Wal-Mart Stores

One of the most commonly cited success stories in selling chain management (SCM) is that of
Wal-Mart Stores, Inc., which reported total sales of $191.329 billion and a net income of $6.295
billion.

Wal-Mart has been an innovator in SCM, which has allowed it to provide low-cost merchandise
to its customers and undercut its competitors.

In 1979 Kmart was one of the leading companies in the retail industry At that time, Wal-Mart
was a small niche retailer in the South with only 229 stores and average revenues about half
those of Kmart stores Today Wal-Mart is the largest and highest profit retailer in the world.
How did Wal-Mart do it? The starting point was a relentless focus on satisfying customer
needs; Wal-Marts goal was simply to provide customers with access to goods when and where
they want them and to develop cost structures that enable competitive pricing. The key to
achieving this goal was to make the way the company replenishes inventory the centerpiece of its
strategy. This was done by using a logistics technique known as cross-docking. In this strategy,
goods are continuously delivered to Wal-Marts warehouses from where they are dispatched to
stores without ever sitting in inventory. This strategy reduced Wal-Marts cost of sales
significantly and made it possible to offer everyday low prices to their customers. This was
followed by a well established Order Management System which ensured the proper
acceptance and processing of the customer order.

The traditional distribution strategy in U.S. retail chains involved keeping inventory at
warehouses. An alternative strategy would be for goods to be shipped from suppliers directly to
the retail stores. Cross-docking has resulted in lower unit transportation and inventory costs,
relative to cost of goods sold, through the supply chain. It relies upon a well-developed
computer information systemutilizing point-of-sale bar-code readers and electronic data
interchange (EDI)which links Wal-Mart stores, distribution centers, and a large number of
major vendors. Moreover, Wal-Mart maintains its own fleet of truck-tractors that deliver multi-
item shipments of goods to any store from one of its distribution centers in the U.S. within 48
hours from the time a consolidated replenishment order is placed.


Procter & Gamble

Procter & Gamble (P&G), founded in Cincinnati in 1837, manufactures and markets worldwide
more than 300 brands of packaged consumer goods in the following product segments: baby
care, beauty care, fabric and home care, feminine care, food and beverage, health care, and
tissues and towel. P&G, which employs some 110,000 people worldwide, had net sales of
$39.951 billion.

P&G began, as early as 1985, a retailer-supplier partnership with Wal-Mart involving a vendor
managed inventory (VMI) system. Under such a system, the vendorsubject to bounds
previously agreed upon with the retailerdecides on the appropriate levels of inventory to carry
at the retail stores, as well as the corresponding inventory policies to maintain such levels. In the
P&G and Wal-Mart partnership, P&G committed to the development of a dedicated team to
handle the Wal-Mart account. A primary objective of this team is to facilitate information-
sharing between the two firms and address logistics, supply, management information systems,
accounting, finance, and other issues. Under this arrangement, Wal-Mart shares point-of-sale
information from retail outlets directly with P&G, giving the latter easy access to information
on consumer transactions and buying patterns. The Integrated Selling System was used as one
of the major infrastructure in improving the efficiency of selling chain of the company. P&Gs
dedicated Wal-Mart account team effectively takes responsibility for the marketing and sales of
P&G products within Wal-Mart stores. Similar VMI partnerships with other giant retailers have
been established by P&G. These partnerships have dramatically improved P&Gs on-time
deliveries to Wal-Mart and the other retailers with the ultimate purpose of improving the
purchase experience of the customer.