Walmart supply chain

•
•
– Lower inventory cost – Reduced lead time POS data sharing with suppliers – Visibility of demand and inventory levels to suppliers Procurement through private exchanges – Quick response – Reduced cost of procurement
Force vendors to DSD (directstore-delivery)
No inventory at stores, vendors responsible to use, sit or hold extra stock
Pricing/ merchandising decisions decentralized to store managers to tailor to local needs
Marketing business system Product Margin mix mgmt. Channel mgmt. Advertising and branding Customer service/ relation -ship
Sales
Support business system Accounts payable/ receivable MRO management (indirect goods) Human resources
payments, check authorization and refunds Be selective in the connections you make and in the information you provide to others to ensure you capture value Select appropriate solutions and create the right balance between custom solutions and “off-theshelf” packages
Source: McKinsey analysis
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WAL*MART’S IT-ENABLED COMPETITIVE ADVANTAGE
Sam Walton opened his first Wal*Mart store in Rogers, Arkansas in 1962… • Had an early focus on being distinctive in its offerings • Hub and spoke network design • Few touch points in the distribution system … and started leveraging technology as early as 1983…
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WAL*MART – BACKGROUND
Business overview
• America’s largest retailer serving customers primarily through the
operation of – Wal-mart stores (discount department stores) – Sam’s Clubs (warehouse membership clubs) – Wal-mart Supercenters • Sales of nearly $191 billion in the fiscal year ending Jan. 31, 2001 • Employs more than 1 million associates worldwide through nearly 3,500 facilities in the United States and more than 1,000 units in Mexico, Puerto Rico, Canada, Argentina, Brazil, China, Korea, Germany and the United Kingdom Business technology agenda
Key processes
• Suppliers linked to company
extranet – Direct delivery of SKUs to POS – High availability ratio to minimize lost sales
• EDI with suppliers
• Company extranet • POS data visibility to suppliers
• Electronic scanning of • •
POS data Satellite communication EDI “retail link”
Support business system Accounts payable/ receivable MRO mgmt. (indirect goods) Human resources
… so they focused on
• Driving costs out of
the system • Highly efficient supply chain
Source: Literature search; press releases; HBS case “Wal*Mart Stores Inc.”; McKinsey analysis
Operations business system Research and development Input costs mgmt. Supply chain mgmt. Manufacturing/ service provision -ing Fulfillment
Key processes
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WAL*MART FOCUSED ON LEVERAGE POINTS…
Operations business system Research and development Input costs mgmt. Supply chain management Manufacturing/ service provision -ing Fulfillment
• Using IT to reduce supply chain costs and improve operations efficiency • Using IT to enable Wal*mart to deliver its promise of everyday low prices
Source: Annual reports
Order mgmt.
• Fast management of cash
flow through electronic networks
Source: McKinsey analysis
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… AND APPLIED TECHNOLOGY TO DRIVE COMPETITIVE ADVANTAGE
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WAL*MART VALUE PROPOSITION AND BUSINESS SYSTEM
Wal-Mart Discount Stores
Product selection Broad SKU selection
Vendor Management Ruthless negotiator, hard bargaining – able to squeeze the best price from suppliers Vendor partnerships to reduce interface costs
Distribution/ Logistics
Retail/ Store format
Selling
Stores clustered Every day low around DC’s pricing
Emphasis on high frequency items
Centralized buying with regional tailoring
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CONFIDENTIAL
Wal*Mart’s Use of Connectivity to Drive Supply Chain Efficiency
eOperations Practice
Case Study May 2001
This report contains information that is confidential and proprietary to McKinsey & Company and is solely for the use of McKinsey & Company personnel. No part of it may be used, circulated, quoted, or reproduced for distribution outside McKinsey & Company. If you are not the intended recipient of this report, you are hereby notified that the use, circulation, quoting, or reproducing of this report is strictlFra Baidu bibliotek prohibited and may be unlawful.
• Electronic scanning of Uniform Product Codes (UPC) at
the Point of Sale (POS) began and was completed for all stores by 1988, 2 years ahead of Kmart • Introduced electronic tracking of refunds and check authorization • Satellite installed at head office in Bentonville, AK in 1983 They continued to seamlessly integrate with the suppliers… • Beginning in 1990, “retail-link” gave more than 2,000 suppliers computer access to point of sale data
Order mgmt.
• Electronic invoicing,
Implications
Although initial steps can be taken quickly and value can be created in the near-term, the path to competitive advantage is a multi-year journey
• Started leveraging technology as
early as 1983
• Stopped sharing POS data
Stores sale data uploaded hourly for forecasting/ replenishment
Stores are run as independent businesses and will do everything to satisfy their local customers