Note & Assignmant for Supply Chain

8/13/2019 Note & Assignmant for Supply Chain

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This casc was wrilten by P. Mohan Chandtan,Research (lC[4R). h 's intended to be used as aineffeclive handlingota managementsituation.The carewas compiled from pLrblished sources.

under the dirclion of Vivek Gupla, ICFAI Center Ior l\4anagenrenlh.sis for class dirculsion rather than to illuslGte elther effective or

o )N3,lcfAlCentet lotManageneht Re*dr.h. A righ9 rckrred. No Paft ol this publi.ation tnal be Eproduced stotetJ irt areticval sfstent. used in a spteatllheet ot taAntted in any forn by any neaF - ele.tftnic o' ne.harical ||Thoutro o { copies,.allOOgI 10-.2313 01A/61/61otwtte to ICFA|Cdtter for anigenett Reteatch Plot t 49 NagaiunaHiIs, Hftlerabad 5OO 082, lDdia ot eDtail [email protected]. lyebsite: MN i.ntirdia org


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oPER/020

WAL-MART'S SUPPLY CHAIN MANAGEMENT PRACTICES''Iyhan .\)au start ta colldpse tha suppu (hdin. dcctlracy h arccution becames critical. Anf lack afdccumte infornatian and pnce.\\e.\ d'e.ile\ castly battlenecks in the |ott al goods and maletials. "

- Bnrcc Richmond, Global hcad, Andersen Consulting.I\1 RODUCTIO\The Us-based Wal-Mart rankecl first in the globel -Fortrure 500 lrst inthe firrancial iear 2001-02earning revenues of$219.81 billion (Refer Table l). Wal Marl wdi Lh;.Jirgeslretailing e"mpcnl rnthe *o .1. T}e oompany was much bigger than its conlpeiito rs ..in.ihl{ US Sears Roebuck, K-Mart. JC Penney al1d Nordstrom combiDed (Refcr Exhibit il),.ln. i0al:,,'Wal-Mart operated morethan 3.500 discount storcs, San's Cllubs and Superceiiers in ille-ljs and more than 1.170 stores inall major countries across the world. The cornpany allo soldiproducts on the lntemct through itswebsile, walmarl.coDr. .. ' ,:1

TAB.GI,Ol]AI, FO O LTST

Source: qrvw.lbrtlnt cdn '- rl,,,,.. ..... .l,,,,.. ....]Wal-Mrn $ft une ofthe largest pri\ate sector employers in ihe world, wiih employec strength ofafJprorirnatell 1.2 8 nrrliion. Thc company s founder, Sam walton (walton) had always focused onimproving sales, constantiy reducing costs, adopting eficient distribution and logisticsrnanageneit systens and using innovative infbrnlatioi technoiogy (lT) tools-According to analysts, Wal-Mari was ablc to achieve a leadership status ((Refer Exhibit fI)) in rheretail industry because ot' its efficient supply chain mturagement practices. Captain Vernon L.Beatry, aide-de-camp to the col]]mander, Defense Supply Center, Columbus, Ohio said, "Supplychain management is moving the right items to thc righi customer at the right time by the mostetficient means. No one does ihat hcttcr ihan Wal-Mart."This case was w tten by P. Mohan Chandmn, under the direction of Mvek Gupta, ICFAI Centr lor l4anagenentResearch (|CI4R).a 2003, ICFAI GrEt lot Managerent Research. All tights rcctued- No part of tltis publicatio, nay be ftptotlu.ed, stored in arct.iedl 3Ften, ukd in a spteadsheet, or thnsnlitted in any lom by any nears - ele.tturi. ot nEchanical, sithoutTo onler.opies,.aI OO9l .40-2l$.0162./63 /64 ot wite to lcf Centet t'ot Managenent Research. Plot#19, NagaiunaHilk, H)/tJe6bad 5OO O82. lndia ot enail imt@itlai otg. lvtbsite: w.i.hindia.ory

ColnDany ReYenues (in $ millions219,812.0al-Mrl1 Stores 'i. 191,58t.0

General Motor$'i:. 17 7,260.0162.412.0orl Mold ).138.7I8.0


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mBACKGROUND NOTE

Wal-lvlart s Supply Chain Management Practices

Wallon \ as born in l918 at Kingfisher, Oklahoma, US. After graduating fiom the tlniversity otMissouri in 1940. Walton worked tbr the famous rctailer, J C Penney- Ir his firstjob, Walton haddisplaycd the qualities of a good salesmtui. He realized the inpofance of building lo)'alty anongouslolllers as \rcll as employees. In the nid I940s, Walton gave up his job and decided to set uphis o\rn retail store. He purchased a storc fianchise fiom Ben lranklin in Newport, Arkansas. Itwas here that hc leamt his fi$t lessons in lctailing offerirrg significant discounls on productpriccs to expand volurres a d incrcasc overall profils. The business was successful ind waltonsoon acquircd a second store wilhin three yeais.Wahor not only looked fbr oppor{unities to open stores in olher snall towns bul also explored thcpossibilily of inlroducing innovative practices such as self'-service. As the need lor people tomanage his stores iDcreased, Walton tried to atlract talented and experienced people from other

guaranteed, and hours that were rcalisiic for thethat old varieiy storc conpetition, with its 45

ie$ellcry di\'isions.

nores. By 1969, Walton had established 18 Wal-Marl slorcs, rcportirg an annual sale of $44million. lrr mid 1970s. Wal-Mad acquired 16 Mohr-Value stores h Siohigan and lllinois. By thelate 1970s, lhe retail chain had cstablished a pharI11acy, an autq servi$ center, and severaliewellcru divisions '._. '. ,lrl-:stores. By 1969, Walton had established 18 Wal-Marl slorcs.million. ll1 mid 1970s. Wal-Mad accluired 16 Mohr-Value stores in

to *ie h:ii sc'iustorltowns. where most oI its stores were located. Comm-eiling.b 'thp gioivth of Wal-Marl. Waltonsaid: "When \le arriled irr thesc small towns offerirr(1orv prlecs tvery day, cuslomer salisfactionof Wal-Marl. Waltoneople lwanied to shop, we passed right byups. liniied selection and limitedhours." wal-Mart stores were locatcd at a con}gqient phae in a big \larehouse rype building andlargeled customers who bought nerchandise in'ir l\ Customers could buy goods at rvholesalepriies by bccoming rnembers and paylng a o'n: t n{] , nr "nrbership fee. By 1984, lhcre were 640w^l'Marr srores in llre lJS ccneratins sales ofriboirt $4.5 bn and accruins Drofii ofover $200 mnal'Mar stores ir the US, gcnerating sales diibqnt $+.s bn ana accming profii ofover $200 rnnWal-Marl suffcrcd a sctback in 1992, wfieivatton died aller a prolonged illness. But ii continuedits impressi\'e grolrth in fhe 1990s;-.'lbcusirrg more on establishing its stores overseas ln 1992,WalNfaft expanded ils operations in Mi\9o by enteri g into ajointventure with Cifra. Two yearslater. lhe co pany acquired ]22-Woolco (torcs from Woohvorlh, Canada. By 1997, Wal-Mart hadbecorne the largest volume disiqNrt"Ietailer in Canada and Mexico. ln 1997, Wal_Mart acquiredthc 21 store Gennan hy,plimzr4eae hain. Wertkauf. Olher intemational expansion eJlbds includedihe purchase of Braz.lllin reiilir Loias Amcricans' 40 percent intcrest in their joint venture, ardthe acquisilion of lo'oi'st ie5. rd additional sites in South Korea liom Korea Makro. ln January1999, Wal-N{al1 expanded it/Gennan operations by buying 74 stores of the hypermarket chain,lnterspar. The stores were aiquired from Spar Handels AC, which owned mulliple rcrail formatsand wholesale operations ilroughout Germany.By 2002, Wal-Mart had emerged as the largest company in the world in ienns of revenuesAralysts felt thal wal-Mart had come a long rlay since 1979, when the company generated annualreveuucs ofmore than a billior dollar lor the first time. By 1993, the company was doing a billiondollnr business in a week and by 2001, it was crossing the billion dollar mark in evcry 1.5 days.Analysts aftributed this phenomcnal growth to Wal-Mart's continued focus on customer needs andreducing costs through efficient supply chain managenent plactices. The company was able tooffer a vast range of products at the lowest costs in the shortest possible time. This was possiblenainly due to two factors Wa1-Mart's highly automated dist.ibution centers, which significantlyreduced shipping cosls and iinle, and its computedzed inventory systern, which speeded up thechecking out time and recording ofliansactions.


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ffiNMANA(]ING THE SUPPLY CHAIN

Wal-Marts Supply Chain Management Practices

PROCUREMENT AND DISTRIBUTIONWal-Mart always cnphasiTed the need 1() rcduce its purchasing cosls and off'er the best prioe 1{) ilscustomers. The conpany procured goods directly liom manufactureN, b-t_passing allintermediarics. Wd-Mart was a lough negotiator on prices and finalizcd a purchasc deal only lvhcnit \\'as fully confide l that lhe products being bought were not available elscwhere al a lower price-Acoording to Claudc Flarris, one ofthe earliest employees. "Every buyer has to bc tough That isrhe job. I al$,als lold the buyers: 'You are ncgotiating for your ouslomcr. And your customerdcscrves the best prices lhat you can get. Don't cvcr leel sorry 1br a vendor. He always kno*swhat he can sell, and we want his botlom pdcc.'We would tell d1e vendols.'Don'l leave iD anyroom for a kickback because \ c don't do it here. And wc don't want your adverlising program ordelivery prcgram. Our truck *'ill pick it up at your warehouse- Now what is your best price?"wal Mart spent a significant amount of time meeting vendors a-nJ iitrrdcrstanding lheir coststructure. By making the process traisparent, the retailer could be certai[-dhat the manuf-acturerswere doing their best to cut dorn costs. Onc('sitisfied. wal-Man beie\cd in establish gahng-lern rclationship with the vendor. In its attempt lu drite lrrrd barlairrs. Wnl Maft did noi cvenspare big manufacturers like Procler & Gamble (P&C).,:l.Io\1dYqr;.lhe company, generally,preferred local and regional vendors and suppliers. ,.r- :.. .'..."i tIr 1998, wd Mart had over 40 distribulion centersl ltr.caterl ii differcnt geographical localions inthc US. Over 80,000 items were stocked in thcsc ielltlrs',Wal-Maft's own warehouses direcllysupplied 85 percent of the invcntory, as corllprred to j0 65 percent f.r colnpetitoh Accordinlilorough eslimales. Wal Mad wlls able to provide GplenishDrents withi i$o days (on an average)against at leasl five days lor competitors. ShlpPin costs 1br Wal-Mart worked ou1 to be roughly 3pcrcent as against 5 percenl for competitors. r. r.. 'Each distribution centcr was dividedin'to iliffqrert sections on the basis ofthe quantity ofgoodsrcrc\ed a d ur. m:rrugeJ rhr .an. $ail"r both ca'e- arrd palleri/ed Cood.. ll-e irr\enl^fturno er ratc uas lerl high, cbout o ce cvtry two weeks lor most ofthe itens. Goods neant fordistribulion wiihin the US rsu;rlly .arrivdd in pallets, while irnpo .3d goods arrived in re-usahleboxes or mses. In ,o." "u.".1 ii'pp'li"rs clelivercd pioods such-as aulollotive ancl drug productsdirectly to the stores. About s5%i"thc goods rvhich were available at the slores passed throughthe distributio centelJ:.\ '... lThe distribution centers ens.qred a stead) and consistent flow of products to suppoft the supplyfunction. As wal-Maft useii sophisticated barcode technology and haad'held computer systems:managing the center became easicr and more economicai, Every employee had an access to real-time infomation regarding the inventory levels of all the products in the center. 'Ihey had tojustmake t*'o scans one to identify the pallet, and thc other to ;deniill lhe location fron where thestock had to be picked up. Diflelnt barcodes were used to label ditferent products, shelvcs andbins in a center. The handhcld computer guided an employee $ith legard to the locatron of aparticular product from a particular bin or shelf in lhe center. When the computer verified the binand picked up n product, the employee confirmed whether it was the dght prodDct or not. Thequalrtity of the product required from the cenler was entered into the hand_held computer by theemployee and then the computer updated the ;nformation on the main server.The hand-held computer also enabled the packaging department lo get accurate information aboutthe products to be packed. It displayed all informalion about the storage, packaging and shippingof ^ particular product thus, saving time on unnecessary paperwork. It also enabled lhe center


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Wal-l\lart's Supply Chain Nlanagement Practicessupelviso$ to monitor their empbyees closely enabling them to give dircctions and even guidethcm cvcn on thc movc. Ihis cneblcd thc company to satisl-.r' customer needs quickly ard ill1provethe level ofefficierc), oithe distribution cente| managenent operations.[ach dislribution cenler had lacililies for nainiainirg personal hygicne such as shower bath andfltness centers. It also had provision for fbod, sleep and persoDal business. Thc distribution cenlercorld also bc used for rnectlngs and paperwork. The truck drivers of Wal-Maft sonletincs availedthese facilities.LOGISTICS MANAGEMEN'TAn in]portant leature ol Wal-Mad's logistios infrastruoture rvas its last and respor"irctranspofatjon systcm. Thc distribution ccnters were serviced by more than 3,500 co pany ownedtfucks. These dedicated tmck fleets allorved the company 10 ship goods liom the distributioncerters to the stores within t*,o days and repleDish the store shelves twjqe a wcck. The truck fleel\ras the visible link bet$een the stores and clistribution centers. Wal+j4\ believed that it neededdrivers who were conmitted aDd dedicated to clrstoner servic6. The'.company hired onlyexperienced drivers who had driven Inore than 300,000 accirient lieq'nriles.\ith no major traffic i. r ',',, ', ... r. \.. .,.Wal-Mal1 truck drivers generally moved the ne.r-chitndisgilgndgil,'1mit... from Wal-Martdistlibution centers to the rctail storcs sc iced b\ each dislribution cenler. These retail stores wereconsidered as cuslorners by the dislribulior centcls.'l he ddvcis had 10 rcport their hours ofscrviceto a coordinator daily. The coodiDator schectuled all ttaijatelt;s {lepeDding on thc available drivingtirnc and the estimated time fbr travel betweelr.tJle dis_tribution centers and the retail stores. Thecoordinator infonned lhe dri\'er of bis dispalches:.qither on tbe drivor's affival at the dislrib tioncenter or on his return to the distributidr oenrei'.li6m llre retail slore- Ihc dr;ver was usuallvexpected to trke a loaded truck trailer.,ftom:ilie.distribution center to ihe rctail store rnd reruback $ith an empt-v tmiler. He had to iiiaii{ch.a loaded truck trailer at the retail store and spcnd thenight there. A driver had to briDg ,tli-iiiiileiil,thc dock of a store only at its scheduled uiloadingtime. no rrrlter \\ hen he ,rn i\ ed rt tie store. The drivers delivered the trailers in the aJiernoon andc\r('ning llou.s a d tLrcl $ouLd bc u lordqd afthe store at nights. There \\'as agap of t*'o hoursbetween unloading of each traji.r,..I 01 instance. if a store received three trailers, thc frrst onewould be unloaded at midnight'il?.,{M), the second one $ou1d be unloaclcd at 2 AM and rhe thirdone at 4 AM. /: \'- '::,'Althoueh, the traile;i \\,.;ie..left unattended. they rvere secured by the drivcrs, until the slorepersonnel took charge of ilieiat night. Wal-Mart received more trailers than they had dooks. duero rlreir l.,rge \olunre or br.r'e.s.walMart maintaincd a stdct vigil ovcr its drivers by keeping a record of their activities throughthe "Privale Fleet Driver Handbook" (Refer Exhibit III). Thc purposc ofthe book was to cducatethe drjvers with regard to the code ofconduct. It also included the tenns ard conditions regardiogthe sale exchange oflrailers wilh the slore personnel and the safety of Wal-Maft's propefy- Thisbook also contai ed a list of odrer activities, the non complia cc of which would result in thetemination of thc driver.To make its distribution process more eficieDt, Wal-Marl also made use of a logistics techniqueknown as'cross-docking.'In this syslen, thc finished goods were directly picked up from themanufacturing plant ofa supplier, sorted out and then directly supplied to the cuslorners. fhesyslem reduced the handling ard storage of finished goods, virtually eliminating the role of thedistribution centers and stores- There were five rypes ofcross-docking (Refer Exhibit lV).


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Wal-tvlart s Supply Chain wlanagement Practices

In cross docking, requisitions receivcd for diifarent goods from a store werc corverted iitopurchase or procurem;nt orders, These purchase orders were then for*ardcd to the nranul'acturerswho conveyed their abilit]' or inability to suppl-v the goods within a particular period ol time- Incases rvhere thc manufaolurer agreed lo supply thc requirecl goods within the specified linrc thegoods wcre directly lorwarded to a place called the stagirg area lhe goods were packed hcreiccording to the orders reccived f'rorl different stores aDd lhen direclly sent to the rcspcclive

To gain nraxinun out of cross docking, Wal-Mart had to make fundanental charges il1 itsapp."ou"h to managerial control. Iladitionally, decisions about nerchandising, pricing andpiomotions had becn highly centralized and $ere generally taken at the corporate level' The cross-docking system. however, changed this practicc The syslem shilied the locus lrom "supply chaii"to thc';demard chajn," which rneant that irstead olthe retailer'pushing' prcducts into the systen;customers couki 'puil' products. when aDd where they nccded This approach placed a prenritrm onfrequent, informil cooPeration arlong stores distribulion centers and suppliers *'i1h far lessceftraliTed coDtrol than earlier. ,,, ll.]INVL,NTORY MANAGEMENT ,i ... :-tWal-Ma had developed an abilit) to cater 1l) rhe iDdividual ne;ds':lot its slorcs storcs couldchoose from a mrmber ofdelivcry pl s. lor insrance. Jhlre rvar ;q ac;lierated clelivery systcm bywhich storcs located within a cefiain distance of a gedgraphicdlcditer could rcceive replcnishnent....Wal-Mart jnveste.l heavily in lT and conmuljcati;;i sistems to elleclively track sales andmerchandise invcntories in stores across the coLriiiry With the rapid expansion of Wal_Mart storesin the US. it was essential lo have a good colrr;;ticiilion systen llence. wal-Mart set up its o\lnsatellile commuDicatiorr sysrem in lt8i'r Exi;lainilig fic bcnefits of lhc system Walton said, "l canwalk in the satcllite room, where ou. Lic\i"i"; 'sit in lront ofthc cornputer screens talking on thephonc to any stores that might be/hdtiigriEoblen with the systen, and just looking over their;houlLlers for a minute or two wiliiiilqle a lot about how a particular day is going on the screen.I can see the total of the day's bank cildit sales adding up as they occur' If we have somethingreally impo ant or urgeil to cgmnlunicarte to dre stores and distrjbution centers' I, or any otherwrl-Ma; executive ca; walk daat'to\our TV studio and gct on thal satcllite transmission aDd gct it

within a daY. r'.-. ,,'

right out lherc. I can a as'lrturday mo ing around three, look over these printouts andkno\\ preciseh $hrt we have had."wrl-Mart was ablc to unproductive inventory by allowing stores to manage thet ownstocks, reducing pack sizes'across many product categories, and timely price markdowns lDsteadof cutting inveitory across the board, wal-Ma( made tuIl use of its IT capabilities to nrake moreinvenlories availabie in the case of items that customen wanted most' while reducing the overallinvcntory levels. Wal-Mart also nelworkcd its suppliers through computers. The company enteredinto collaboralion with P&G fot maintaining the inve tory in its stores and built an autonlated re-orderirg system, which linked all conputers bet$een P&G and its stores and other distribulioncentcrsiTlre computer system at Wal-Mart stores identified an itcm which was low in stock andsent a signal to PAC. The system then sent a re-supply ordcr to the nearest P&G f'actory through asatellite;ommunicatjon system. p&c thcn delivercd the iten either to the wal-Mart .listributioncenter or directly to the concemed stores This collaboration between Wal-Mart and P&C was arvin-win proposition for both because Wal-Mart could nonitor its stock levcls in the storesconstantli and also identify the items that were moving fast. ?&G could also lo er its cosls andpass on sorne ofthe savings to Wal-MaIl due to better coordination.


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Wal-lvlart's Supply Chain Management PracticesEnlplolees at thc slores had the Magic Wand.' a hand-held computer \\,hich \\,as linked to in-storeterminals through a radio fiequc cy nebvork. thcsc helped then lo keep track ofthe inventory jnstores, dcliveries and b.rckup merchandise in stock ar rhe distrib tion cenle$. The ordermanagement and store replenishnlent ofgoods were entirely cxeculed \'/ith the help ofconputersthrough the Point-of Sales (POS) syslern. Through this s\stenl: it was possibte to monjt;r a dtrack rhe sales and nte|chandise slock levels on thc store shelvcs. Wal-Mift also made usc ofthesophistjcatcd algorithm system which enabled it ro lorecasl the exact quantilies ofeach item to bedclivered, bascd on ihe invcntories in each store_ Since rhc data was accurate. even bulk itemscould bc broken and supplied to thc slores. \l al-Mart rlso used a celltralzed in\;nrory data systenusing which rbe personrcl at tbe stores could fi ril uur rLc le\


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Wal-Mart's Supply Chain Manaqement PracticsThe benefits of an efficient supply chain management syslen included rcduciion in lead time,rfaster inventory tunover, accurate forecasting of inventory levels, jncreased warchouse space,rcduction in safety stock . rd better working capital utilizatioD. 11 also hclpcd reduce thedependency on lhe distribuliou ccnter rnanagement personnel resulting in I1linirnizalion oftrainingcosts and errols. The stock-out of goods aDd llre subsequent loss arising out of it was conpletclyelirninaled.Wal-Mart's supply chain nanagcment practices resulted in increased etioiency in opcratjons andbetter customer service. It elilnirated old slocks and maintdned qualiry of goods. Bar coding andradio frequency technologies enabled accurate distribution of goods. Cross docking also helpedWal-Marl to reduce iDventory slomge costs. lt also helped to cut down the labor and oth,'rhandling costs involved ir the loading and unloadilrg ol goods.QUESTIONS FOR DISCUSSION: /:'i. Wal-Mad has been able to achieve respectable leadership i lhe,rctlill industry becarrre of its

Iocus on supply chaii lnanagement. Discuss in detail the disltibutioi and logisiics systemadopted by wal-Mart. ,-i: ....'. a.l,....a -.,.,2. The use of innovative infoanatior technology tools hajlr\ertfitd. rwai-Mart's supply chainDlanagement. ln rhe lighl ofthe above statcrlent, Eigfly p\Atain hdi TT beDefiled wal-Mart'slogistics and inventory management. 1i ,. '3- What were the supply chain managernent proces5es ad-apted b) wal Mal1 and lrow lar werethey eliictive? Discuss. l.:4- what lvas the nalure of Uenenrs aeriye,i..try Wal Mart froin the efficient supply chainmanagement practices and horv falit haiiqdntiibuled to its sustaiiable competitive advaitage?

Explain. "\ '.-'',/..i, \,,.. -ri:l.::'..r''i. ''\'t-'...'-...t,ty''

f Au p,-9-4p ,+. ae 7 L,t ,'/rr t4/L7 ( r,,-t avLt A4j^le t/ t r-. /,a.

I Tr e'i, c r"lcn t^r good. o rca, l' \\ al-V"".rore. lio'll rhe pla.e olr anulacru"(.


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Wal-Nlart s Supply Chain l,lanagement PracticesEXHIBTT I

WORLD'S 25 LARCEST RETAIL COMPANIES BY SALES (2002)Rank Company Coutrtry 2001 Srles(in mn Rrnk byNlarl(cl

l Wal-Marl lls :t 7.800) Canefour 6 t,121 63 SuDerna*et/Hv.enn.rlcl cl.'r0l 12

tJ,S, )5 {JS SuDernrJrket 50 0913 t:l6 Metro AG .18.264 321 U.S. DiscouniStore/Department store lq.t'5 58 ll.s. tr,qi I )o9 I]K SuDermarket/HvDcrnrarket 37.17S 9t0 Se S,l(oebuck U.S. Dcpadmcnl store/ceneralfr$.handi(. .. 35i817 l4lt u.s. 3+.lUl t512 ti.s. Wholesale rlrb13 Diversified ,. i. '.. ,'':l:t 640 Pl4 ]TMEnterorises '- i:t' 32-9)2ti .l.C.Pemy u.s. Depxrftrent .. slore/Druestorc 32.00,1 t8t6 FoodlDi3coxnt stole i0 000 P17 Edeka Gruppc Div-n;ifie:l )9,3(]2.18 J Sainsbury IJ K )7.1)1 25l9 I'inault Divelsified 21,019 2710 lI.s- Druq srore 24,623 32l Diverified P22 A*h." ,"'i.. Hypernn*et/Diversified 23.118?'l TeDselmannGruDDe P24 u.s. t825 U.S. Ho e lmDrovenr-".1 22 t 1

Source: ws*.chrirstorcage.conNolc: *P: P.ivately ownedAll amounts are in nrillions ofU.S. dollars. using the average 2001 exchange raies. All dala is corporareIelel for retail-di 'ersiiied companies, excludhg VAT and non,retailing rcvenue rhen available. Thcdifferent businesses olJapanese Conglonerates are accounted for separatel_v.


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Wal-lvlart's Supply Chain lvlanagement PracticesIIXHIBIT II

THN STRENCTH OF WALMARTYearlv sales $220 biLlionIotal emplo\ees Jero'" thc qlohe 1.28 millionNumhcr ofstores \\,o dwide 4.i82Nnmher of Suoercenlers 1.060Nunber ofSam's Chbs 495Numher ot'new stores oDcned in 2002 420Number olsuDoliers r0.000Number of Wal-Mart's in Texas (US) 316Vnlue of 100 shares of wal-Malt (as on January 28, 2003)nurchased in 197014 $16.50 Der share $l 1.5 millionwal-Mari's rank/position anong all retailers in the US (in tenns ofwrl Mart's rank in ie*ellery salesNunrbcr ofDallets shinDed bv Wal-Maf tntck everv week 'l 50 millionAnnual sales ofhot doqs bv Wal-Mart every year (approx) /''. '\ l 70 nillionPercentase ofdry dog lood bought by walMalt iD the US -. \. i.{orrl o.cunied lloor area ot \\ r, Marl 18. J square ilesPercentase oftoothDaste bousht bv Wal-Mart ,7_ 24voYcarh ad \ ertis in . e\pelldiiurc $498 millionV.urtr pr'.hi.e olcold lo- wll-Man bl i s .upplier' 18.4 metric tonneHirhesr oll


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Wal'Mart s Supply Chain lvlanagement Practices

NXHIBTT IIIPRTVATE FI,IIET DRIVER HANDBOOK

Wal Mart's Private Fleet Driver Handbook contajned terms and conditions with regard 1()tenniiation olthe truck drivers. ,^ccording to lhe Wal Maf's Privatc Ileet Driver Ilarrdbook, adriver oould be terminated from his iob il he relused to deliler an assignment given to him.However, if a drivcr rcfused to deliver the assignmcnt duc to faligue or insufficicnt rest. therelusal was not considered as a violation. This book included other rules, the violation oiwhichwould rcsult in inmcdiate tennination of the driver. This book was nraintained by Wal-Mart tooreale a\rareness about thc rcle, duties and responsibililies ol a driver towa s lhc company,sociefy and profession in various situations. Ihe expected actions ofeech driver and the'code ohavior'\\as clearly detailed in this handbook arld the drivcr had to strictly adhere to thcse rulesaDd regulations. However. drivcrs wcro not temrinated sinply because thcy violated the rulcs andternN mcntioned in the handbook. The facts, cilcunstarces, situations and othcr collaborativeevidence were taker into account and thoroughly assessed lo decide abdut the termination. Whena driver violated a rule or 'code of behavior'. he was not terminated ilni\rediately, but was firsitaught the coffect code oibehavior by Wa1-Mar,. ... 1.. l\For example, though tlre handbook mcrtioned that Jri\crs h. lo be \cr) polite and kind rvbiledcaling with the store personnel and others, a driver rvqs npl t*dr iii:,rqd4' tor be;ng.ude. Instead,he was given a warning aod asked to behave properly:ge '44'bi.ininited only when he showedno improvenent. The drivers were also reqL'ir.d io "..u,. tt,e truck rrailirt at the timcdclivering them to the stores. Tlre inabilily or f.riluie tn do s; $as nor eonsidered rs breachcontlact that would result in immediate termination. Horvel'dr. a driver wns once tcrminated fronhis job (in the yeal 2000) by Wal Mad's theri'llivale Fleel Manager, Mr. Paul Darwir, (wholoo.,lrar"e'n looRrl', r


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wal'Marts Supply Chain lvlanagement PracticesBXHIBIT IV

TYPES OP CROSS DOCKINGOpportunislic Cross docldngIlr tlis meihod ofcross docking, cxact information about wherc the required good rvas to be shippcdand from where it has to be procurcd and the exad quantily 1() be shipped, was Decded lhis methodof cross docking enabled ihe company to directly shjp the goods nccded by the rctail customers.sithout storing lhem in the warehouse bins or shelves. Opporluuistic cross docking coxld also beused when thc *arehouse management software, installed by the relailer, alerted him thal a particularproducl rrs rcady lor moving and could be nroved immediately.FlorY-through Cross dockingln this rypc ofcross docking, there vas a constant irflow and outflow olgoods from thc disiributioncenter. This 1)rpe of cross docking was nroslly suirable for perishable goods. which had a verf shorttime span. or goods that were difficult to be stored in the warehouses. Thjs cross dockjng system $asmostly followed by tbe sxpermarkets and olhcr r etail discount stores, especially for perishable items.Distributor Cross dockingIn this typ of cross docking. t|e manulacturer delivered the goods direcily to the [etaiLer. Nointcmediaries Nere involved in this proccss. This enabled the reiailer to save a major portion ofthecosts in the form ofstorage. As Lhc rctailer did not teed to maintain a dislribution cenler for stornlgvarious kinds ofgoods, he helped hnn save warehouse costs. Thc lead lime for rhe delivery of goodslrom the manufacturer ki thc consunrer was also drastically rcduced. However, this nethod had somedisadvantages too. TIe tra.spoiation cosrs for both thc manufacturer and the relailer tended toincrease over a period oftnn, when the goods we.e rcqulred to be transpoted to different locrlionsseveral times. Moreover. the lransportalion systen had to be very fast. Otheiuise, rhe very purposeof cross docking was losL. The traosporiation systenr should also be highly responsive and take theresponsibilit) lbr thc delsys in delivery ofthe goods. The relajler was at .t greater risk lle lost theadvarrtagcs olsharing the risks Nith the manufacturer. fhis lype ofcross docking was suitable onlyfor thosc .elailers who had a large distribuLion network and could be used h situations

"vhenonods

had to be dclivered in a short span oftjme.Manufjlcturing Cross dockingIn Manufacturing cross docking, these cross docknlg facilities served ihe faclories and acied aslcmporary and 'lnini rva|ehouses." Whenever a manufacturing company required sone pa{s ornaterials for nanufacturnrg .t Frticular product, it lvas delivered by lhe sxpplier nr small lots $'ithin averf short span oftilrle,just $,hc'n il ,as needed. Tbis heiped i:drce the transpofatlon and warehousecosts substantially.Pre-Allocated Cross DockingPre-allocated cross dockiig is very much like tbe sual cross-docking, except thai in ihis tjpe ofcrossdocking, the goods are alread , packed and labeled by the nanufacturer and it is ready for shipnent tothe distribution center liom where it is sent to ihe store. The goods can be delivered bv rhedisiribution center directly Lo the store without opning the pack of the nanufrcturer and re-packingthe goods. Tle store can theo deliver ihe goods djrectly ro the consumer without aoy further r+packing. Goods receivcd by lhe distribxtion centcr or rhe store are directly sent into the orihoundshippirg truck, io be delivercd to the consumer, wiLhoul altering the package of the good Crossdockirg requires very close co-ordinalion and co-operation of rhe manufacturers. warehousepersonnel and the storcs personnel- Goods can be easily and quickly delivered only when accnrateinionnation is available readjly. 'l'he lnlbrrnaiion can be manrged w'ih rhe help of Electronic DataTnterchange (EDI) and other geDeral sales infonnation.

Source: Conpiled hy IClvlR throuSh sources ilcluding wcb.nps.nary.mi1, colbt.com.au. wnalogistics com and

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ADDITIONAL RXADING l\ND REFIIRENCITS:L Oftrneyer, K.cwcndolyn. and Laltin M. James, ',A Theoretical Rationale for Evcry DayLo$ Pricing by grocery rctailrs," Sranfbrd cradLlatc SchooI oiBrrsiness- Igg I2. "Dist bution and Rct:riling in China Revolution and Competition,'. w\tw.alberla_orglNovember 12, 1996.L Ro$al. Christine, "Cross docking: The move from supply to denand", wwn,.dmg.co.uk,Augrst 1998.,1. Hulet. D.William, "clobat Warming an(t Wal-Mafi, Why gtobrt warming isgor(rnnrent concern . \$\ e.(Ire t..Io.ii. \eplcmber Iqqg.5. "Cross Docking and Cross Doching Nelwork Dsign,,, www.tti.js],e.gaieoh.edu1998-99

"Cross docldng dclivers for Retait,,, w \.\\,.spscommercc.coln. 1999.Haffinglrnr, Lisa, "Digital Age $arehousing,,' penton Media. *,ww.industryweek.conl, July

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8. "Distribution strategiesJ Supply Chain analysis at Volirlwagen of An ca",,www.eng.aubum.edu, 2000. ,, --r,9. O'Brien. P. Kevin, 'rValue Chain Report- Warehous MaL{geientSysterrx Add Vahr,,,rvrvw.industryu'eek.corrr, w vw.i\waluechain.com, February.-1.0';.20110. '-'10. Weiscotl. N. Maria. "Wrreho ce Evolution: High .Telh..'DCiJclopnents cct InatustryCooking", Plants. sites and parks magazinc, ww*,.Iizsit- i:qid p;Uilrarv/March.2000.l1."Cross-dockinginthU.K,"SiemcnsDern3tic,l\\\\\.sicmensde taric.:orn.3U.2001.l2. "WhAt is cross docking?, Tle Wateho se \ ord, \a s $.colof$ hoLrsrnc.conr aU. 200l.13. Colosino, Robert and Medr,yk, Nicholas, ',Whgjesati Distribution, Managing comptcxsrpply chain requirements r..in thc foodscrvice industry,,,wholcsaleclistribution.sen,ices.ibnr.com. Apriiil.t, 200 t.14. Daudelin.,\lcxandre, "Supply Chain Managcmnt thr Wat-l\lxrr Way,.. Supply Chain andLogistics Jounral, \r-1vrv.infochain.orr, Apiil.2l. 2001.

t5. "Wil-Mart.com: The ehysic'al:\giarii_,rgocs Virtual," Red Herjog Magazire.\r \ s.f(J\e. rinq.ro ", M:rJ 7. 201,1.16. Hulten, Stall'en and Nyberd. -Anna, ' otuntary retiit chains and tho threats andopportunities oltruropean tntegt;ilqn,', www.s ee.org, May 15.2001.I7. "It's not only the retail side,--w:ll-Itiart Distribution,'. www.Wal Maf\rarch.conl- Januarv0. ) 1,u2.18. "StaufTer V Wnl-ryarl a-tqie :Iirc., wrvrv.oalj.dol.gov. June 14. 2002.19. Coylc. J. John,,,U'ardi, l' ltdrvar.l. Langley, C. Joln, ,'The Management oI BrsinessLogisticsr A Suiily..Chail'Prospctive,', wwrv.house.gor,, June 25. 200-2.20. "Thriry Wal-Mart \Pjlrtner for Flat Rite Rental plan," Auto Renral News,www.autorentalne\r's.coin, J ly 29, 2002.2l. "Transloading, Cross docking," $,ww.connnoditylogistics.co1n. October 23. 2002.

Wal'lvlart's Supply Chain Manaqement practices

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Note & Assignmant for Supply Chain