ERNEST BRAWUA

ID NUMBER: 10040101

WAL-MARTS SUPPLY CHAIN MANAGEMENT PRACTICES The worlds largest retailer Wal-Mart was founded by Sam Walton in 1962. It operated more than 3500 discount stores, Sams clubs and supercenters in the U.S and over 1170 stores in all major countries across the world. The company also sold products on the internet through its website, walmart.com. In the financial year 2001-2002,Wal-Mart ranked first in the global fortune 500 list earning revenues of 219.81 billion dollars. Wal-Marts phenomenal growth was attributed to its continued focus on customer needs and reducing cost through efficient supply chain management practices. The company offers a vast range of products at the lowest cost in the shortest possible time through its highly automated distribution centers which significantly reduced shipping cost and time, and its computerized inventory system which speeded up the checking out time and recording of transactions. MANAGING THE SUPPLY CHAIN Procurement and Distribution. To reduce its purchasing cost and offer the best prices to its customers, Wal-Mart procured goods directly from manufacturers, bypassing all intermediaries. The company is a tough negotiator on prices and only purchased when there were no lower prices elsewhere. The company established long term relationships with its vendors by making the procurement process very transparent and also understanding the cost structure of vendors. In 1998, Wal-Mart had over 40000 distribution centers located at different geographical locations. About 85% of the goods available at the stores passed through the distribution centers and in some cases, suppliers delivered goods such as automotive and drug products directly to the stores. The distribution centers ensured a steady and consistent flow of products to support the supply function. The company employed information technology solutions in its distribution. Wal-Mart used barcode technology and a handheld computer system in managing the distribution centers. Every employee had access to real time information regarding inventory levels. The handheld computer guided an employee with regard to the location of a particular product from a particular bin or shelf in the distribution center. The quantity of the product required from the center is entered into the handheld computer which immediately updated the information on the main server. Information about the storage, packaging and shipping of products were displayed with the use of the hand held computers thus, saving time on unnecessary

paperwork. It also enabled supervisors to monitor their employees closely and give them directions on the go. With this, Wal-Mart was able to satisfy customer needs quickly and improved the level of efficiency of the distribution center management operations. LOGISTICS MANAGEMENT. An important feature of Wal-Marts logistics was its fast and responsive transportation system. The distribution centers were serviced by more than 3500 company owned trucks which allowed the company to ship goods within two days and replenish the shelves twice a week. Wal-Mart drivers moved the merchandise-loaded trailers from distribution centers to retail stores serviced by each distribution center. These retail stores were considered as customers by the distribution center. The company hired only experienced drivers who were committed and dedicated to customer service .The Private Fleet Driver Handbook was introduced to keep record of driver activities and to educate them with regard to the code of conduct. Wal-Mart made use of the 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 customers. This reduced the handling and storage of finished goods, virtually eliminating the role of the distribution centers and stores. Today, technology, innovation and the commitment of the people involved in driving the companys logistics mission of providing customers an outstanding shopping experience that saves them money. SUPPLY CHAIN MANAGEMENT PROCESSES. Fundamental changes to managerial control had to be effected to make maximum gains out of cross- docking. Traditionally, decisions about merchandising, pricing and promotions had been highly centralized and were taken at the corporate level. Cross-docking 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. INVENTORY MANAGEMENT. Wal-Mart had developed an ability to cater for the individual needs of its stores. Stores could choose from a number of delivery plans .The Company invested heavily in IT and communications systems to effectively track sales and merchandise inventories in stores across the country. It was essential to have a good communication system. Hence, Wal-Mart set up its own satellite communication system in 1983. 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 it suppliers through computers. The company built an automated reordering system which linked all computers between a supplier, P&G, and its stores and other distribution centers. With this, Wal-Mart could monitor its stock levels and constantly identify fast moving items and send a resupply order. Employees of the stores had a handheld computer which was linked to in store terminals through a radio frequency network. The order management and store replenishment of goods were entirely executed with the help of computers through through the point of sale system. This made it possible to monitor and track sales and merchandise stock levels on store shelves. Also, with the centralized inventory data system, one 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 or in transit on a truck. Once the goods are delivered at the store, the inventory data is updated. Wal-Mart also used barcoding and radio frequency technology to manage its inventory. This enabled efficient picking, receiving, and proper inventory of the appropriate goods as well as easy order packing and physical counting of the inventories. In 1991,the company invested almost four billion dollars to build a retail link system which was used by suppliers to monitor sales of their goods at stores and replenish inventories. By making effective use of IT in all its operations, it was successful in providing uninterrupted service to its customers, suppliers, stockholders and trade partners. Wal-Mart derived enormous benefits from its efficient supply chain management. The company enjoyed low transportation costs since it used its own transportation in delivering the goods to different stores. Cost of transportation was estimated at about 3% of the total cost as compared to 5% for their competitors. Wal-Mart enjoyed good bargaining power as it purchased in bulk. Customers benefited a lot in the form of competitive prices. Low pricing ensured that the sales volumes were high and consistent. There was reduction in lead time, faster inventory, accurate forecasting of inventory levels, increased warehouse space, reduction in safety stock and better working capital utilization. The stock out of goods and the subsequent loss arriving out of it was eliminated. The objective is to reduce its purchasing costs and offer the best price to its customers. WalMart achieved competitive advantage through lowest transportation cost, lowest shipment costs, fastest inventory replenishment, better use of IT capabilities, and the use of crossdocking method of logistics.