26 1 Presentation to Prof M.K.

Srivastava July 10, 2014

Sec B Group 3
Manu Mehrotra 13P084
Mitul Jain 13P086
Mohamad Hasan 13P087
Nitin Dangwal 13P094
Piyush Beriwala 13P097
Shivtosh Kumar 13P111
26 2 Presentation to Prof M.K. Srivastava July 10, 2014
$ 477.3
Billion
2.2 mn
85%
self-sourcing
10130
worldwide
3%
2OO
Million times
per week
26 3 Presentation to Prof M.K. Srivastava July 10, 2014
Sam Walton dies
TIMELINE
WALMART
1940
1970
1984
1992
1997
2002
Present
640 stores clocking
sales of $ 4.5bn
Walton opens first
store at Newport,
Arkansas
Expansion mode
Open First
Distribution Center
Global Expansion
Walmart becomes the
worlds largest company
Revenue: $ 477.3 bn
26 4 Presentation to Prof M.K. Srivastava July 10, 2014
Vendor
Working
Capital
Costs
Customer
Value
Creation
Employee
Costs
Cost
Savings
Cross-
Docking
Logistics
26 5 Presentation to Prof M.K. Srivastava July 10, 2014
PROCUREMENT
PHILOSOPHY
Best Price to
Customer
Lowest Price
Negotiate for
Customer
Tough
Bargainer
Bypass
Intermediaries
Local & Regional Vendors
Long Term Relationship
Understand Cost Structure
Assist cost cut down
OBJECTIVE
Extended Supply
Chain
Chain Optimization
procurement is actual buying of the product from the sourced supplier
26 6 Presentation to Prof M.K. Srivastava July 10, 2014
PROCUREMENT STRATEGY
Lakewood
Engg
Wal-Mart
2
nd
Tier
Supplier
2
nd
Tier
Customer
1
st
Tier
Customer
Lakewood Engg - fan manufacturer
1990s, a 20-inch box fan costs $20
Wal-Mart pushed the manufacturer to
lower the price
By 2003, the price on the fan in a Wal-
Mart store had dropped to about $10
Centralized Purchasing
In 2010 offered its own fleet services
The benefits passed down to customer
Suited for India Entry Strategy Local
Procurement
26 7 Presentation to Prof M.K. Srivastava July 10, 2014
SHIPPING
SHIPPING COSTS ROUGHLY 3%
Competitors cost is 5% APPROX
AGILE
REPLENISHMENT WITHIN
TWO DAY
Industry average is around 5 days
WAREHOUSES
85% OF INVENTORY OWN
SUPPLIED
Industry average is 50-65%
BACKBONE
42 DISTRUBTION CENTERS IN
US
Hub & Spoke Model expanding around
DC expanding around DC
HUGE
EACH WAREHOUSE OVER A
MILLION SQUARE FEET
Equivalent to area of 500 football fields
INVENTORY
12 MILES OF CONVEYOR
BELTS
Moves 5.5 billion cases of merchandise
DISTRIBUTION SYSTEM
26 8 Presentation to Prof M.K. Srivastava July 10, 2014
MANAGING DISTRIBUTION SYSTEM
Fewer Links
Worked directly with manufacturers
Big Box Concept
Collaboration
Synchronized demand forecasting -CPFR
VMI Vendor Managed Inventory
Cross Docking
Direct Transportation to the Supplier
Supplier Relation Management
Set up Communication and relationship network with suppliers
Leveraging Technology
Universal Product Code & Retail Link System Database
Global Satellite System
Hand held systems for real time information tracking
26 9 Presentation to Prof M.K. Srivastava July 10, 2014
26 10 Presentation to Prof M.K. Srivastava July 10, 2014
WALMARTS LOGISTICS
Fast and responsive transportation
system serviced by more than 3000
trucks
Stores are replenished twice a week
Coordinator at the distribution centre
schedules the dispatches (driving time
& time to travel)
Unloading at the dock only at
scheduled time.
26 11 Presentation to Prof M.K. Srivastava July 10, 2014
CROSS DOCKING
Cross docking is used by Wall Mart makes
Distribution process more efficient
Timely distribution of freight
Better synchronization with the demand
Leads to efficient use of transportation assets
The distribution centres essentially acts as a high throughput sorting
facility for several suppliers and customers.
Cross Docking leads to minimization of warehousing and economies
of scale in outbound flows (from the distribution centres to the
customers).
Costly inventory function of a distribution centres becomes minimal,
while still maintaining the value-added functions of consolidation
and shipping.
Inbound flows (from suppliers) are thus directly transferred into
outbound flows (to customers) with little, if any, warehousing.
Cross docking changed the practice from Supply Chain (retailer pushing
products) to Demand Chain (customer pulling products)
26 12 Presentation to Prof M.K. Srivastava July 10, 2014
TYPES OF CROSS DOCKING
Opportunistic Cross Docking:
Goods are directly shipped from the manufacturer to the retail customer, without storing them in the warehouse
or distribution centres.
Takes advantage of real-time information exchanges among various distribution and fulfilment systems
Identifies when an inbound shipment or part of shipment can be used to fulfil an outstanding order by directly
routing the inbound merchandise to the staging or shipping docks for an outbound order.
Flow-through Cross Docking
Constant inflow and outflow of goods from the distribution centre
Used for products that have consistent demand, that are perishable or difficult to store in a warehouse
Manufacturing Cross Docking
This procedure involves the receiving of purchased and inbound products that are required by manufacturing.
26 13 Presentation to Prof M.K. Srivastava July 10, 2014
Distributor Cross Docking
Manufacturer Delivers the goods directly to large retailer
Consolidates inbound products from different vendors into a mixed product pallet, which is then delivered to the
retailer
Reduce Warehouse cost and lead time for delivery of goods
Disadvantages
Relatively high transportation cost
Delay in deliveries if transportation is not fast and responsive
Pre Allocated Cross Docking
The Goods are pre allocated i.e they are packed and labelled by the manufacturer to be delivered directly to the
customer
Requires close coordination and cooperation between manufacturer, warehouse and store
26 14 Presentation to Prof M.K. Srivastava July 10, 2014
INVENTORY MANAGEMENT
Heavy investment in IT and communications systems to effectively track
sales and merchandise inventory in stores
Set up its own satellite communication system in 1983
Stores managed their own stock reducing pack sizes and timely price
markdown
Use of IT to make more stock available of items which customer wants
more
POS System: To monitor and track sales and merchandise stock level on the
store shelves
Use of bar coding and radio frequency which enabled efficient picking,
receiving and proper inventory control of the appropriate goods
26 15 Presentation to Prof M.K. Srivastava July 10, 2014
In 1991, Wal-Mart had invested approximately $4 billion to build a retail link
system.
More than 10,000 Wal-Mart retail suppliers used the retail link system to
monitor the sales of their goods at stores and replenish inventories.
Details of daily transactions (~10 million per day) were processed through this
system
The suppliers could find out how their product was performing vis-a-vis
competitors products in a particular product category
Ex: P&G for maintaining the inventory in its store by automated reordering
15
RETAIL LINK SYSTEM
26 16 Presentation to Prof M.K. Srivastava July 10, 2014
By the mid 1990s, Retail Link had emerged into an Internet-enabled SCM system
whose functions were not confined to inventory management alone, but also
covered collaborative planning, forecasting and replenishment (CPFR)
In CPFR, Wal-Mart worked together with its key suppliers on a real-time basis by
using the Internet to jointly determine product-wise demand forecast.
CPFR is defined as a business practice for business partners to share forecasts and
results data through the Internet, in order to reduce inventory costs while at the
same time, enhancing product availability across the supply chain.
Though CPFR was a promising supply chain initiative, it was hard to implement
16
CPFR
26 17 Presentation to Prof M.K. Srivastava July 10, 2014
Since the floor area of any Wal-Mart store varied between 40,000 to 200,000 square feet,
movement of goods within the store was an important part of logistics operations.
Wal-Mart made significant investments in IT to quickly locate and replenish goods at the
stores.
The company asked its suppliers to ship goods in store-ready displays called pretty darn quick
(PDQ) displays.
Goods were packed in PDQ displays that arrived at the stores ready to be boarded on the
racks.
Wal-Marts employees could directly replace the empty racks at the stores with fully packed
racks, instead of refilling each and every item at the racks.
17
REPLENISHMENT :PRETTY DARN QUICK DISPLAYS
26 18 Presentation to Prof M.K. Srivastava July 10, 2014
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
The VOF system also verified quantities picked, and could respond to a variety
of requests such as providing product detail (type, price, barcode number, etc.)
By installing the VOF system, Wal-Mart eliminated mispicks and product
18
VOICE-BASED ORDER FILLING (VOF)
26 19 Presentation to Prof M.K. Srivastava July 10, 2014
RFID
SMALL THING LARGE VALUE
Automatic Non-Line of Sight
Scanning
Ability to scan multiple objects
simultaneously
Encompasses more information
than previous technologies and
can be updated dynamically
Extremely Durable can endure
harsh environment
Enhanced Visibility Always-
on technology
26 20 Presentation to Prof M.K. Srivastava July 10, 2014
WAL-MART initiated RFID tech in 2003, making it mandatory for top its 100 suppliers
INVENTORY
VISIBILITY
Tracking of products
from supplier to POS
Reduces Theft,
misplacement &
misrouting
RFID can track
returned goods through
the supply chain and
prevent counterfeit
AUTOMATED
DATA CAPTURE
Reduce paperwork,
labor cost
Real time data
transmission to be
used for warehouse &
inventory
management, financial
and other enterprise
systems.
AUTOMATING
SUPPLY CHAIN
VMI: Supplier can
keep track of its
products and
automatically
replenish inventory
Reduced Bullwhip
effect
LOW EVERYDAY
PRICES
Increase efficiency of its suppliers
Minute to minute information when
to make, ship and display products
Automatic alert to manufacturer at
low inventory
Supplier need not keep excess
inventory in its warehouse
Automatic invoicing and payment
Reduce inventory and order
processing cost
RFID its not about TECHNOLOGY, its about DATA (LEACH, 2004)
26 21 Presentation to Prof M.K. Srivastava July 10, 2014
WALMART initiated RFID tech in 2003, making it mandatory for all
its suppliers
INVENTORY
VISIBILITY
Tracking of products
from supplier to POS
Reduces Theft,
misplacement &
misrouting
RFID can track
returned goods through
the supply chain and
prevent counterfeit
AUTOMATED
DATA CAPTURE
Reduce paperwork,
labor cost
Real time data
transmission to be
used for warehouse &
inventory
management, financial
and other enterprise
systems.
AUTOMATING
SUPPLY CHAIN
VMI: Supplier can
keep track of its
products and
automatically
replenish inventory
Reduced Bullwhip
effect
LOW EVERYDAY
PRICES
Minute to minute information
whn to make, ship and display
more products at stores
Automatic alert to manufacturer
at low inventory
Supplier need not keep excess
inventory in its warehouse
Automatic invoicing and
payment
Reduce inventory and order
processing cost
RFID
Out-of-Stock items replenished three times faster
Reduced stock out situations by 30%
10% reduction in manual orders
Total savings expected to be $8 billion per year
26 22 Presentation to Prof M.K. Srivastava July 10, 2014
Green Supply Chain
Save Enviroment Save Money
Environmental Impact
Closed Loop Reverse
Supply Chain
26 23 Presentation to Prof M.K. Srivastava July 10, 2014
TO BE SUPPLIED BY 100%
RENEWABLE ENERGY
Global Green house Gas
Strategy
Alternative Fuels
Global Logistics
Energy Efficient Designs
TO CREATE 0 WASTE
Operations and Internal
Procurement
Packaging
Recycle, Refurbish,
Reuse
TO SELL PRODUCTS THAT SUSTAIN
PEOPLE & ENVIRONMENT
Sustainable Agriculture
Work closely with suppliers to ensure
environmental friendly products
Increased transparency in supply chain
Green Supply Chain
In 2005, WALMART initiated Business Sustainability Strategy
Goal is to reduce the companys impact on environment
An important outcome was that its supply chain efficiency increased dramatically
lowering down costs
26 24 Presentation to Prof M.K. Srivastava July 10, 2014
Green Supply Chain
To source 95% products from factories certified by Walmart for safe environmental
practice
60% increase in truck fleet efficiency, compared to 2005
16% reduction in plastic bag waste (approx 4.8 billion bags)
In 2009, unveiled GreenWRECS tool to assess chemical composition of products
on its shelf and screen them for chemical ingredients that have adverse
environmental impact.
It also announced the development of Sustainable Product Index- to drive product
innovation, and acting as a source of information on sustainability of a product
Global initiative to drive the production or procurement of 7 billion kWh of Renewable
Energy by the end of 2020 saving $ 1 billion every year in energy costs
26 25 Presentation to Prof M.K. Srivastava July 10, 2014
LEAGILE SUPPLY CHAIN OF WALMART
Inventory optimization
Transportation optimization
L
E
A
N
A
G
I
L
E
+
Cross Docking : Cross Docking is an
agile method in which the Inter-store
transfer of goods takes place on
demand
Responsive & Cost Efficient
26 26 Presentation to Prof M.K. Srivastava July 10, 2014
Save Money, Shop Smart Only at Walmart