In , distribution costs registered as 1. Beyond Technology SCM processes go beyond technology. But the retailer has refined all SCM methods. The positive trend in net income has not brought a rise in net profit margins owing to a rise in operating expenses.
In terms of sales revenue, Wal-Mart has the greatest sales turnover as compared to its current competitors in the global discount retail market. However, it should be noted that when it comes down to management of cost of goods sold, competitors like Target, Safeway, and Walgreen have managed to have better gross profits margins as compared to Wal-Mart recently.
Wal- Mart has the greatest level of net profit margin in the industry with better margins as compared to competitors like Costco, Safeway, Kroger Co, Amazon. The business was successful and Walton soon acquired a second store within three years. Walton not only looked for opportunities to open stores in other small towns but also explored the possibility of introducing innovative practices such as self-service. As the need for people to manage his stores increased, Walton tried to attract talented and experienced people from other stores.
By the y late s, the retail chain had established a pharmacy, an auto service center, and several jewellery divisions. Customers could buy goods at wholesale prices by becoming members and paying a nominal membership fee. No Wal-Mart suffered a setback in , when Walton died after a prolonged illness. But it continued its impressive growth in the s, focusing more on establishing its stores overseas.
In , Wal-Mart expanded its operations in Mexico by entering into a joint venture with Cifra. Two years later, the company acquired Woolco stores from Woolworth, Canada.
By , Wal-Mart had become the largest volume discount retailer in Canada and Mexico. In January , Wal-Mart expanded its German operations by buying 74 stores of the hypermarket chain, Interspar. The stores were acquired from Spar Handels AG, which owned multiple retail formats and wholesale operations throughout Germany.
By , Wal-Mart had emerged as the largest company in the world in terms of revenues. Analysts felt that Wal-Mart had come a long way since , when the company generated annual revenues of more than a billion dollar for the first time. By , the company was doing a billion dollar business in a week and by , it was crossing the billion dollar mark in every 1. The company was able to offer a vast range of products at the lowest costs in the shortest possible time.
The company procured goods directly from manufacturers, bypassing all intermediaries. Wal-Mart was a tough negotiator on prices and finalized a purchase deal only when it was fully confident that the products being bought were not available elsewhere at a lower price. That is the job. And your customer deserves the best prices that you can get. He always knows what he can sell, and we want his bottom price. Our truck will pick it up at your warehouse.
Now what is your best price? By making the process transparent, the retailer could be certain that the manufacturers were doing their best to cut down costs. Once satisfied, Wal-Mart believed in establishing a long- op term relationship with the vendor.
However, the company, generally, preferred local and regional vendors and suppliers. Over 80, items were stocked in these centers. According to rough estimates, Wal-Mart was able to provide replenishments within two days on an average against at least five days for competitors.
Shipping costs for Wal-Mart worked out to be roughly 3 percent as against 5 percent for competitors. No Each distribution center was divided into different sections on the basis of the quantity of goods received and was managed the same way for both cases and palletized goods.
The inventory turnover rate was very high, about once every two weeks for most of the items. Goods meant for distribution within the US usually arrived in pallets, while imported goods arrived in re-usable boxes or cases. In some cases, suppliers delivered goods such as automotive and drug products Do directly to the stores. The distribution centers ensured a steady and consistent flow of products to support the supply function.
As Wal-Mart used sophisticated barcode technology and hand-held computer systems, managing the center became easier and more economical. Every employee had an access to real- time information regarding the inventory levels of all the products in the center. They had to just make two scans — one to identify the pallet, and the other to identify the location from where the stock had to be picked up. Different barcodes were used to label different products, shelves and bins in a center.
The hand-held computer guided an employee with regard to the location of a particular product from a particular bin or shelf in the center. When the computer verified the bin and picked up a product, the employee confirmed whether it was the right product or not. The quantity of the product required from the center was entered into the hand-held computer by the employee and then the computer updated the information on the main server.
The hand-held computer also enabled the packaging department to get accurate information about the products to be packed. It displayed all information about the storage, packaging and shipping of a particular product thus, saving time on unnecessary paperwork. It also enabled the center 4 Wal-Mart's Supply Chain Management Practices supervisors to monitor their employees closely enabling them to give directions and even guide them even on the move.
This enabled the company to satisfy customer needs quickly and improve the level of efficiency of the distribution center management operations.
Each distribution center had facilities for maintaining personal hygiene such as shower bath and fitness centers. It also had provision for food, sleep and personal business.
The distribution center could also be used for meetings and paperwork. The truck drivers of Wal-Mart sometimes availed these facilities. The distribution centers were serviced by more than 3, company owned trucks. These dedicated truck fleets allowed the company to ship goods from the distribution centers to the stores within two days and replenish the store shelves twice a week.
Station: Chennai Date: The case explains in detail how Wal-Mart managed various components of the supply chain including procurement, distribution, logistics and inventory management. It covers how the use of innovative IT tools has helped the company in improving the efficiency of supply chain. The case concludes with a discussion on the benefits reaped by Wal-Mart due to its efficient and effective supply chain management system. Supply chains exist in both service and manufacturing organizations, although the complexity of the chain may vary greatly from industry to industry and firm to firm.
Keeping this in mind Sam Walton, the founder of Wal-Mart had always focused on improving sales, constantly reducing costs, adopting efficient distribution and logistics management systems and using innovative information technology IT tools.
By , Walton had established 18 Wal-Mart stores. By late s, the retail chain had established a pharmacy and an auto service center. In s, Wal-Mart continued to grow due to huge customer demands in small towns.
In , Wal-Mart operated more than 3, discount stores, Sam's Clubs and Supercenters in the US and more than 1, stores in all major countries across the world. Wal-Mart was one of the largest private sector employers in the world, with employee strength of approximately 1. The phenomenal growth of WalMart is attributed to its continued focus on customer needs and reducing cost through efficient supply chain management practices. Under the system, goods were centrally ordered, assembled at a massive warehouse, known as distribution center hub , from where they were dispatched to the individual stores spoke.
The hub and spoke system enabled Wal-Mart to achieve significant cost advantages by the centralized purchasing of goods in huge quantities and distributing them through its own logistics infrastructure to the retail stores spread across the U. The company directly procured from manufacturers, by passing all intermediaries. Wal-Mart finalizes a purchase deal only when it is fully confident that the products being bought are not available elsewhere at a lower price.
Wal-Mart spends a significant amount of time meeting vendors and understanding their cost structure. By making the process transparent, the retailer can be certain that the manufacturers are doing their best to cut down costs.
It also showed whether a product was being loaded in the distribution center or was in transit on a truck. But it continued its impressive growth in the s, focusing more on establishing its stores overseas. Keeping this in mind Sam Walton, the founder of Wal-Mart had always focused on improving sales, constantly reducing costs, adopting efficient distribution and logistics management systems and using innovative information technology IT tools. Supply chains exist in both service and manufacturing organizations, although the complexity of the chain may vary greatly from industry to industry and firm to firm.
Goods can be easily and quickly delivered only when accurate information is available readily. Supply chains exist in both service and manufacturing organizations, although the complexity of the chain may vary greatly from industry to industry and firm to firm. All information related to sales and inventories was passed on through an advanced satellite communication system. The business was successful and Walton soon acquired a second store within three years. In this system, the finished goods were directly picked up from the manufacturing plant, sorted out and then directly supplied to the customers. In , distribution costs registered as 1.
Two years later, the company acquired Woolco stores from Woolworth, Canada. Wal-Mart made significant investments in IT to quickly locate and replenish goods at the stores.