Supply Chain Management

Continuous Replenishment System - Wal-Mart

Group 13
Berit Vestad Monica Tenny Therese Krogsether Janne Visnes

Introduction of the Information System and what it does

Supply chain management integrates the supplier, distributor, and customer logistics requirements into one cohesive process. The supply chain is a collection o physical entities such as manu acturing plants, distribution centers, conveyances, retail outlets, people, and in ormation, !hich are lin"ed through consumption. Supply chain management has been recogni#ed as an important business element due to the act that decreased time, as !ell as cost to the customer, !ill greatly contribute to their competitiveness !ithin their perspective industry. Supply chain management reduces product costs through the elimination o unnecessary steps and adds value to the customer service unction by more closely managing the coordination among logistics providers and customers. $t is primarily concerned !ith managing the company%s integration !ith transportation and in ormation providers as it de ines and drives the requirements or both. The ultimate purpose o supply chain management is to increase customer value !hile maintaining competitive prices. $t is mostly concentrated on material and product sourcing, vendor evaluation, and purchasing. &al'Mart is an e(ample o supply chain management at its inest. By "eeping prices lo! and their shelves !ell stoc"ed, &al'Mart has become the leading retail business in the )nited States. *ne o many reasons &al'Mart is able to o er such lo! prices and maintain a constant level o inventory is through a legendary inventory replenishment system triggered by point'o 'sale purchases that is the best in the industry.

The igure illustrates &al'Marts supply chain+

The ,continuous replenishment system, sends orders or ne! merchandise directly to suppliers as soon as consumers pay or their purchases at the cashregister. -oint'o 'sale terminals record the bar code o each item passing the chec"out counter and send a purchase transaction directly to a central computer at &al'Mart headquarters. This computer collects the orders rom all &al'Mart stores and places orders !ith their suppliers to replenish the sold products. Suppliers can also access &al'Mart%s sales and inventory data using &eb technology.

Because the system can replenish inventory !ith lightning speed, &al'Mart does not need to spend much money on maintaining large inventories o goods in its o!n !arehouse. The system also allo!s &al'Mart to ad.ust purchases o store items to meet customer demands. The continuous updating o data shared bet!een suppliers and customers such that replenishment, as managed by the supplier, may occur daily or even less. / success ul continuous replenishment system requires accurate product demand orecasting and an in ormation system that includes up'to'date !arehouse !ithdra!al data, shipping data, and point'o 'sale data, so that the inventory and distribution process can be managed !ith pinpoint control.

What makes an Information System Strategic

Strategic $n ormation Systems change the goals, operations, products, services or environmental relationships o organi#ations to help them gain an edge over competitors. Strategic $n ormation Systems can be used at all levels o the organi#ation and are more ar'reaching and deep'rooted than other "inds o systems 0li"e strategic'level systems or senior managers1. Today in ormation systems can so dramatically boost a irm2s productivity and e iciency that businesses vie! in ormation as a !eapon against competition and a strategic resource.

!ow is this Information System Strategic

The replenishment system is strategic or &al'Mart in di erent parts o the organi#ation, both in services, environmental relationships and operations. "t a #usiness le$el% /t the business level o strategy, in ormation system is used to help the irm become a lo!'cost producer. The system also helps them di erentiate products and serve ne! mar"ets.

&ow-cost% The system can replenish inventory !ith lightning speed. Because o the system &al'Mart does not need to spend much money on maintaining large inventories o goods in its o!n !arehouses. There ore &al'Mart spends a lot less money to pay or overhead than their competitors. *verhead is e(penses or salaries, !arehousing, advertising and building up"eep. 'ifferentiate new products% The system also allo!s the store to ad.ust to the customers demands. The system orders a lot o the product !hen customers buy much o the item, and doesn2t order the product !hen none !ants to buy it. Ser$e new markets% )sing this in ormation system, &al'Mart can o er their customers to access &al'Mart2s sales and inventory data using the &orld &ide &eb. "t the firm le$el% $n ormation systems can be used to achieve ne! e iciencies or to enhance services by tying together the operations o disparate business units so that they can unction as a !hole or promote the sharing o "no!ledge across business units. The replenishment system in &al'Mart registers sales at terminals all over the )S/. The bar codes o each item is ne(t sent to a central computer at the headquarters. This computer collects orders rom all &al'Mart stores and then transmits them to suppliers. (n$ironmental relationships% The system o er employees and employers an e icient !ay o organising the store. That means that by using the system they get available time, !hich they can spend on other things they need to do.

Where does the Information System add $alue for those that are implementing it
The replenishment system sends orders or ne! merchandise directly to the suppliers. That means that the employees do not need spend time illing out orders and send them to the suppliers, because the system i(es this itsel . The employees get time ree to use on other important issues and more time spent !ith customers.

This can mean a lot or employees. They can eel that their !or"load is less heavy and there ore eel more satis ies !ith their !or"place.

)alue Chain
Support activities

*irm infrastructure !uman recourse management +echnology de$elopment ,rocurement

M a r g i n

-rimary /ctivities

$nbound 5ogistics

*perations

*utbound 5ogistics

Marketing and sales

Service

The ma.or point is that all o these activities have to be in sync in order or the value chain to operate e ectively. The support activities is not bound to any o the primary activities, but is supposed to serve them, The irst step in analy#e o intern resources is to identi y ho! the company2s di erent activities ma"es the oundation or its competition strategy. Support acti$ities 3irm in rastructure+ This includes systems or planning, inance, quality assurance etc. /lso structure and routines to maintain the culture o the organi#ation are included here. 4uman recourse management+ $ncludes among other things recruiting, training, and evolving re!ard'systems. Technology development+ $s o course important !hen it comes to the actual product, but it is also important in the process o ma"ing the inished product and the resources !hich is central in this !or".

-rocurement+ $ncludes all activities that provide or all the necessary ra! material to be available or the irm activities.

,rimary acti$ities $nbound logistics+ This includes receive o goods, stoc"ing, transport and distribution. 6ontrol o the merchandise is a central part in this matter *perations+ includes all the activities that ma"e the product or service. 3rom basic to inished product. This also includes the manu acturing process, testing and rapping etc. *utbound logistic+ include stoc"ing and distribution o the inished product Mar"eting and sales+ This includes commercial and sales. The customer gets to notice the product during announcement and mar"eting campaigns. The product is then available or the customer. The sales'administration handles this "ind o !or". Service includes all activity, !hich obtains the value o the product or service. 3or e(ample+ installation and repairment etc

)alue Chain "nalysis% Wal-Mart

Infrastructure% There are 789: &al'Mart stores all over the !orld. This includes ;97 Supercentres, 8:< Sam2s 6lubs, : &al'Mart =eighbourhood Mar"ets and >??< units o &al'Mart $nternational. &al'Mart serves over >?? million customers !ee"ly !orld!ide. There are >?@:??? associates, and the company is /merica2s largest private employer. &al'Mart is run rom a national headquarter. The headquarter ta"es care o orders, and every local store has to report to the headquarter. The local store is responsible or satis ying the local customer. Avery associate is challenged to reduce the cost o doing business, ranging rom reduced paper use to ma"ing suggestions that can save millions o dollars. This challenge is met every day because associates understand that the savings they create are passed to the customer in lo! prices. !uman resources% /lmost ;?B o all managers in &al'Mart stores started as hourly associates. This indicates that &al'Mart gives employees the opportunity or career advancement. The employees are encouraged to communicate openly, o er ne!

ideas, ta"e ris"s, strive or e(cellence and have un. &al'Mart has been ran"ed as one o /merica2s >?? best companies to !or" or in recent surveys. Amployees are getting competitive !ages and comprehensive bene its. These bene its include both ull'time and part'time people. Some o these bene its areC pro it sharing, stoc" purchase program, medical coverage, vacation, holiday pay, leave o absence, private counselling, scholarship program and dental coverage. &hen recruiting ne! associates the company begins a comprehensive recruitment program in the community !here the store is to identi y candidates. Decruitment programs are !ell publicised and convenient, providing an opportunity or .ob applicants and the company to start getting acquainted. &hen ne! employees start at &al'Mart they are presented to the t!o basic rules o &al'Mart. These are+ Dule >+ The customer is al!ays right Dule 7+ $ the customer happens to be !rong, re er rule >. +echnology% &al'Mart uses computer'based technology. /s a product2s bar code is s!iped at the chec"out aisle, in ormation is instantaneously sent to &al'Mart2s data !arehouse. The data !arehouse pro.ects !hen the item needs to be replenished and then places the order directly to the vendor or to a &al'Mart Eistribution 6enter. This F.ust'in'timeG inventory management reduces overhead associated bo(es o unneeded merchandise sitting in !arehouses and stoc" rooms. -rdering% The national headquarter apply goods or all &al'Mart stores. The bar codes o each item is sent to a central computer at the headquarters. This computer collects orders rom all &al'Mart stores and then transmits them to suppliers. &al'Mart !or"s together !ith suppliers to identi y !ays to reduce costs and still reali#e a reasonable pro it. /s a result o this team!or", pac"aging is reduced and distribution systems are streamlined to lo!er the total cost o the product. Marketing% The ma.ority o sales in the stores account or nationally advertised merchandise. The company both sells their o!n brands and licensed brands. &al' Mart is committed to purchasing products rom local and regional vendors, instead o buying it cheaper rom else!here. The &al'Mart $nnovation =et!or" encourages ne! products and ideas. $t o ers ine(perienced inventors and entrepreneurs the advice o pro essionals to

determine the commercial potential o products that are still in development stage, or have a sales history o less than si( months. The process also helps identi y the ris"s involved !ith bringing the product to mar"et. The program o ers re errals to government or university economic development organi#ations that may assist !ith urther development, production and mar"eting o ne! products. Ser$ice% *pening hours at &al'Mart generally range rom <.?? a.m. to >>.?? p.m. si( days a !ee", and rom >?.?? a.m. to 9.?? p.m. on Sunday. /ll &al'Mart stores maintain uni orm prices, e(cept !here lo!er prices are necessary to meet local competition. Sales are primarily on a sel 'service, cash'and'carry basis !ith the ob.ective o ma(imi#ing sales volume and inventory turnover !hile minimi#ing e(penses. Ban" credit card programs, operates !ithout recourse to the 6ompany, is available in all stores. The replenishment system also helps the store ad.ust to customers demands. The stores are organised the same !ay all over the !orld, so the customers !ill recognise the stores !herever they go. -perations% Decycling is a high priority at &al'Mart. &al'Mart has recycling programs or cardboard, plastics, aluminium cans, car batteries and paper products. They also !or" to reduce !aste by encouraging vendors to reduce pac"aging. &al'Mart stores have advanced energy management systems to regulate and reduce energy use. They also strive to provide a sa e shopping e(perience or our customers and a sa e !or" place or our associates. &ogistics% The company uses the retail last'in, irst'out 05$3*1 method or the &al'Mart stores segment. They use the cost 5$3* or the Sam2s 6lub segment and another cost method or the international segment. Euring the >HHH iscal year, appro(imately 98B o the &al'Mart discount stores2 and Supercenters2 purchases !ere shipped rom &al'Mart2s 8@ distribution centers, nine o !hich are grocery distribution centers and t!o o !hich are import distribution centers. The balance o merchandise purchased !as shipped directly to the stores rom suppliers. The international segment operates e(port consolidation acilities in Jac"sonville, Seattle and 5aredo in support o product lo! to its Me(ican, /sian and 5atin /merican mar"ets. $n addition, distribution acilities are located

/rgentina, Bra#il, 6anada, 6hina and Me(ico, !hich process and lo! both imported and domestic product to the operating units. *perationally, the principle ocus is on crossdoc"ing product, !hile maintaining stored inventory is minimi#ed.

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References%
>. 7. @. 8. :. ;. <. -ro essor Joe Komar !!!.!al'mart.com The management o business logistics *peration Management I ocusing on quality and competitiveness $nn ring i strategi &al'Mart associative Management $n ormation Systems

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