit of $122 million. Reported International operating income for the year ended Jan.
31, 2010 was reduced by $540 million for the effect of currency exchange rate fluctuations. On
a constant currency basis, International operating income increased 18.7 percent and 12.8

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percent, respectively, for the fourth quarter and full fiscal year 2010, compared to the
corresponding periods in fiscal year 2009.

International net sales for fiscal year 2010 were $100.1 billion, an increase of 1.3 percent from
last year. On a constant currency basis, International net sales increased 11.2 percent to $109.9
billion in fiscal year 2010, compared to $98.8 billion in fiscal year 2009.
Wal-Mart International ended fiscal year 2010 with more than $100 billion in net sales, with
strong double-digit sales growth in the fourth quarter. Many countries delivered strong
comparable sales performance and gained market share. On a constant currency basis, fourth
quarter operating income for Wal-Mart International grew faster than sales.

Walmart in India Fact Sheet

Total retail units as of March 31, 2010: 1

Best Price: 1

Associates: 544

About Bharti Walmart Private Limited

Bharti Walmart Private Limited is a joint venture between Bharti Enterprises, one of India's
leading business groups with interests in telecom, agri-business, insurance and retail, and
Walmart, the world’s leading retailer, renowned for its efficiency and expertise in logistics,
supply chain management and sourcing. The joint venture is establishing wholesale cash-and-
carry and back-end supply chain management operations in line with Government of India
guidelines. Under the agreement, Bharti and Walmart hold a 50:50 stake in Bharti Walmart
Private Limited. The first wholesale cash-and-carry facility named “Best Price Modern
Wholesale” opened in Amritsar in May 2009.

Wholesale Cash-and-Carry to Benefit Retailers

Best Price Modern Wholesale store is a one-stop shop that meets the day-to-day needs of
restaurant owners, hoteliers, caterers, fruit and vegetable resellers, kiranas, other retail store
owners, offices and institutions. The store offers an assortment of approximately 6,000 items,
including food and non-food items, which are available at competitive wholesale prices,
allowing retailers and business owners to lower their cost of operations.
More than 90 percent of these goods and services are being sourced locally; thereby helping
keep costs to a minimum, adding to the growth of the local economy and creating job
opportunities, with the cash and carry store directly employing more than 200 local people.

Efficient Supply Chain to Help Minimize Wastage and Maximize Value for all Key Stakeholders
The joint venture has also invested in establishing an efficient back-end supply chain
management operation. The joint venture works with the existing supply chain infrastructure to
help make it more efficient, thereby maximizing value for farmers and manufacturers on the
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one end and retailers, and in turn, consumers on the other. The supply chain operation
supports farmers and small manufacturers who have limited infrastructure and distribution
strength and help minimize wastage, particularly of fresh foods and vegetables. An efficient
supply chain can play an important role in transforming farmers and small manufacturers into
successful entrepreneurs.

Technical Collaboration between Bharti Retail and Walmart

In addition to the joint venture, Bharti Retail (a wholly-owned subsidiary of Bharti) has entered
into a franchise agreement with Walmart whereby Walmart provides certain technical support
to Bharti Retail. For its front-end retail venture, Bharti Retail requires critical retail technology
and technical know-how. Within the framework of permitted franchise arrangements, Bharti
Retail has entered into a technical collaboration with Walmart whereby Walmart provides such
critical technical support to Bharti Retail. Since April 2008, Bharti Retail has opened 48 small
format stores and two medium format stores in the states of Punjab, Haryana, Rajasthan and
Delhi.

Sourcing from India

Walmart has been sourcing a variety of products from suppliers in India for more than 20 years.
Walmart’s office in Bangalore serves as Wal-Mart’s Global Procurement (GP) hub for the
sourcing of merchandise from India and Sri Lanka to Walmart stores and Sam’s Clubs globally.
GP India also manages Global Procurement from Sri Lanka, including quality control/ assurance
audits and ethical sourcing factory compliance audits in Sri Lanka.
Major categories sourced from India include home textiles (including towels, shower curtains,
bath mats, accessories, bedding sheets, and kitchen linens), apparel (including woven, knitwear
and leather footwear), leather accessories, fine jewelry, and house wares (including fine dining
ware, home décor and tabletops). The main categories sourced from Sri Lanka are apparel,
textiles and gifts.

INTRODUCTION:
The world’s largest retailer Wal-Mart was founded by Sam Walton in the year 1962. He opened
his first store in Rogers, Ark. On 31st October 1969, the company was incorporated as Wal-Mart
Stores. Key success factor was the guidance of Sam. Presently they are operating in fifteen
countries with more than 8,000 stores with 2.1 million employees[ CITATION Wal10 \l 1033 ].
Major features of Wal-Mart stores are its store area, cleanliness and its shelves which is filled
with varieties of quality items that includes health care products, family apparels, electronic
items, automotive products, hardware items, jewelry etc.

Wal-Mart is giving more emphasis for customer needs and tried to reduce cost through the
effective usage of supply chain management system. In the year 2009, Fortune Magazine
ranked Wal-Mart as first among other retailers in its survey. Sales were about 401 billion U.S
dollars in the FY 2009.

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The US-based Wal-Mart ranked first in the global Fortune 500 list in the financial year 2001-02
earning revenues of $219.81 billion. Wal-Mart was the largest retailing company in the world.
The company was much bigger than its competitors in the US - Sears Roebuck, K-Mart, JC
Penney and Nordstrom combined.

In 2002, Wal-Mart operated more than 3,500 discount stores, Sam's Clubs and Supercenters in
the US and more than 1,170 stores in all major countries across the world. The company also
sold products on the Internet through its website, walmart.com.

Wal-Mart was one of the largest private sector employers in the world, with employee strength
of approximately 1.28 million. The company's founder, Sam Walton (Walton) had always
focused on improving sales, constantly reducing costs, adopting efficient distribution and
logistics management systems and using innovative information technology (IT) tools.
According to analysts, Wal-Mart was able to achieve a leadership status in the retail industry
because of its efficient supply chain management practices. Captain Vernon L. Beatty, aide-de-
camp to the commander, Defense Supply Center, Columbus, Ohio said, "Supply chain
management is moving the right items to the right customer at the right time by the most
efficient means. No one does that better than Wal-Mart."

LITERATURE REVIEW
The movement of a product or a service from supplier to customer takes place with the help of
organizations, people, technology and resources. According to Terry. Harrison “a supply chain is
a network of facilities and distribution options that perform the functions of procurement of
materials, transformation of materials into intermediate and finished products and the
distribution of the finished products to customers”. Supply chain finds its place in both services
as well and manufacturing industry. Supply chain can also be explained as the association of
the retailers, distributors, transporters and suppliers who come together and share the process
of sale, delivery and production of a particular product or service.

Supply chain management is an efficient way of managing the above mentioned activities.
According to Jessie Chinami Supply chain management can be defined as “an oversight of
materials, information and finances as they move in a process from supplier to manufacturer to
wholesaler to retailer and finally to the consumer”. The basic aim of supply chain management
is coordinating and integrating the flow which takes place within and among companies.
The basic three types of supply chain management flows are:

 The product flow

 The information flow
 The finances flow

The product flow deals with the goods and services that are subjected to movement from a
supplier to a customer and vice-versa. The information flow manages the upgrading as well as

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management relating to the status of the delivery process while the financial flow manages all
the finances related to the delivery process.

A schematic diagram of the Supply chain management process is as shown. The various
processes in Supply chain management are:

 Supply chain strategy

 Logistics
 Product lifecycle management
 Procurement
 Asset management
 Enterprise applications
 Supply chain planning

The decisions associated with supply chain management cover both the long-term and short-
term. Strategic decisions deal with corporate policies, and look at overall design and supply
chain structure. Operational decisions are those dealing with every day activities and problems
of an organization. These decisions must take into account the strategic decisions already in
place. Therefore, an organization must structure the supply chain through long-term analysis
and at the same time focus on the day-to-day activities.

Furthermore, market demands, customer service, transport considerations, and pricing

constraints all must be understood in order to structure the supply chain effectively. These are
all factors, which change constantly and sometimes unexpectedly, and an organization must
realize this fact and be prepared to structure the supply chain accordingly.
Structuring the supply chain requires an understanding of the demand patterns, service level
requirements, distance considerations, cost elements and other related factors. It is easy to see
that these factors are highly variable in nature and this variability needs to be considered
during the supply chain analysis process. Moreover, the interplay of these complex
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considerations could have a significant bearing on the outcome of the supply chain analysis
process.

Cross Docking:
Cross Docking is a method of handling goods. This happens when vendor and the company
work together. This is the method of supplying the product in the right time and the said
quantity. This cut down a lot of time. This also changed Wal-Mart’s way of looking things. This
transitioned Wal-Mart from being a centralized management to almost decentralized system
took a major turn in focus of pull strategy than a pull strategy.

Cross-docking is one of the techniques used by Wal-Mart. It means there is no unnecessary

storage or little storage in between the loading and unloading of goods so that customer can
enjoy the quality of the goods by first hand. Wal-Mart have logistics infrastructure which is very
fast transportation system wherein the distribution centres are being serviced.  Wal-Mart
assured that their drivers are capable of doing their jobs accordingly and do not cause
unnecessary delays that can hamper the efficiency of the distribution operations.  To deliver it
on time, the coordinators give information to the driver the expected time of arrival or delivery
of the goods.

Point Of Sale:
Information sharing is one of the most important things when it comes to SCM. P&G with its
Pampers requested Wal-Mart to share its point of sale so that it could predict its demand more
or less and work on the information to bring in efficiency. When Wal-Mart shared this
information P&G could plan in advance and it with its efficient supply chain management could
supply pampers to Wal-Mart on time.

Wal-Mart did not want to dedicate lot of space to pamper in its warehouse of shop store either.
Instead the supply was taken care by P& G. This led the initiation of working with the vendors
and coming out with huge efficiency by maintaining lower inventory and satisfying demand
without stock outs. Thus point of sale sharing would be a key element for any company for its
further scope of improvement and also when there is further scope of improvement there is a
role for Supply chain management.

MANAGING THE SUPPLY CHAIN:

PROCUREMENT AND DISTRIBUTION: Wal-Mart always emphasized the need to reduce its
purchasing costs and offer the best price to its customers. The company procured goods
directly from manufacturers, bypassing all intermediaries. Wal-Mart was a tough negotiator on
prices and finalized a purchase deal only when it was fully confident that the products being
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bought were not available elsewhere at a lower price. Wal-Mart spent a significant amount of
time meeting vendors and understanding their cost structure. By making the process
transparent, the retailer could be certain that the manufacturers were doing their best to cut
down costs. Once satisfied, Wal-Mart believed in establishing a long-term relationship with the
vendor. In its attempt to drive hard bargains, Wal-Mart did not even spare big manufacturers
like Procter & Gamble (P&G). However, the company, generally, preferred local and regional
vendors and suppliers.

In 1998, Wal-Mart had over 40 distribution centers located at different geographical locations
in the US. Over 80,000 items were stocked in these centers. Wal-Mart’s own warehouses
directly supplied 85 percent of the inventory, as compared to 50-65 percent for competitors.
According to rough estimates, Wal-Mart was able to provide replenishments within two days
(on an average) against at least five days for competitors. Shipping costs for Wal-Mart worked
out to be roughly 3 percent as against 5 percent for competitors. Each distribution center was
divided into different sections on the basis of the quantity of goods received and was managed
the same way for both cases and transport goods. The inventory turnover rate was very high,
about once every two weeks for most of the items. Goods meant for distribution within the US
usually arrived in pallets, while imported goods arrived in re-usable boxes or cases. In some
cases, suppliers delivered goods such as automotive and drug products directly to the stores.
About 85% of the goods which were available at the stores passed through the distribution
centers. The distribution centers ensured a steady and consistent flow of products to support
the supply function.

As Wal-Mart used sophisticated barcode technology and hand-held computer systems,

managing the center became easier and more economical. Every employee had an access to
real time information regarding the inventory levels of all the products in the center. They had
to just make two scans – one to identify the pallet, and the other to identify the location from
where the stock had to be picked up. Different barcodes were used to label different products,
shelves and bins in a center. The hand-held computer guided an employee with regard to the
location of a particular product from a particular bin or shelf in the center. When the computer
verified the bin and picked up a product, the employee confirmed whether it was the right
product or not. The quantity of the product required from the center was entered into the
hand-held computer by the employee and then the computer updated the information on the
main server. The hand-held computer also enabled the packaging department to get accurate
information about the products to be packed. It displayed all information about the storage,
packaging and shipping of a particular product thus, saving time on unnecessary paperwork. It
also enabled the center supervisors to monitor their employees closely enabling them to give
directions and even guide them even on the move. This enabled the company to satisfy
customer needs quickly and improve the level of efficiency of the distribution center
management operations. Each distribution center had facilities for maintaining personal
hygiene such as shower bath and fitness centers. It also had provision for food, sleep and
personal business. The distribution center could also be used for meetings and paperwork. The
truck drivers of Wal-Mart sometimes availed these facilities.

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INVENTORY MANAGEMENT
Wal-Mart had developed an ability to cater to the individual needs of its stores. Stores could
choose from a number of delivery plans. For instance, there was an accelerated delivery system
by which stores located within a certain distance of a geographical center could receive
replenishment within a day. Wal-Mart invested heavily in IT and communications systems to
effectively track sales and merchandise inventories in stores across the country. With the rapid
expansion of Wal-Mart stores in the US, it was essential to have a good communication system.
Hence, Wal-Mart set up its own satellite communication system in 1983.

Wal-Mart was able to reduce unproductive inventory by allowing stores to manage their own
stocks, reducing pack sizes across many product categories, and timely price markdowns.
Instead of cutting inventory across the board, Wal-Mart made full use of its IT capabilities to
make more inventories available in the case of items that customers wanted most, while
reducing the overall inventory levels. Wal-Mart also networked its suppliers through
computers. The company entered into collaboration with P&G for maintaining the inventory in
its stores and built an automated reordering system, which linked all computers between P&G
and its stores and other distribution centers. The computer system at Wal-Mart stores
identified an item which was low in stock and sent a signal to P&G. The system then sent a re-
supply order to the nearest P&G factory through a satellite communication system. P&G then
delivered the item either to the Wal-Mart distribution center or directly to the concerned
stores. This collaboration between Wal-Mart and P&G was a win-win proposition for both
because Wal-Mart could monitor its stock levels in the stores constantly and also identify the
items that were moving fast. P&G could also lower its costs and pass on some of the savings to
Wal-Mart due to better coordination.

Employees at the stores had the ‘Magic Wand,’ a hand-held computer which was linked to in-
store terminals through a radio frequency network. These helped them 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 were entirely executed with the help of
computers through the Point-of-Sales (POS) system. Through this system, it was possible to
monitor and track the sales and merchandise stock levels on the store shelves. Wal-Mart also
made use of the sophisticated algorithm system which enabled it to forecast the exact
quantities of each item to be delivered, based on the inventories in each store. Since the data
was accurate, even bulk items could be broken and supplied to the stores.

Wal-Mart also used a centralized inventory data system using which the personnel at the stores
could find out the level of inventories and the location of each product at any given time. It also
showed whether a product was being loaded in the distribution center or was in transit on a
truck. Once the goods were unloaded at the store, the store was furnished with full stocks of
inventories of a particular item and the inventory data system was immediately updated. Wal-
Mart also made use of bar coding and radio frequency technology to manage its inventories.
Using bar codes and fixed optical readers, the goods could be directed to the appropriate dock,
from where they were loaded on to the trucks for shipment. Bar coding devices enabled
efficient picking, receiving and proper inventory control of the appropriate goods. It also

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enabled easy order packing and physical counting of the inventories. In 1991, Wal-Mart had
invested approximately $4 billion to build a retail link system.

More than 10,000 Wal-Mart retail suppliers used the retail link system to monitor the sales of
their goods at stores and replenish inventories. The details of daily transactions, which
approximately amounted to more than 10 million per day, were processed through this
integrated system and were furnished to every Wal-Mart store by 4 a.m., the next day. In
October 2001, Wal-Mart tied-up with Atlas Commerce for upgrading the system through the
Internet enabled technologies. Wal-Mart owned the largest and most sophisticated computer
system in the private sector. The company used Massively Parallel Processor (MPP) computer
system to track the movement of goods and stock levels. All information related to sales and
inventories was passed on through an advanced satellite communication system. To provide
back-up in case of a major breakdown or service interruption, the company had an extensive
contingency plan. By making effective use of computers in all its company’s operations, Wal-
Mart was successful in providing uninterrupted service to its customers, suppliers, stockholders
and trading partners.

LOGISTICS MANAGEMENT

An important feature of Wal-Mart’s logistics infrastructure was its fast and responsive
transportation system. The distribution centers were serviced by more than 3,500 company
owned trucks. These dedicated truck fleets allowed the company to ship goods from the
distribution centers to the stores within two days and replenish the store shelves twice a week.
The truck fleet was the visible link between the stores and distribution centers. Wal-Mart
believed that it needed drivers who were committed and dedicated to customer service. The
company hired only experienced drivers who had driven more than 300,000 accident-free
miles, with no major traffic violation. Wal-Mart truck drivers generally moved the
merchandise-loaded trailers from Wal-Mart distribution centers to the retail stores serviced by
each distribution center.

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These retail stores were considered as customers by the distribution centers. The drivers had to
report their hours of service to a coordinator daily. The coordinator scheduled all dispatches
depending on the available driving time and the estimated time for travel between the
distribution centers and the retail stores. The coordinator informed the driver of his dispatches,
either on the driver’s arrival at the distribution center or on his return to the distribution center
from the retail store. The driver was usually expected to take a loaded truck trailer from the
distribution center to the retail store and return back with an empty trailer. He had to dispatch
a loaded truck trailer at the retail store and spend the night there. A driver had to bring the
trailer at the dock of a store only at its scheduled unloading time, no matter when he arrived at
the store. The drivers delivered the trailers in the afternoon and evening hours and they would
be unloaded at the store at nights. There was a gap of two hours between unloading of each
trailer. For instance, if a store received three trailers, the first one would be unloaded at
midnight (12 AM), the second one would be unloaded at 2 AM and the third one at 4 AM.
Although, the trailers were left unattended, they were secured by the drivers, until the store
personnel took charge of them at night. Wal-Mart received more trailers than they had docks,
due to their large volume of business. To make its distribution process more efficient, Wal-Mart
also made use of a logistics technique known as ‘cross-docking.’ In this system, the finished
goods were directly picked up from the manufacturing plant of a supplier, 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 distribution centers and stores.

In cross docking, requisitions received for different goods from a store were converted into
purchase or procurement orders. These purchase orders were then forwarded to the
manufacturers who conveyed their ability or inability to supply the goods within a particular
period of time. In cases where the manufacturer agreed to supply the required goods within
the specified time, the goods were directly forwarded 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.

To gain maximum out of cross-docking, Wal-Mart had to make fundamental changes in its
approach to managerial control. Traditionally, decisions about merchandising, pricing and
promotions had been highly centralized and were generally taken at the corporate level. The
cross docking system, however, changed this practice. The system shifted the focus from
“supply chain” to the “demand chain,” which meant that instead of the retailer ‘pushing’
products into the system; customers could ‘pull’ products, when and where they needed. This
approach placed a premium on frequent, informal cooperation among stores, distribution
centers and suppliers with far less centralized control than earlier.

Wal-Mart: A Leader in Logistics

Since the early days of our company, the ability to move product from place to place quickly

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and efficiently has been a key driver in Wal-Mart’s success. Today, technology, innovation and
the commitment of our associates continue to drive Wal-Mart Logistics’ mission of providing
Wal-Mart customers and Sam’s Club members an outstanding shopping experience that is not
only uniquely tailored to their community, but saves them money so they can live better.

Quick Facts: Wal-Mart Logistics has approximately:

… 85,000 associates
... 147 distribution centers
... 51 transportation offices
... 7,200 tractors
... 53,000 trailers
… 7,950 drivers

Wal-Mart’s distribution network began in a rented garage in the 1960s. We opened our first
distribution center in 1970, as part of Wal-Mart’s current Home Office facility.
Logistics Facts: Wal-Mart’s private fleet is one of America’s safest fleets with 2.2 million miles
per preventable accident. Collectively, Wal-Mart’s fleet drivers log approximately 800 million
miles per year. The average Wal-Mart truck driver logs more than 100,000 miles annually – the
equivalent of about four trips around the world! Wal-Mart distribution centers typically employ
500-1000 associates.

• An average facility will serve 75-100 stores, many with a unique merchandise assortment for
each specific store, within a 250 mile radius.

• A regional distribution center can have twelve miles of conveyor belts, which can move
hundreds of thousands of cases through the center each day. Last year, we moved more than
5.5 billion cases of merchandise.

• A Wal-Mart grocery distribution center is equipped to house up to four million bananas at one
time. Ice cream freezers at a grocery DC are cooled to -20 degrees Fahrenheit.

• By doing thing like reducing the number of “empty miles” our trucks drive and optimizing how
merchandise is stacked in our trailers, Wal-Mart drivers logged 87 million fewer miles last year
while transporting 161,000 more cases. This enabled the company to save 15 million gallons of
diesel fuel.

• Wal-Mart’s truck fleet is working with the trucking industry and truck and trailer
manufacturers to improve the fuel efficiency of our trucks. Since 2005, we’ve improved
efficiency by more than percent, with more improvements to come.

• In 2009, Wal-Mart began testing new innovations designed to save fuel, including the
introduction of hybrid tractors as well as those powered by liquid natural gas and by brown
grease recycled from our in-store deli operations.

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• Wal-Mart has nine disaster distribution centers strategically located across the country
stocked with relief supplies needed to assist communities recover in the event of a disaster.

• Wal-Mart Logistics supports communities across the nation. In 2008, more than $60 million in
cash and in-kind contributions were made to local charities on behalf of our distribution
centers, transportation offices and other logistics facilities.

• Logistics associates registered approximately 140,000 volunteer hours in their local

communities last year.

The wisdom of Wal-Mart's supply chain strategies:

What can Wal-Mart teach manufacturing about global supply chains? Perhaps manufacturers
would want to consider a best-in-market supply chain approach rather than best-in-class, to
better meet customers' needs.
Gary Maxwell, senior vice president of international supply chain for Wal-Mart Stores Inc., said
a best-in-market approach requires thinking like a customer; complying with local and
international laws, regulations, and customs; matching the maturity curve to the market;
setting high expectations for low costs; and operating in a sustainable way. When it comes to
serving customers, best-in-market supply chain management trumps world-class supply chains
every time, he said.
Maxwell delivered the advice during the keynote address at the 2009 Annual Global Conference
of the Council of Supply Chain Management Professionals, which took place in late September
in Chicago.

Adaptive growth
Wal-Mart, just shy of $100 billion in revenue last year, does business in 15 countries, with more
than 7,900 stores and 228 distribution centers. These outlets include:
Small, 1,000-square-foot Costa Rican convenience stores; Large, 200,000-square-foot U.S. super
stores; Japanese Seiyu four-level premium-quality grocery/department stores; and United
Kingdom-based ASDA Living, general merchandise stores that expanded from a grocery chain
acquired 10 years ago.
Through such expansions, respect for individuals remains, Maxwell says, with emphasis on
customer service and continuous improvement. There was some question initially if the Wal-
Mart culture would work in other countries, he admitted, but everywhere "people need love
and respect. When they get respect, they can do extraordinary things." Adding sustainability-
doing what's right by the environment-has been a natural extension of original company
principles, Maxwell said.
When Wal-Mart grows by acquisition, management of the acquired company often expresses
excitement about the idea of Wal-Mart building stronger supply chains around their businesses,
Maxwell explained.

Customer-focused structure
Starting with the customer ensures development of systems that won't create an

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uncompetitive cost structure. The business needs to serve the customers' needs, education,
customs, and tastes. It's wrong to start with the backend and discuss technology or automation
first, he warned. Instead ask what customers expect, what are their experiences, and where do
you want to take them? Ensure all laws and customs are followed, without bribes. Assess
market maturity. Identify if the market is emerging (India-great education but challenging
infrastructure), high-growth (Brazil), focused on asset-utilization (U.S., with concern for return
on investment), or working on redefinition (Japan, which goes beyond third-party supply chain
relationships into fourth and fifth parties); Learn customer expectations; Develop leaders within
the organization, ensuring appropriate infrastructure, land, and labor costs; Look at asset
allocations based on risks, laws, and regulations. For example, countries with regulations that
limit the number of times workers can put their hands over their heads per day might be a
strong candidate for automation; Design facilities to match customer-cost expectations, with
options to upgrade later.
A small warehouse with rack and forklift might be best in class for many places in India. In
Japan, $2 peaches, individually wrapped, two per clamshell package, refrigerated, meet local
expectations. Wal-Mart's Misato, Japan, distribution center, has four floors (land costs are very
expensive and labor equal to or greater than in the U.S.). It uses many technologies including
conveying, automated sorting, and radio frequency identification (RFID).
Automation needs to match what customers can support. Big Hairy Audacious Goals are good,
Maxwell said, in reference to a phrase that recently entered business management vernacular.
Wal-Mart goals, however audacious, are set from the bottom up. Doing so improves
participants' abilities to meet and exceed expectations, Maxwell suggested.

Implementation strategies
Maxwell spoke in favor of what he called the productivity loop: Lower costs, then lower prices,
sell more units, increase profits, and repeat. Wal-Mart is working on accelerating the number of
times it exercises that loop.
Inventory optimization often is overlooked, Maxwell said. In a pyramid design, inventory
policies are on top, achieved with collaboration and integration. Below that are forecasting and
event planning. The pyramid base is made of supply chain fundamentals, such as lead times,
performance metrics, and order constraints.
Often supply chain implementations begin with an internal sales effort. Educating organizations
about the power of supply chain management is part of what practitioners need to do, Maxwell
said, to ensure capital for upgrades when they're needed. "You need to market the concepts
within your organizations.

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Information Technology and Wal-Mart:

In November 2003, Wal-Mart, the world's largest retailing company, held a meeting with its top
100 suppliers at its Bentonville headquarters. The meeting was held to discuss the course of
action for implementing the Radio Frequency Identification (RFID) technology by the company's
suppliers. Earlier, in July 2003, Wal-Mart asked its top 100 suppliers to be RFID compliant by
January 2005, while the remaining suppliers were given an extension of one year to accomplish
the task.
Wal-Mart planned to replace bar code technology with RFID technology. The company believed
that this replacement would reduce its supply chain management (SCM) costs and enhance
supply chain efficiency.
Commenting on the importance of RFID for Wal-Mart, Tom Williams (Williams), a Wal-Mart
spokesman said, "We follow what the stores sell, and orders are customized for the stores. For
us, tracking inventory is extremely important. RFID is a chance to move to a more advanced
system...in our distribution centers. It's somewhat akin to moving from tapping out telegraph
signals to moving to the Internet.
What we see at the base of all this information is efficiency; moving product more efficiently.
That translates into lower costs."Analysts were appreciative of Wal-Mart's move to implement
RFID on a large scale for managing its supply chain. They expected that by using RFID, the
company could save $8.35 billion per year, primarily in labor costs. Expressing the reason for
Wal-Mart's move to force its suppliers to adopt the latest SCM technologies, Ananth Raman, a
Harvard Business School professor said, they give suppliers a choice. Shape up or pay the price.
It's a lot of money that a supplier can lose. There's a lot of inefficiency that exists in the supply
chain."

Analysts appreciated Wal-Mart for setting a benchmark for all the companies operating in the
retailing industry to employ the best practices in SCM. Wal-Mart had established state-of-the
art SCM systems, using the most advanced communication technologies to link its retail stores,
distribution centers, headquarters and all its suppliers.
Over the decades, Wal-Mart had always been the first mover in the retailing industry to
embrace new technologies for managing the supply chain processes. At the same time, Wal-
Mart helped its suppliers adapt to the new SCM technologies, so that both the parties derived
benefits.

As the goods flow from the company to the customers, information flows from customers to
the company. This is a very valuable source for SCM. Wal-Mart recognized this and invested
heavily in Information Technology. In 1983 Wal-Mart set up its own Satellite Communication
System. This helped them manage a lot of things better with the information that they received.
This helped to manage inventory, study the demand and also networked suppliers through
computers. Retail link has emerged into an internet based Supply chain management system by
1990’s. Supply chain management that had evolved was expected to cover Collaborative
planning, Forecasting and replacement (CPFR). CPFR was considered insufficient and discarded

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at its outset. But Wal-Mart worked closely with its key suppliers and retail chains to start a
internet based system to determine a product-wise demand system. The only stumble block
Wal-Mart had was the initial investment and time constraints.

Wal-Mart differed from its competitor giants by their avid use of technological advancements in
a bid to improve their Supply chain management. By 2002 Wal-Mart introduced Web based EDI
where all the transactions between business partners were routed through the internet. Web
based EDI that Wal-mart implemented was also security free. In July 2003 Wal-Mart started
using RFID (Radio frequency Identification). This introduction meant a shift from tried and
tested bar code technology with RFID technology. Use of RFID has avoided the physical
scanning of the bar codes thus signifying the technology advances of Supply chain
management.

Objectives:
 Understand the importance of an efficient distribution and logistics management system in not
only reducing the costs for a retailing company but also in creating value for the customers
 Understand how IT/Internet could be effectively used to enhance the efficiency of the supply
chain thereby by reducing costs
 Get insights into some of the latest supply chain management technologies including CPFR and
RFID and their applications in the retailing industry.

Key discussion and analysis:

Supply chain management is now an imperative part of any organizations strategic plans. Supply
chain management’s ability to adapt quickly to customers demands, uncertainty in demands, and
globalization in market place, creating longer supply chains and shorter product life cycle &
advanced technology has created a pool for its success apart from providing a dimension for long
term-relationships. Supply chain management though a new introduction in business is fast
catching up with the evolution of material management and purchasing. Companies have also
overlooked their strategic role which revolved around raw material and finished goods inventory
to working in tandem with suppliers and customers. Better and efficient technological
advancements have reduced the gap between suppliers and customers despite their existence in
the global market. [ CITATION Rye07 \l 1033 ]

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Supply chain management is designed to improve customer service, balance costs and service,
uniform costing and provide a competitive advantage to organizations in supply chain. Suppliers
expect manufacturers to obligate themselves to purchase large quantities so as to imprint long
production runs and lower production runs and lower production costs. On the other hand if
customer demand is fewer manufacturers restores to inventory. Supply chain management
brings on integration between different blocks of process and is displayed as one whole lot.
[ CITATION Pen01 \l 1033 ]

The last 20 years have seen considerable improvements in the accounting of Supply chain
management. Wal-Mart as discussed in the literature review reflects how Supply chain
management has catapulted them to the top. Wal-Mart’s key to success is its legendary use of
Supply chain management with technology apart from traditional elements like Inventory,
Logistics management etc.

The benefits reaped by Wal-Mart through Supply chain management are:

 Strengthened relationship with the customers, vendors and employees

 Each and every small opportunity was sensed in pursuit of bringing a efficient SCM
 Helped to capitalize on cost cutting resulting in efficiency
 Saving on cost was passed on to customers that added value
 Saved a huge amount in transportation cost
 Provided higher discounts to customer
 Resulted in higher sales volume and revenues
 Arriving at a rational and Supply chain management

Apart from this Wal-Mart’s ability to order inventory on demand enabled them to meet customer
demand. Wal-Mart observed that today’s fads and fashions were the obsolete inventories for
days to come.

Thus Wal-Mart’s SCM not only increased efficiency but also increased customer service that
resulted in customer satisfaction. This brought in reducing stocks and increased its
responsiveness in distribution through the bar codes and radio frequency technologies. It cut cost
by cross docking which resulted in decreasing space in warehouses and manual labor cost to a
huge extent.[ CITATION Pen01 \l 1033 ]
The benefits of an efficient supply chain management includes reduction in lead time, faster
inventory turnover, accurate forecasting of inventory levels, increased warehouse space,
reduction in safety stock and better working capital utilization. It also helped reduce the
dependency on the distribution center management personnel resulting in minimization of
training costs and errors. The stock-out of goods and the subsequent loss arising out of it was
completely eliminated. Wal-Mart’s supply chain management practices resulted in increased
efficiency in operations and better customer service. It eliminated old stocks and maintained
quality of goods. Bar coding and radio frequency technologies enabled accurate distribution of
goods. Cross-docking also helped Wal-Mart to reduce inventory storage costs. It also helped to
cut down the labor and other handling costs involved in the loading and unloading of goods.

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Conclusion:
Sam Walton claims that Wal-Mart’s vision had always been to increase sales through lowering
the costs through organized distribution system with the help of the Information Technology. It is
said that Wal-Mart’s extreme success could be attributed to its effective supply chain
management (Chandran, 2003). Wal-Mart’s efficiency in supply chain management was due to
two key factors namely automated distribution centre and the computerized inventory system.
This brought in minimizing a lot of time the later not only reduced the checking out time but also
recorded the transaction which is much needed to know envisage demand. Demand forecast is a
constant issue which could be a threat when not handled properly. This is due to the fact that
demand prediction is always inaccurate. Aggregation would be a remedy for this unpredictable
demand. Inventory management is one of the important things that have gained importance
these days.

Wal-Mart’s focus has always been to sell goods at a lower price to the customers. They ensured
direct purchase form the companies bypassing the intermediaries. This by passing is one of the
ways to reduce cost. Wal-Mart preferred small vendors to the big players however the vendor
who provides the best price qualifies and gets the deal. This applies to the giants like P& G as
well. Their practice these days had been choosing few vendors and they literally negotiate the
best price the one that comes up with the best price qualifies. This does not blindly mean that
they have been ruthless. Wal-Mart also works with the vendors for improving its supply chain
efficiency.

Wal-Mart with its power distribution system made quite innovative changes like reducing paper
work, reduced its lead time drastically, used bar codes to bill which recorded inventory levels and
the access to the stock levels served as the valuable data for management. The movements of
products are systematic and strategically aliened in a way that it reduces the most valuable time
and cost and results in efficiency. Wal-Mart had a very effective rather responsive and flexible
distribution system to transport goods from docks to stores. It educated the drives with the
ethics and code of conduct which pictures their supply chain responsibility. Cross docking is one
lethal weapon that was used by Wal-Mart in their SCM.
Supply chain management is here to stay and we are at the beginning of the spectrum. We still
have a long way to go and miles to conquer before the entire industry, all players and all
participants become supply chain enabled and get necessary tools to make informed decisions.
Companies have a lot to gain from Supply chain management implementations. Individual
companies will definitely gain tremendously but the benefits will move beyond the four walls of
the company and everybody will gain. This will obviously have direct repercussions on the
organization and thus add to their locked-in working capital. Supply chain management principles
primarily focus on three things. Its tells that the company can compress its lead times and raise
quality and accuracy at every stage, service will improve thus getting rid of costs out of business.
Secondly organizations should take a process view rather than a functional view of the operation
Third working across functional boundaries to integrate business processes in the future. Thus

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change in the supply chain can be focused on improving the characteristics of supply in the
context of the goals that have been set for changing the service objectives.

Bibliography

Guyer, P. (2001). The future of supply chain management. Logic tools .

Ryerson. (2007). Fundamentals of supply chain management. Mc-graw - Hill pvt Ltd.
Walmart. (2010). Retrieved April 20, 2010, from Wal-Mart Stores Inc. - About Us.:
http://walmartstores.com/AboutUs/

 Chandran, M (2003). Wal-Mart’s supply chain management practices. ICFAI centre of

management research.Wal-Mart India Fact Sheet -
http://walmartstores.com/pressroom/FactSheets/
 Wal-Mart Logistics Fact Sheet- www.walmartstores.com.
 “Cross docking delivers for retail”, www.spscommerce.com

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 The wisdom of Wal-Mart's supply chain strategies,

http://walmartstores.com/pressroom/news/9482.aspx
 Company Data Sheets, http://walmartstores.com/pressroom/news/

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