SUPPLY CHAIN MANAGEMENT AT WAL-MART
Wal-Mart was the world's largest retailer, with US$312.4 billion sales from operations spanning 15 countries in 2006. In the most recent quarters the company had been unable to meet its self-imposed target of holding inventory growth to half the level of sales growth. Wal-Mart's new executive vice-president of logistics, Johnnie C. Dobbs, wondered what he could do to ensure that Wal-Mart's supply chain remained a key competitive advantage for his firm, RETAIL INDUSTRY
In United States, retailers competed at local, regional and national levels, with major chains such as Wal-Mart and Costco competing in foreign countries. The industry included formats such as one-store owner-operated retailer, discount stores, department stores, variety and convenience stores, specialty stores, supermarkets, supercentres, Internet retailers and catalogue retailers. The top 200 retailers accounted for approximately 30% of worldwide retail sales. For 2005, retail sales were estimated to be US$3.7 trillion in the United States and CDN$572 billion in Canada.
BACKGROUND OF WAL-MART STORES
Based In Bentonville, Arkansas and founded by Sam Walton, Wal-Mart was the world's largest retailer with more than 6,500 stores worldwide, including stores in all 50 states as well as international stores in Argentina, Brazil, Canada, Costa Rica, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Puerto Rico and the United Kingdom, as well as joint venture agreements in China and a stake in a leading Japanese retail chain. It was estimated that Wal-Mart served more than 138 million customers each week. Wal-Mart's strategy was to provide a broad assortment of quality merchandise and services at "everyday low prices" (EDLP) and was best known for its discount stores. In the general merchandise area, Wal-Mart's competitors included Sears and Target, with specialty retailers including Gap and Limited. Department store competitors included Dillard, Federated and J.C. Penney. Grocery store competitors included Kroger, Albertsons and Safeway. THE DEVELOPMENT OF WAL-MART'S SUPPLY CHAIN
Before he started Wal-Mart Stores in 1962, Sam Walton owned a successful chain of stores under the Ben Franklin Stores banner, a franchisor of variety stores in the United States. To stock his new warehouse-style stores, initially named "Wal-Mart Discount City," Walton needed to step up his merchandise procurement efforts. Purchasing
Wal-Mart, located in Bentonville, worked with suppliers to ensure that the correct mix of staples and new items were ordered. Over time, many of Wal-Mart's largest suppliers had offices in the town, supporting Wal-Mart's business. Private label sales at Wal-Mart, first developed in the 1980s, were believed to account for 20% of 2005 sales. For Wal-Mart, the private label items generated higher margins than did the suppliers' branded products. Wal-Mart wielded enormous power over its suppliers. WM business was a factor in Procter & Gamble's (P&G) acquisition of chief rival Gillette. Prior to the acquisition, sales to Wal-Mart accounted for 17% of P&G's revenues and 13% of Gillette's revenues. On the other hand, these two suppliers combined accounted for about 8% of Wal-Mart's sales. Some viewed Wal-Mart's close co-operation with suppliers in a negative light, accept payment entirely on Wal-Mart's terms, share information all the way back to the purchasing of raw materials. When negotiating with its suppliers, Wal-Mart insisted on a single invoice price and did not pay for cooperative advertising, discounting or distribution. Globally, Wal-Mart was thought to have around 90,000 suppliers, of whom 200 — such as Nestle, P&G, Unilever and Kraft — were key global suppliers. Distribution
Wal-Mart's store openings were driven directly by its distribution strategy of stores, persisting for the next two decades as Wal-Mart added thousands of U.S. stores. Stores were located in low-rent,...