Group members:

1) Kshitij Anand - 19020841014

2) Rupam Biswas – 19020841137

3) Saransh Bansal – 19020841141

Topic presented: SUPPLY CHAIN MANAGEMENT AT WAL-MART

Date presented: 19th August 2020

Assignment-1 - Summary Report:

Wal-Mart Inc. is an American multinational retail corporation that operates a chain of hypermarkets,
discount department stores, and grocery stores, headquartered in Bentonville, Arkansas. The company
was founded by Sam Walton in 1962 and incorporated on October 31, 1969.
Annual Revenue: $524 Billion Employees: 2.2 Million CEO: Doug McMillon
There are 4 types of Wal-Mart stores: Super Centers, Discount Stores, Sam’s Club, Neighborhood
Markets.

How Wal-Mart developed the supply chain?

Purchasing: Regular meeting of management & vendors to understand cost structure & cut out
middlemen | Global outsourcing of products for private label | Single voice invoice price while
purchasing.
Distribution:
CROSS DOCKING HUB & SPOKE MODEL
A logistical strategy where materials are Form of transportation optimization where the
unloaded from inbound source then moved to central distribution centres are called HUBS and
outbound transportation after sorting with the individual distribution points are called
minimum storage time. SPOKES.

Hub & Spoke saturated the distribution by 132 miles | largest distribution network | standardized case
sizes & labelling | generating BACK-HAUL revenue | Non-unionized workforce.

Now to understand the retail strategy, let us first understand what is Bullwhip Effect?
The bullwhip effect can be explained as an occurrence detected by the supply chain where orders sent to
the manufacturer and supplier create larger variance then the sales to the end customer. Some of the
factors for the occurrence of Bullwhip effect are- Disorganization, Lack of communication, Free
return policies, Order batching and Price variations.
For example; the actual demand for a product and its materials start at the customer, however often the
actual demand for a product gets distorted going down the supply chain. Let’s say that an actual demand
from a customer is 8 units, the retailer may then order 10 units from the distributor; an extra 2 units are
to ensure they don’t run out of floor stock. The supplier then orders 20 units from the manufacturer;
allowing them to buy in bulk so they have enough stock to guarantee the timely shipment of goods to the
retailer. The manufacturer then receives the order and then orders from their supplier in bulk; ordering 40
units to ensure economy of scale in production to meet demand. Now 40 units have been produced for
the demand of only 8 units; meaning the retailer will have to increase demand by dropping prices or
finding more customers by marketing and advertising.

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Wal-Mart implemented “EDLP i.e. every-day low prices” as a Retail Strategy to smooth out the
demand, thereby overcoming bullwhip effect. Other retail strategies included- Efficient store-level
operations; Daily-10-minute long-standing meetings; Storewide template with shelf space divided up
according to specific SKUs; "Store of the community"; "Category captains" - where suppliers such as
Colgate-Palmolive and P&G were told not to promote themselves on the expense of Wal-Mart revenues,
if they are doing so then Wal-Mart reserved the right to replace them with another player as a category
captain.
How Wal-Mart improved its supply chain using Information Systems?
 In the mid-1980s, Wal-Mart developed Central database along with point-of-sale (POS) systems
which helped combined its sales data with external information such as weather forecasts; providing
additional support to buyers, improving the accuracy of its purchasing forecasts.
 Apart from transmitting and receiving POS data, Wal-Mart’s satellite network also provided senior
management to broadcast video messages to the stores; thereby motivating ground staff at sore-level
and communicating them the latest advancements in the supply chain.
 In the early 1990s, Wal-Mart 's Retail Link, the largest civilian database in the world with an
estimated memory of 570 TB, helped suppliers to access real-time sales and SKUs data.
 In the 1990, Collaborative planning, forecasting and replenishment (CPRF) provided Wal-Mart
to develop an integrated approach regarding planning and forecasting by sharing supply chain data
such as data on promotions, inventory levels and daily sales data.
 Vendor-managed inventory (VMI) helped Wal-Mart 's supply chain personnel to connect well with
the suppliers' analysts and ensure two major reviews; the supplier’s out-of-stock rate and the
inventory levels with indications of how well replenishment was being handled.

Human Resource has been efficiently used by Wal-Mart. Sam Walton encouraged the lowest
category of employees to give out ideas to better the stores. Saturday Morning Meeting helped the store
evaluate themselves based on a week’s result and the necessary changes required to rejig the store.
Centralization has always been a way to keep better communication within the employee groups and the
same was done by Wal-Mart. Being Non-Unionized helped Wal-Mart save costs on the labour force. It
did backfire on them when they expanded, but operations cost was always less than their competitors.
Remix was one of the Supply Chain Improvement Initiative which looked at reducing the percentage of
out of stock items. Instead of bringing important items through general merchandise Distribution Centers
(DC), they decided to put those items in High-Velocity Food Distribution Centers where they plan to
replenish such items at a faster space and reduce out of stock items.
RFID (Radio Frequency Identification) was another Supply Chain Improvement Initiative,
which was introduced to increase stock visibility as the stock moved from DC to stores. It was adapted to
give visibility where the product is and hence can be replenished sooner. It also gives the ability to
employees to track promotional effectiveness in stores while reducing out of stock losses and overstock
expenses. RFID tag readers were installed at all important checkpoints and it showed that 16% fewer out
of stock on RFID-tagged products than those who aren’t. The only drawback is that a single RFID tag
costs $0.17.
The Idea that Inventory growth should be half of Sales growth is something which made
sense as a giant like Wal-Mart started compiling $6 billion inventory which would’ve hurt the bottom
line of Wal-Mart. Less Inventory growth will give way for better inventory turnovers.
Conclusion:
In the end, we would like to conclude that “Wal-Mart got big by replacing inventory with
information”. Due to IT-enabled systems and services in their supply chain network, Wal-Mart was able
to collaborate well with its suppliers and customers both. Since the combination of real-time sales data,

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point-on-sale systems, satellite networks and other technological advancements were made accessible,
Wal-Mart was able to reduce its inventory costs to a greater extent and managed the inventory well.

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