Supply Chain Management Presentation to Mr. Starinsky & IS 560 Class

IS560 Enterprise System

Supply Chain Management Presentation to Mr. Starinsky & IS 560 Class

Prepared by:

Lucy ChenJianjun HuangDon Janjaroen Mollie LimpranaThomas PinkowskiCynthia Saving

March 15, 2004

IS 560 Enterprise Systems - DePaul University2

Agenda

Wal-Mart Background What is Supply Chain Management Supply Chain Technology at Wal-Mart Benefit of SCM to Wal-Mart Best of Breed Practice Benefits of SCM to others


Wal-Mart Background

About Wal-Mart

Wal-Mart is a global retail organization, in the business of serving customers.

In the United States, their operations are centered operating retail stores and

membership warehouse clubs. International, they are centered on retail stores,

warehouse clubs and restaurants. Their business is to offer customers quality

merchandise at low prices. Wal-Mart mission is to be the place where prices

are low and value and customer service are high everyday.


Wal-Mart Background

Background on the Wal-Mart's SCM

Wal-Mart has established critical strategies in multiple functional

areas to hit its goals for supply chain management excellence:

Financial Operations Logistics Processes People


Wal-mart Background

Wal-Mart's Financials

Wal-Mart’s Net sales (in millions) for the three fiscals years ended January 31,

2003 as follows:

Fiscal Year Wal-Mart Stores SAM’S CLUB International Other Total CompanyTotal Company Increase from Prior Fiscal Year

2003 $ 157,121 $ 31,702 $ 40,794 $ 14,907 $ 244,524 12%

2002 139,131 29,395 35,485 13,788 217,799 14%

2001 121,889 26,798 32,100 10,542 191,329 16%


Supply Chain ….

“encompasses all activities

associated with the flow and transformation

of goods from the raw materials through to the end user.

Material and information flow both up

and down the supply chain.”

What is Supply Chain Management


Supply Chain Management ….

“is the integration of these activities

through improved supply chain relationships,

to achieve a sustainable

competitive advantage.”

Handfield, R & Nicholas Jr., E 1999, Introduction to Supply Chain Management, Prentice Hall, New Jersey



Management beyond the borders of an organization


UpstreamThe upstream business partners are the external organizations that supply products or services to an organization.

DownstreamThe downstream supply chain is the organizations external distribution channels, processes, and functions that the product passes through on its way to the end customer.




Elements of the Internal Supply Chain

SCM includes the management of organization’s internal components in the supply

chain:


ProductDesign

InventoryManagement

OrderManagement

LogisticsManagement

ProductionScheduling

DistributionManagement

PurchaseManagement

InternalSCM


Information System in Supply Chain Management

Centralization of information flow Order management

Total visibility of resources and processes

Data interchange between partners within supply chain Data capture:

Monitoring of processes

Events happening across the supply chain

Automated forecasting, planning, scheduling



Supplier Relations

In SCM, the single most important ingredient is supplier relationships. It is important that the relationships are managed well, which each party involved have mutual confidence in other members of the partners in the supply chain. These types of inter-organizational relationships are called strategic alliances. A strategic alliance is a process wherein participants willingly modify basic business practices to reduce duplication and waste while facilitating improved performance.[1]

[1] Schmitz, J., Frankel, R., & Frayer, D., 1995, ‘ECR Alliance: A Best Practice Model,’ Joint Industry Project on Efficient Consumer Response, 1995.



Supply Chain Technology at Wal-Mart

Retail Link

Provides communication between Wal-Mart and suppliers.

Manages purchase orders and invoices.

Provides suppliers with sales and inventory data at every store.



Data Warehouse

101 terabytes

Largest of any Fortune 500 company

2 years worth of sales transaction history

Transactions available in data warehouse the next day

120,000 trend analysis queries every week from vendors



Vendor Involvement

Wal-Mart success depends on vendors’ analysis.

Wal-Mart expects vendors to lower prices over time.

Vendors often need to make technology and business process

changes to use Retail Link effectively.

Largest vendors have employees stationed at Wal-Mart corporate

headquarters.


Benefit of SCM to Wal-Mart

Retail Link system

More than 10,000 Wal-Mart suppliers use Retail Link to monitor

sales of their goods at the store level and replenish inventories as

needed.

Integrates into one of the largest data warehouses around, with

more than 100 terabytes of information.

Make daily transactions details (more than 10 million daily)

available to every Wal-Mart store by 4 a.m. the next day.

Today, over 7,000 suppliers access Retail Link and get answers to any question at any time. Averages 120,000 of these complex trend analysis questions each week.



Through Retail Link, suppliers/vendors can retrieve:

Purchase Orders

Sales performance data Determine how many of their products were sold at Wal-Mart the

previous day Examine the effects of markdowns or returns on their inventory Access reports on sales over a period of up to two years, as well as

sales forecasts for their products for up to one year

Inventory levels

Invoice status



“It’s really all about service to our customers. Our investment

in this technology helps our supplier partners and Wal-Mart

buyers provide customers with what they want: the right

product in the right store at the right price.”

---- Tom Coughlin, President and CEO of the Wal-Mart




Increasing visibility into all business transaction on a timely basis

Streamlining the physical pick pack process leading to reduced errors

and redundant labor

Eliminating charge backs and fines by retailer compliance and permitting

access to all data from EDI through shipping

Keeps inventory costs down

Quickly and effectively predict the needs of customers in different areas

and from different backgrounds


Best of Breed Practice

Wal-Mart's Best of Breed practice on SCM

Wal-Mart was one of the first retailers that seriously invest in it's IT

infrastructure. This gave Wal-Mart stronger foundation in information

technology comparing to competitors.

Initially developed its own information system (Retail Link), then later

outsourced it to third party. Wal-Mart understands it needs best. Develop

what they want first, after everything is on the track, outsource it to third

party.

The system itself is relatively user-friendly. Wal-Mart's partner doesn't

need time to learn to use new application. Data can be easily exported to

standard formats like Excel or Access



Wal-Mart's Best of Breed practice on SCM

Relevant information is available to its partner. This information will help its partner make a production planning according to current

trend. This relationship is based on a trust that partner will not release these information

to competitors.

The system is dynamic and adjust quantity of orders according to current situation.

Bottled water, gasoline container was almost emptied from Wal-Mart's shelves on

September 11 and flags sold out on September 12. Wal-Mart's system was able to detect

change in buying pattern and trigger orders to restock accordingly.

Wal-Mart must be able to get most up-to-date information out of the system to do be able to do proper prediction.

It keeps looking for a better way to track its inventory. (RFID)



Wal-Mart's Best of Breed Practice on SCM

Always Low Prices concept. All items must be at lowest price possible.

The goal is to reduce costs in various ways: Wal-Mart uses technology to manage its inventory and replenishment system. Relevant information is available to everyone which greatly helps suppliers and Wal-

Mart do various planning. Wal-Mart itself can use pricing knowledge to make a bargain

with supplier. On the other hand, supplier knows how well its product sells and able to

plan the production accordingly.



Wal-Mart has high expectation on its suppliers.

No early or late shipment is acceptable.

Wal-Mart does not do a business with business partner that does not

meet its requirement. Levi's had to invest a large amount of money to improve the

supply chain system according to Wal-Mart requirement.


Benefits of SCM to others

Benefits of SCM to other businesses and organizations can be viewed as

Cost and Financial

Retailers

Manufacturers

Distributors

Streamlined inventories and

reduced costs Reduced errors and redundant

laborIncreased visibility of all business

transactionImproved return on inventory

investmentOptimized transportation costs,

routes, and load timesIncrease cost savings from

outsourcing for low cost materialsE.g. Dell and Intel have created an

increasingly streamlined supply chain

model with mass-customization and

customer-direct capabilities.

Improvements




Processes

Improvements

Manufacturers Construction companies Automotive industry

Improved forecast accuracy as well as resource and distribution planning

Improved manufacturing and replenishment cycle time

Enhanced manufacturing scheduling

Increased effectiveness of planning and decision making

Improved overall efficiency in production

Enhanced a seamless multi-channel shopping

Reduced supplier base

E.g. Cisco uses the Internet to enable deep process integration of all levels of the extended supply chain.




Services

Improvements

Retailers Service companies

Reduced out-of-stock situations

Improved order fill rates

Increased ship-complete and on-time

percentages

E.g. Wal-Mart uses the replenish

model to keep their shelves full and

penalize their suppliers for late

shipment.


Questions ?

Documents

Supply Chain Management Presentation to Mr. Starinsky & IS 560 Class