WAL-MART
The King of Organized Retailing Industry
Evolution of Wal-Mart
• The company’s founder is Sam Walton.
• In 1940, he worked for the famous retailer,
J C Penney.
• He purchased a store franchise in
Arkansas.
• Offering significant discounts on prices, he
became successful and acquired a second
store in 3 years.
• By 1969, Walton had established 18 Wal-
Mart stores.
• By late 1970s, the retail chain had established
a pharmacy and an auto service center.
• Wal-Mart was offering low prices, customer
satisfaction guaranteed.
• By 1984, there were 640 Wal-Mart stores in
U.S.
• Wal-Mart suffered a setback in 1992, when
Walton died.
• But it continued its growth in the 1990s, focusing
on overseas stores.
1992, Mexico (joint venture with Cifra)
1994, Canada (acquired 122 Woolco stores from
Woolworth)
1997, Germany (acquired 21 store of Wertkauf)
Korea, Brazil, and so on.
• Currently has 3,500 discount store and supercenters
in US and more than 1,170 stores across the world
Distribution and Logistic system
• Centralize distribution system, pioneering the retail
hub-and-spoke system.
• The hub and spoke system enabled significant cost
advantages by the centralized purchasing in huge
quantities.
• Distributing through its own logistics infrastructure to
the retail stores spread across the U.S.
Logistics Management
• Fast and responsive transportation system.
• The distribution centers were serviced by more than
3500 company owned trucks.
• Wal-Mart needed drivers who were committed and
dedicated to customer service.
• Selection of drivers
6
Cross-docking
• The system reduced the handling and storage of
finished goods
• The manufacturer directly forwarded the goods to a
place called the “staging area.”
• The goods were packed here according to the orders
received from different stores and then directly sent
to the respective customers. 7
USE OF INNOVATIVE IT TOOLS
• The computer systems of Wal-Mart were connected
to those of its suppliers.
• EDI enabled the suppliers to download purchase
orders
• Also store-to-store sales information relating to their
products sold were obtained.
• On receiving information suppliers shipped the
required goods to Wal-Mart’s distribution centers.
Inventory Management
• Heavy investments in IT and communication systems
• Computerized inventory system.
• Due to rapid expansions Wal-Mart set up its own
satellite communication system in 1983.
• Allowed stores to manage their own stocks and reduced
unproductive inventory
• More inventories available in the case of items that 9
customers wanted most
Inventory Management…
• Employees at the stores had the “Magic Wand,” a
hand-held computer which was linked to in-store
terminals through a radio frequency network.
• Quick replenishment
• Retail link system
10
Supply chain management process
adopted by Wal-Mart.
• Reduce purchase cost and offer best prices.
• Procured goods directly from manufactures.
• Over 40 distribution centers located in different
geographical locations.
• Distribution centers divided in sections on the basis of
quantity of goods received.
• Wal-Mart own warehouses supplied 85%of the inventory.
• Use of sophisticated barcode technology and hand held
computers.
Benefits gained.
• Bypassing all the intermediaries.
• Products being bought were not available elsewhere at their
price.
• Over 80000 items stocked in distribution centers.
• Replenishments provided within 2 days against 5 days of the
competitor.
• Shipping cost came up to 3% as that of 5 % of the
competitors.
• High inventory turnover rate.
• Use of advanced technology made it economical and easier
to mange the centers.
Companies that have Buyer Power
are more focused on exerting Price
Pressure than having innovative
Business Process.
Comment.
• Focus only on price don’t yield results.
• Inefficient Business Processes lead to increased costs.
• Business Process Automation necessary to develop
competitive advantage.
• Empowers people to take right decisions by providing
right solutions at right time.
Case of failure: Subhiksha
• Business model: Criticality of cost and Convenience of
buying.
• Extracted maximum discount from suppliers.
• Difficulty in managing front-end & supply chain
operations using existing ERP.
• Expansion without adequate IT Support.
• Too late to implement SAP.
Case of success: Pantaloon Retail
• Pantaloon Retail had started expanding its chain in
urban market.
• Chose SAP as the platform and it worked as an
outsourcing party on turnkey basis.
• 3 phases of implementation-
Current process was analysed and drafted.
SAP platform was developed after evaluation of needs.
Stores switched over to new system and current data
was ported.
Discuss how good/bad is sharing
knowledge with
Vendors/Suppliers or even
Customers.
• SCM is about knowledge sharing.
• For better co-ordination with Suppliers/Vendors.
• For highlighting Customer benefit to attract more
and more customers.
• For maintaining transparency in organised
retailing industry especially for countries like
India.
Wal-Mart changed its slogan to
“ Save Money. Live Better” which
was earlier “Always Low prices”.
Which is better and Why?
Sustaining the Supply Chain Edge EPC tag
EPC tag
Implementation deadline of 2006 – gradually
2005 – Sent notice to top 100 suppliers
2006 – pilot programs with leading suppliers
2008 – Sam’s Club follows suit with penalty
2009 – P&G ends pilot program
What should Wal-Mart do?
• Phased out strategy is good.
• Partner with small partners for assistance.
• Work with IT majors in reducing cost.
• Explain the benefits of the technology.
“It’s not Sale; it is a great price you
can count on every day to make
your Dollar go further at Wal-
Mart”.
Comment.
• Pricing low
• Pricing not bound to occassions
• Passing benefits to customer
• No compromise on the quality
• Caring for every Dollar
• Value for money
Conclusion
• Techail(Technology + Retail): Use of technology in
best possible way
• Reduced cost, lead time
• Better forecasting & optimum utilization of
working capital
• Better chances of tapping every opportunity
• Proper & efficient control over procedures
• “Be Smart To Be The Best”
