SUPPLY CHAIN MANAGEMENT

OF

Submitted by
Prateek Gandhi
MFT/18/91
INTRODUCTION
Wal-Mart is the largest retailer operating from 15 countries and according to
them, Supply Chain management is the main source through which their
organization grows and achieves this status. Even they claim that other retailing
organizations are copying their strategies in retail and supply chain like shared
sales data with suppliers, deployment of RFIDS and bar codes, enabled self-
distribution with in-house transit and fully digital point of sales to manage the
inventory levels. In the process of supply chain management there are certain
functions that are to be focused like the purchasing of the products from the
suppliers and wholesale dealers. The next phase is of distribution which requires
an efficient strategy through which costs could be reduced and to use best
transit modes at least cost. When the product is ready to be sold at any point of
sale, its retail strategy should be formulated as at these stores, the products are
to be sold mostly at bulk level. The retail strategy comprises of all operations
from the level of logistics to store level and assists in reducing the operating
costs. Wal-Mart is very famous for deploying Just-in Time process in their
supply chain management that reduces a lot surplus costs by stocking bulk of
not required products. Using the immensely strategic and intellectual supply
chain processing system, Wal-Mart has managed to achieve a significant share
within the US stock market.

Supply Chain Description

Procurement and distribution

Wal-mart always emphasized the need to reduce its purchasing costs and offer
best prices 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
products being bought were not available else where at a lower price. Wall-
mart had over 40 distribution centers located at different geographical locations
in the US. Over 80000 items were stocked in these centers. Wall-marts own
warehouses directly supplied over 85 % of the inventory as compared to 65%
by competitors. Each distribution center was divided into different sections on
the basis of quantity of goods received. The distribution center ensured a steady
supply and consistent supply of products to support the supply function. Wall
mart used sophisticated bar-coded technology and hand held computer systems,
managing the center became easier and more economical. Every employee had
access to real time information regarding inventory levels of all products in the
center.

Logistics management

An important feature of Wall-marts logistics infrastructure is that it was fast and

responsive transportation system. The distribution centers were serviced by
more than 3500 company owned trucks. This vast fleet allowed the company to
ship goods from distribution centers to stores within two days and replenishes
the stores shelves twice a week. Wall mart generally moved the merchandise
loaded trailers from the distribution centers to the retail stores serviced by each
distributing center. Retail stores were considered as customers by the
distribution centers. To make the distribution process more efficient Wall- mart
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 directly supplied to customers. The system reduced
handling and storage costs.

Inventory management

Wall 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 would receive replenishment within a day. Wall- mart
invested heavily in IT and communication systems to effectively track sales and
merchandise inventories in stores across the country . Wall- mart set up its own
satellite communication system in 1983 . Wall- mart was able to reduce un
productive inventory by allowing stores to manage their own stocks,
reducing pack sizes across many product categories and timely price mark
downs. Instead of cutting inventory across the board Wall- mart made full use
of its it capabilities to make more inventories available in case of items
customers most wanted while reducing overall inventory levels. Wall mart
networked its suppliers through computers. It also helped in identifying items
which were low in stock and automated ordering. It also made use of bar-coding
and RFID to manage its inventories . By making efficient use of technology in
all its operations Wall- mart successfully provides uninterrupted service to its
customers supplier stock holders and trading partner.
Procedures

This study is a review of Wal-Mart 's cross-docking as logistics technique,

information technology (IT), scanner and RFID Technology, Electronic Data
Interchange (EDI)to internet based supply chain systems and sales and pricing
as cost dimension. Simchi-Levi, Kaminsky and Simchi-Levi (2003) define that
cross-docking is a supply chain strategy which can bring significant savings in
supply and supply chain cost. In the late 1980's to make the distribution process
more efficient Wal-Mart began using this logistic technique in the retail sector.
In Wal-Mart's cross-docking, goods are continually transmitted to company's
distribution centers where after the selection, repack and consign to the stores
they are crossing from one loading dock to another in less than 48 hours, instead
of waiting useless in the ware houses (Stalk, Evans and Sgulman, 1992).In this
system cross-docking facilities are operated as transfer points where the purpose
of eliminating the storage of materials they are not used as stores like in
traditional shipping .

While in the traditional supply chain retailers put the products into the stores,
but cross docking system works when the customer takes the product from the
shelf. In addition to that Wal-Mart has its own transportation system beside its
competitors. This gives an advantage to company to lower the transportation
costs. Wal-Mart has used information systems to enlarge many operating
advantages. Wal-Mart gains a cost advantage by using (IT) technologies and
makes it better to control orders and inventory. The company cautiously manage
store inventories with the informations come from seizing and monitoring
costumer demand. This control is extended through the distribution system, as
Wal-Mart uses its capabilities to coordinate the flow and inventories its
distribution centers that the use of (IT) for inventory management has the
obvious effect of improvement efficiency and inventory turns, which reduces
cash-to-cash cycle times. But it also allows for increased variety. Wal-Mart
gained competitive advantage through superior inventory management, enabled
by its investments in sales and inventory tracking. Accounting and human
resources management systems are as a core and they make inventory
management context. Wal-Mart has done rationalistic investments in support
systems and developed its own private satellite-communication system that
sends daily point-of-sale data directly to its 4,000 suppliers to operate cross-
docking. By satellite communications between the suppliers, distribution centers
and stores Wal-Mart Headquarters gets all the information of chains in SCM.
Distribution centers work as a transfer points crossing from one loading dock to
another, suppliers directly get the information from the stores by satellite
communications and prepare the products for the needs of the stores.

Wal-Mart's Supply Chain

Wal-Mart's eventual use of scanner technology has been fundamental for the
company. With this system Wal-Mart constantly knows about the selling
information from where and when happens. This technology helps to
replenishment what needs in the stores. Wal-Mart's products remain on the
shelves as consignment by the manufacturers and the use of scanner made it
possible to create and manage larger inventories (Hair,Wolfinbarger, Ortinau&
Bush, 2008). Wal-Mart now requires its top 100 suppliers to use RFID
technology in shipping cases and pallets (Attaran, 2007). RFID is a system
consisting of RFID tag, receiver and antenna by these reads the radio frequency
data and transmits a processor and contains the information to be transported
RFID tag. FID tags also provide the informations of customer behaviors which
can be used by retailers and suppliers. Electronic Data Interchange (EDI)
provides data transferring among the companies in the supply chain in a to
increase the speed and accuracy of data streams, to eliminate multiple datas to
be entered in different systems and same data in different places (Lambert,
Stock &Ellram, 1998). A fundamental strategy to reduce supply chain costs is
cooperating with the rings in the supply chain and as a result sharing benefits to
be obtained. Electronic Data Interchange Systems (EDI) replaced by the internet
data based supply chain systems where exchange of information and managing
the supply chain process much faster and cheaper (Brockmann, 1999). Lancioni,
Smith & Oliva (2000) defined that internet based supply chain management is a
system which established in internet to supply raw materials used in production,
to move these substances to production areas and to reach the products
performed to the customer. Internet based supply chain management will make
a significant contribution to reduce the costs and provide optimal use of
resources within the organization of inventories, production and logistics plans
according to the conditions of reaction of changes in market.

Wal-Mart focuses on providing goods at the lowest possible cost to the

costumer. Wal-Mart in particular has developed network-based capabilities that
allow it to achieve low cost performance throughout its supply chain. Managers
of the local Wal-Mart store had the freedom and flexibility in determining the
purchase, price adjustment and product issues to respond to local rivals and to
the changing needs of customers (Leenderset. al, 2006). "Every day low price"
strategy offers to the customer with a better deal and provides savings in
merchandising and advertising costs (Stalk et. al, 1992). Because of the high
amounts of purchasing power for the company has a good bargain.Wal-Mart
operates more than 10.000 retail units in 27 countries
Results

Cross-docking provides significant savings of racking in the ways of storage,

materials replenishment, order picking, preparing and packing for shipment are
eliminating functions. Instead of using a large fraction of distribution centers for
storage as waiting stops, by converting them to transfer points companies can
provide a competitive advantage in macro level. Wal-Mart's success in reducing
the storage, distribution and logistics costs was to be settled every Wal-Mart
store to the distribution center in one day distance. Mol(2013) draws attention to
Wal-Mart's lower transport costs because of its own transportation system
which is making delivery to different stores in less than 48 hours. Transport
costs of Wal-Mart is 3% of total costs, competitive transport cost is 5% of their
total costs. To have company's own transportation system provides Wal-Mart to
fill the store shelves four times faster than the competitors.

Some of the potential benefits of the RFID technology include the following
manual counting and bar counting and bar coding of incoming and outgoing
material are eliminated; readers can automatically track inventory levels;
identifying and picking inventory would be faster, easier, and more accurate;
and spoilage could be reduced through improved stock rotation. Zhu and
Thonemann (2009) report that using the RFID technologies Procter &Gamble
and Wal-Mart lowered their stocks 70%, developed their level of service from
96% to 99% and at the same time reduced their management cost in this way.

Wal-Mart's stock management significantly has resulted effectively after the use
of cross-docking, (IT) information technology and RFID Technology.With the
use of these technologies stock time period in the supplier reduced from 30 days
to 3 days. The stock time period in the distribution centers reduced from 30
days to 2 days and in the store reduced from 14 days to 3 days. All of these
provided suppliers to answer the product need more faster. Wal-Mart see the
benefits of effective inventory management in this way according to the
competitors that Wal-Mart stores are filled the distribution centers 2 times a
week, but the speed of the overall sector is repeated 1 time per 2 weeks. Within
the Wal-Mart's stable sales with prices becoming more predictable, in that case,
thus reducing stock-outs and excess inventory is avoided. Low price policy
provides that always a high level of sales volume is to be ensured and this
brings easy profit sharing

Conclusion

This study reviewed Wal-Mart to examine supply chain management system

which is considered to be one of the vital for the companies-business system. In
this sense, today, in developed countries is thoroughly understood that the
necessity to implement in enterprises and this study may lead the enterprises in
order to understand the importance and benefits of the most effective supply
chain management company in the world. The Wal-Mart's effective supply
chain management system consisted of cross-docking, (IT) information
technology, RFID Technology, and internet based supply chain systems and the
sales and pricing strategies supported this system in order to get success. Wal-
Mart's effective supply chain management system benefits are seen as;
shortening of delivery times, faster inventory turns, and increasing inventory
levels more precise estimates, storage areas, a reduction in the replacement
stock and better use of capital. In addition to these, due to reduce dependence on
distribution center managers which made training costs reduce and minimize the
errors, however the risk of non stock and its harms were also eliminated. In
developing inter-enterprise integration and cooperation is seen that the value
spreaded in creative ways with the help of information and communication
technologies. Today's world of business will be competitive in the environment
of each companies own supply chain rather than the individual competition.
This sense, enterprises in our country should create an environment of trust and
move business processes required to open to each other for to stay competitive
and transfer their businesses to the next generations. The opportunity to earn
more benefits will arise for all supply chain members who practice in the way of
businesses through the whole chain with the coordination of the management. It
has been indicated in this study that to have a superior SCM and e-supply
applications are the important roles behind the Wal-Mart's succeed in world
markets. Wal-Mart’s supply chain management system has provided the
company with many competitive benefits such as lowering product costs,
reducing the stock transportation costs and highly competitive pricing for the
customers. This strategy has helped Wal-Mart to become a leading power in the
competitive global market. As technology develops Wal-Mart carry on
improving its supply chain to have much more efficiency by focusing on the
inventive SCM processes and systems.
References

 Andel, T., “Partnerships With Pull,” Transportation and Distribution, July

1995, pp. 65-74.
 Barry C. Lynn, “Breaking the chain,” Harper’s Magazine, July 2006,
page 33.
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mart_59bf3928f581716e46c3c4f7_pdf&psig=AOvVaw1ZoTyeoUZndyu
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