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OPRE 3320.

Vincent James
Haytham Dablouk
Bruno Porto Maia
Jiaming Rao

Company & Division

Wal-Mart Stores is an American multinational retail corporation that runs chains
of large discount department stores and warehouse stores. The company is the world's
second largest public corporation, according to the Fortune Global 500 list in 2013, the
biggest private employer in the world with over two million employees, and is the largest
retailer in the world (Wikipedia). Walmart is a family-owned business, controlled by the
Walton family, who own over 50 percent of Walmart.It is also one of the world's most
valuable companies. Today, Wal-Mart operates more than 11,000 retail units under 69
banners in 27 countries.

Executive Summary
Wal-Mart is considered a success story without precedent. Founded by Sam

Walton in 1962 in Bentonville, Arkansas, Wal-Mart stores offered customers abroad

range of goods. In its first year, Wal-Mart Stores accumulated $700,000 in sales, which
increased to $5.4 million by 1974. In 1980, Wal-Mart became the youngest U.S. retail
company, and the only regional retailer to exceed $1 billion in net sales. In 2002, WalMart's revenue equaled 2.3% of U.S. gross domestic product. Wal-Mart's key strategy
lay in its Everyday Low Prices (EDLP) which it achieved through aggressive bargaining
with suppliers, its efficient distribution system and inventory control as well as its unique
culture. Wal-Marts superior processes in supply chain and IT have ensured that it was
able to provide the customers with 7 % lower prices than its competitors. Wal-Mart was
able to achieve a leadership status in the retail industry because of its efficient supply
chain management practices. Areas where Wal-Mart manages the supply chain:
Procurement & DistributionWal-Mart








intermediaries. It was a tough price negotiator which will only purchased when it was
fully assure that the products bought were not available elsewhere at a lower price.
Logistic management

Cross- Docking system.

Distribution centers were serviced by own Wal-Mart's trucks.

Drivers had to report their hours of service every day.


Hiring only experienced drivers for trucks.

Distribution system

Barcode Technology.

Establish long -term relationships

Hand-Held computer system.

Procured goods directly from manufacturers.

Wal-Mart's advertised mission statement and its advertising slogan are the same:
"We save people money so they can live better (" In addition to this
mission statement, the company looks to its founder, Sam Walton for a company
purpose: If we work together, well lower the cost of living for everyonewell give the
world an opportunity to see what its like to save and have a better life.
In order to fulfill its mission, Wal-Mart has developed some unique, policies,
principles, rules, processes and procedures, the sum total of which form the Wal-Mart
stores corporate culture:

Open Door Policy - Managers' doors are open to employees at all levels
Sundown Rule - Answering employee, customer, and supplier questions on the

same day the questions are received

Grass Roots Process - Capturing suggestions and ideas from the sales floor and

front lines
3 Basic Beliefs & Values - Respect for the Individual, Service to our Customers,

Striving for Excellence

10-Foot Rule - Making eye contact, greeting, and offering help to customers who

come within 10 feet

Servant Leadership - Leaders are in service to their team
Wal-Mart Cheer - An actual structured chant that was created by founder Sam
Walton to lift morale every morning

Company Structure
From its humble beginnings as a small discount retailer in Rogers, Ark., Wal-Mart
has opened thousands of stores in the United States and expanded internationally.
Through this model of expansion, which brings the right store formats to the
communities that need them, Wal-Mart is creating opportunities and bringing value to
customers and communities around the globe. Today, Wal-Mart operates more than
11,000 retail units under 69 banners in 27 countries. Wal-Mart employs 2.2 million
associates around the world 1.4 million in the U.S. alone.
Locations at a glance

Total retail units on Oct. 31, 2013

Walmart U.S.
Sam's Club
Walmart International


Wal-Mart currently operate four primary store formats in the U.S., each custom tailored
to its neighborhood.
Walmart SupercenterWal-Mart Supercenters offer a one-stop shopping experience for electronics,
apparel, toys and home furnishings with the added convenience of a grocery store with
fresh produce, bakery, deli and meat and dairy products. Most Supercenters are open
24 hours, and may also include specialty shops such as pharmacies, banks, hair and
nail salons, name-brand restaurants, vision centers or health clinics.
Walmart Discount StoreSince Sam Walton opened his first discount store in Rogers, Ark., in 1962, WalMart have built hundreds across the U.S. Smaller than a Supercenter, discount stores
employ about 200 associates and offer electronics, apparel, toys, home furnishings,
health and beauty aids, hardware and more in about 106,000 square feet of open,
brightly lit space.

Walmart Neighborhood MarketWalmart Neighborhood Markets were designed in 1998 as a smaller-footprint

option for communities in need of a pharmacy, affordable groceries and merchandise.
Each one is approximately 38,000 square feet and employs up to 95 associates.
Walmart ExpressThe Walmart Express format was created in 2011 to offer low prices, convenient
shopping, and Wal-Marts smallest footprint yet, an ideal format for urban and rural
areas that lack access to larger stores. Walmart Express stores are about 15,000
square feet and offer groceries, general merchandise and even pharmacies.
Sams ClubFirst Sam's Club opened in 1983 to meet a growing need among customers who
wanted to buy merchandise in bulk. Since then, Sam's Club has grown rapidly, opening
more than 600 clubs in the U.S. and 100 clubs internationally.
Walmart became an international company in 1991, and it operates in 26
countries outside the United States. With more than 800,000 associates and over 6,000
stores internationally, Wal-Mart leverage its global resources to meet local needs.
Walmart International is currently the fastest growing part of Wal-Marts business and is
led by President & CEO Doug McMillon.

Supply Chian Diagram

Major Customers-End Customers

The average US Wal-Mart customer's income is below the national average, and
analysts recently estimated that more than one-fifth of them lack a bank account, twice
the national rate(Jones 2011). In 2006, Wal-Mart expanded its US customer base, by
change to a new strategy that is designed to "reflect each of six demographic groups
African-Americans, the affluent, empty-nesters, Hispanics, suburbanites and rural
residents."A new slogan unveiled after that: "Saving people money so they can live
better lives". This reflects the three main groups into which Wal-Mart categorizes its 200
million customers: "brand aspirationals","price-sensitive affluents" and "value-price

Order processing

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

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

distribution centers
Each person responsible for order picking was provided with a microphone/speaker

headset, connected to the portable (VOF) system that could be worn on waist belt
They were guided by the voice to item locations in the distribution centers
Wal-Mart provides the product, as well as pricing and availability information, to

the customer. The customer transfers funds to Wal-Mart. Wal-Mart convey point-of-sales
data as well as replenishment order via trucks back to the store. Wal-Mart transfers
funds to the distributor after the replenishment. The distributor also provides pricing
information and sends delivery schedules to Wal-Mart. Similar information, material, and
fund flows take place across the entire supply chain. Wal-Mart trains employees on how
to problem solve and develops each employee to focus on pleasing the customer. The
slogan of "satisfaction guaranteed" is something that Wal-Mart says it takes seriously.
Wal-Mart says it trains employees to ask customers if they need assistance or tutorials
on how a particular product functions.
Wal-Marts Delivery system procedures1. Create account
2. Check your address
3. Shop online
4. Reserve your delivery time

Wal-Marts process of procurement consists of reducing its purchasing costs as
much as possible so that it can offer best price to its consumers. The company procures
goods directly from the manufacturers, bypassing all intermediaries.

Wal-Mart has distribution centers in many different geographical places in the

United States. Wal-Marts own warehouses provide about 80% of the inventory. Each
distribution center is split in different groups contingent on the quantity of goods
received. (Wohl, J., & Kellehe 2009).The inventory turnover rate is extremely high,
approximately once every week for the majority of the items. The goods to be used
internally in the US arrive in pallets and imported goods arrive in reusable boxes.
The distribution centers ensure steady flow and consistent flow of products.
Managing the center is economical with the large-scale use of modern technology such
as the bar code, hand held computer systems (Magic Wand) and now, RFID. Every
employee has access to the essential information regarding the inventory levels of all
the products in the center. They make two scans- one for identifying the pallet, and
other to identify the location from where the stock had to be collected. Bar codes &
RFID are employed to label different products, shelves and bins in the center. The hand
held computers direct employee to the location of the specific product. The quantity of
the product needed from the center is entered in the hand held computer, which
updates the information on the main central server. The computers also allowed the
packaging department to get accurate information such as storage, packaging and
shipping, thus saving considerable time in unnecessary paperwork. This also facilitates
supervisors in monitoring their employees closely in order to guide them and give
This enables Wal-Mart to fulfill customer needs swiftly and enhance the level of
efficiency of distribution center management operations.

Considering the quick expansion of Wal-Mart stores, it was vital to have an
incredibly good communication system. For this to happen, Wal-Mart set up its own
satellite communication system in 1983. This allowed the management to monitor each
and every activity going on in a particular store at any point of time and analyze the
course of action to be taken depending on how the things panned out.
Wal-Mart ensures that unproductive inventory is reduced to the fullest extent
possible, by allowing the stores to manage their own stocks, thereby decreasing pack

sizes across many categories and timely price markdowns. Wal-Mart makes full use of
its IT infrastructure to make more inventories available in case of items that customers
wanted most, while decreasing overall inventory. By making use of Bar-coding & RFID
technologies, different processes like efficient picking, receiving and proper inventory
control of the products along with easy packing and counting of the inventories was
Wal-Mart owns the Massively Parallel Processor (MPP), the largest and most
complex computer system in private sector, which allows it to easily track movement of
goods and stock levels across all distribution centers and stores. As an emergency
backup, it has an extensive contingency plan in place as well. Employees use Magic
Wand, which is linked to in-store terminals through a Radio frequency network, 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 is fully
executed with the help of computers through Point of Sale (POS) system. Wal-Mart also
makes use of high-tech algorithm to forecast the quantities of each item to be delivered,
based on inventories in the store. A Centralized inventory database lets the personnel at
the store to discover the level of inventories and location of each product at a given
time. Additionally, it shows the location of the product like distribution center or transit on
the truck. When the goods are unloaded at the store, the inventory system is
immediately updated.

Its supply chain strategy has four key components: vendor partnerships, cross
docking and distribution management, technology, and integration. Walmarts supply
chain begins with strategic sourcing to find products at the best price from suppliers who
are in a position to ensure they can meet demand. Walmart establishes strategic
partnerships with most of their vendors, offering them the potential for long-term and
high volume purchases in exchange for the lowest possible prices. Suppliers then ship
product to Walmarts distribution centers where the product is cross docked and then
delivered to Walmart stores. Cross docking, distribution management, and
transportation management keep inventory and transportation costs down, reducing

transportation time and eliminating inefficiencies. Technology plays a key role in

Walmarts supply chain, serving as the foundation of their supply chain. Walmart has the
largest information technology infrastructure of any private company in the world. Its
state-of-the-art technology and network design allow Walmart to accurately forecast
demand, track and predict inventory levels, create highly efficient transportation routes,
and manage customer relationships and service response logistics
In terms of location, Wal-Mart has traditionally taken advantage of developing
countries lower labor costs to settle manufacturing plants there. However, they have
recently pledged to turn to the U.S. for their manufacturing needs once realizing it was
becoming more profitable doing so due to the rising wages in emerging economies such
as China. Wal-Mart guarantees this move wasnt motivated by patriotism, and won't
purchase American goods if its means higher prices. Wal-Marts traditional Every Day
Low Prices policy will be kept intact thanks to its strategy of keeping manufacturing
costs low. Hampton Products International, a supplier of locks and door hardware to
retailers including Wal-Mart, decided to bring their manufacturing back home in 2008.
This move proved to be a successful one. Over the past six years, the price of
producing a door hardware part in China has risen 24 percent to $2.20 from $1.77,
because of the Chinese currency's appreciation and increased labor costs. Throw in
transport costs and U.S. tariffs, and that product, shipped to the United States today,
would cost about $2.53. By moving production back to the United States, Hampton can
make the part today for just $2.16, a nearly 15 percent saving even including the
amortized investment in its new American plant (Chandran 2010). In addition to
production costs, Wal-Mart can reduce its inventory costs if it orders locally since goods
spend less time in transit, and the short distance that products travel allows the retailer
to better stock its shelves as soon as consumer trends come and go.

Logistics Facilities Network

Every year, Walmart moves millions of products from manufacturers to Walmarts
distribution centers, and from distribution centers to the shelves in the stores. WalMarts highly-automated distribution centers, which operate 24 hours a day and are

served by Wal-Marts truck fleet, are the foundation of its growth strategy and supply
The companys hub-and-spoke distribution network utilizes a system of manufacturer
storage with customer pickup. No inventory is stored at Wal-Marts distribution centers.
Wal-Marts fleet of 6,500 dedicated trucks and over 50,000 trailers. (SC Digests
editorial staff, 2011). They are used to pick up goods directly from manufacturers
warehouses, thus eliminating intermediaries and increasing responsiveness.

A regional distribution center can have up to 12 miles of conveyor belts, which can

move hundreds of thousands of cases through the facility each day.

There are 9 disaster distribution centers, strategically located across the country and
stocked to provide rapid response to struggling communities in the event of a

natural disaster.
Each distribution center is more than 1 million square feet in size, and uses more
than 5 miles of conveyor belts to keep products moving to our stores 24 hours a

Every distribution center supports 90 to 100 stores in a 200-mile radius.


Transportation methods


Walmarts distribution operation is one of the largest in the world. The main
method they are using to transport is by trucks. Walmart logistics has a fleet of 6,500
tractors, 55,000 trailers and more than 7,000 drivers (SC Digests editorial staff, 2011). It
ensures Walmart to move goods to and from distribution centers because of its private
fleet of trucks and skilled truck drivers. Walmarts truck drivers fleet is one of the largest
and safest fleets, and every year they drive 700 million miles to make millions of
deliveries to its stores and clubs. Each driver averages around 100,000 miles annually,
thats like driving around the world 4 times!
Together with the truck drivers, Walmart constantly working to ensure that it is
moving merchandise in responsible, sustainable ways. Drivers follow the most efficient
routes to their destinations, and work to minimize the number of empty miles they drive
(SC Digests editorial staff, 2011). This way, Walmart uses less fuel, drive fewer miles,
and maximizes the merchandise it delivers while minimizing its environmental impact.
Just last year, Walmart drivers logged 28 million fewer miles while transporting 65
million more cases. Those improvements avoided nearly 41,000 metric tons of carbon
emissions, which is the equivalent of taking 7,900 cars off the road.

Information systems
The Information Systems Department has around 3000 societies that work in the
David Glass Technology Center located in Bentonville, Arkansas. Wal-Marts IS
Department is very hierarchal. It includes a Business Analyst, Senior Business Analyst,
Manager, Senior Manager and levels below them. The department of the information
system is very structured and formal (Wilgum 2009). It is so structured that they track
the time spent on projects down to fifteen minute increments. Doing this keeps them on
track for budget and productivity metrics.
Jane data center is the data center of Wal-Mart which has a capacity of 460
terabytes of data. Which is a huge capacity of data available in the internet. And it has
helped Wal-Mart become the biggest retailer in the world, and to the corporation's
growing secrecy since founder Sam Walton's death in 1992 (Walmart 2012). To the


power of data, Jane data center is considered a mysterious icon. It helped Wal-Mart to
become the biggest retailer in the world. When Wal-Mart constructed its primary data
center at corporate headquarters in 1989, it wasn't a secret, it was the largest poured
concrete structure in Arkansas at the time, and Walton himself ordered a third story.
According to the econometric society, Wal-Mart deals with the following data: Store
openings data which included the opening dates of Wal-Mart stores and Supercenters.
Also the data that Wal-Mart dealt with included distribution center opening which show
Opening dates of General Distribution Centers and Food Distribution Center. Moreover,
Wal-Mart dealt with Model Calculations data which include Gauss Programs and Gauss
Data sets that calculate sales, operating profits, and distribution miles for any given
configuration of Wal-Mart stores in any given year.
Universal bar code and RFIDThe universal bar code was established after Wal-Mart pushed the retail industry
, which made manufacturers adopt common labeling. The bar allowed retailers to
generate all kinds of information, creating a shift of power from manufacturers to
retailers. Also Wal-Mart became very good at using the information behind the bar code
and is considered a pioneer in developing sophisticated technology to track its inventory
and cut the fat out of its supply chain. No one has used the technology as efficiently as
Wal-Mart. The famous retail store Wal-Mart recently showed that it is investing more in
technology , dealing more with sales and production tracking. Wal-Mart now requires
its suppliers to provide microchips which will service radio frequency identification, or
RFID, which will greatly enhance the systems created by bar codes .
Transaction process system (TPS)This information system ordinarily automates routine and repetitive tasks that are
very important to the operation of Walmart. The input of TPS is raw data; the processing
involves with the summarizing, recording, and merging the data and the output is in the
form of report (Wilgum 2009).One example of TPS is Point-of-Sale when you check-out
the product at Walmart, the cashier has to scan the product with the bar code that the
input of system; it has many benefits to Wal-Mart, they are:


Ensure accurate pricing

Improve efficiency
Reduce Shrinkage
Improve communications
Management information system (MIS)MIS is the system provides the actual performance report of Walmart that use in
middle management, which created based on the data from TPS.

Fewer LinksWal-Marts supply chain innovation began with the company removing a few of
the chains links. In the 1980s Wal-Mart began working directly with manufacturers to
cut costs and more efficiently manage the supply chain. From 1993 to 2001, Wal-Mart
grew from doing $1 billion in business a week to $1 billion every 36 hours
(Johnbagamery 2012), growth that was attributed as much to supply chain management
as to customer service.
VMIUnder a Wal-Marts supply chain initiative called VMI - vendor managed inventory
manufacturers became responsible for managing their products in Wal-Marts
warehouses. As a result, Wal-Mart could expect close to 100 percent order fulfillment on
CollaborationWal-Mart implemented the first companywide use of Universal Product Code bar
codes, in which store level information was immediately collected and analyzed, and the
company devised Retail Link, a mammoth Bentonville database. Through a global
satellite system, Retail Link is connected to analysts who forecast supplier demands to
the supplier network, which displays real-time sales data from cash registers and to
Wal-Marts distribution centers (Uni of San Francisco Online 2011). In recent years Wal-


Mart has used radio frequency identification tags (RFID), which use numerical codes
that can be scanned from a distance to track pallets of merchandise moving along the
supply chain. Even more recently the company has begun using smart tags, read by a
handheld scanner, that allow employees to quickly learn which items need to be
replaced so that shelves are consistently stocked and inventory is closely watched.

In North America, Wal-Mart's primary competition includes department stores like
Kmart, Target, ShopKo and Meijer, Competitors of Wal-Mart's Sam's Club division are
Costco, and the smaller BJ's Wholesale Club chain operating mainly in the eastern US.
Wal-Mart's move into the grocery business in the late 1990s also set it against
major supermarket chains in both the United States and Canada. Some retail analysts
see regional grocery store chain WinCo Foods as serious competition for Walmart.
Several smaller retailers, primarily dollar stores, such as Family Dollar and Dollar
General, have been able to find a small niche market and compete successfully against
Wal-Mart for home consumer sales.In 2004, Wal-Mart responded by testing its own
dollar store concept, a subsection of some stores called "Pennies-n-Cents."

Current/Future Challenges
Online salesWalmart facing a new challenge is how to goose Wal-Marts online sales, which
account for about $5.15 billion, or 2 percent, of total annual sales, according to Kantar
Retail, a London-based consulting firm. More and more Wal-Mart customers are
shopping at Amazon (Carson 2010). The future of shopping is e-commerce market, as
the e-commerce market is getting crowded to enter. How to get market share from ecommerce giants such as Amazon and Ebay is their biggest challenge.

Going aboard-


Wal-Mart will continue to grow overseas. Sales outside the U.S. are about 25% of
the company's $408 billion in sales. But It was difficult for Walmart to expand their
territory. Wal-Mart pulled out of Germany in 2006 with a $1 billion loss. Germany has the
world's fifth-largest GDP. The same year, the world's largest retailer sold its South
Korean stores and left that market. Wal-Mart has also struggled in Japan for years(
Mclntyre 2010). In sum, the company's efforts to break into several of the world's largest
retail markets have been a failure. Still, the success in Canada, Mexico and Britain
shows there are significant business opportunities outside the U.S .How to expand
overseas is the ultimate challenge that Walmart have to face.

Recommendations for Potential Improvement

Based on the challenges Walmart will face or current facing, We suggest
Walmart to keep their low prices strategy to attract more lower class customers. At the
same time, continue to Conquering foreign markets, especially Asian-Pacific ones with
careful consideration of the strategies and approaches, because theyve failed once.
Walmart also needs to keep improving their logistics since they are constantly delivering
from distribution center to local stores. That is a big part of their supply chain and they
could minimize cost by analyzing their strategy and look for different ways to transport

Supply chain management is a complex process involving the intricacies of top of
the end management practices. Every successful company has its own ways to improve
their Supply chain process, Wal-Mart is no different. It has been working hard on
improving their supply chain process and done some remarkable works, and that is why
Walmart being the world 2nd largest retailer in term of sales.
Walmart is doing well domestically. But they still need to make more efforts to
approach towards enhancing their associates and building relationship, so that it helps
the company to further expand globally. Improvement of their supply chain process


always calls necessarily. Continuous improvements and learning, emphasizing on

different strategy will not only make them successful domestically but also globally.


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