WAL-MART'S SUPPLY CHAIN MANAGEMENT PRACTICES
“When you start to collapse the supply chain, accuracy in execution becomes critical. Any lack of accurate information and processes creates costly bottlenecks in the flow of goods and materials.” -- Bruce Richmond, Global head, Andersen Consulting.
The US-based Wal-Mart ranked first in the global Fortune 500 list in the financial year 2001-02 earning revenues of $219.81 billion (Refer Table I). Wal-Mart was the largest retailing company in the world. The company was much bigger than its competitors in the US – Sears Roebuck, KMart, JC Penney and Nordstrom combined (Refer Exhibit I). In 2002, Wal-Mart operated more than 3,500 discount stores, Sam’s Clubs and Supercenters in the US and more than 1,170 stores in all major countries across the world. The company also sold products on the Internet through its website, walmart.com.
GLOBAL FORTUNE 500 LIST (2002)
Rank 1 2 3 4 5
Company Wal-Mart Stores Exxon Mobil General Motors Ford Motor Enron
Revenues (in $ millions) 219,812.0 191,581.0 177,260.0 162,412.0 138,718.0
Wal-Mart was one of the largest private sector employers in the world, with employee strength of approximately 1.28 million. The company’s founder, Sam Walton (Walton) had always focused on improving sales, constantly reducing costs, adopting efficient distribution and logistics management systems and using innovative information technology (IT) tools. According to analysts, Wal-Mart was able to achieve a leadership status ((Refer Exhibit II)) in the retail industry because of its efficient supply chain management practices. Captain Vernon L. Beatty, aide-de-camp to the commander, Defense Supply Center, Columbus, Ohio said, “Supply chain management is moving the right items to the right customer at the right time by the most efficient means. No one does that better than Wal-Mart.”
Wal-Mart's Supply Chain Management Practices
Walton was born in 1918 at Kingfisher, Oklahoma, US. After graduating from the University of Missouri in 1940, Walton worked for the famous retailer, J C Penney. In his first job, Walton had displayed the qualities of a good salesman. He realized the importance of building loyalty among customers as well as employees. In the mid 1940s, Walton gave up his job and decided to set up his own retail store. He purchased a store franchise from Ben Franklin in Newport, Arkansas. It was here that he learnt his first lessons in retailing – offering significant discounts on product prices to expand volumes and increase overall profits. 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 1969, Walton had established 18 Wal-Mart stores, reporting an annual sale of $44 million. In mid 1970s, Wal-Mart acquired 16 Mohr-Value stores in Michigan and Illinois. By the late 1970s, the retail chain had established a pharmacy, an auto service center, and several jewellery divisions. In the 1980s, Wal-Mart continued to grow rapidly due to the huge customer demand in small towns, where most of its stores were located. Commenting on the growth of Wal-Mart, Walton said: “When we arrived in these small towns offering low prices every day, customer satisfaction guaranteed, and hours that were realistic for the way people wanted to shop, we passed right by that old variety store competition, with its 45 percent mark ups, limited selection and limited hours.” Wal-Mart stores were located at a convenient place in a big warehouse-type building and targeted customers who bought merchandise in bulk. Customers could...