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

1. IS560 Enterprise System Supply Chain ManagementPresentation to Mr. Starinsky & IS 560 Class • Prepared by: • Lucy Chen • Jianjun Huang • Don Janjaroen • Mollie Limprana • Thomas Pinkowski • Cynthia Saving • March 15, 2004

2. 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

3. 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.

4. 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

5. 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:

6. What is Supply Chain Management 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.”

7. 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

8. What is Supply Chain Management Management beyond the borders of an organization • Upstream • The upstream business partners are the external organizations • that supply products or services to an organization. • Downstream • The downstream supply chain is the organizations external • distribution channels, processes, and functions that the product • passes through on its way to the end customer.

9. What is Supply Chain Management

10. What is Supply Chain Management • Elements of the Internal Supply Chain • SCM includes the management of organization’s internal components in the supply chain:

11. What is Supply Chain Management • 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

12. What is Supply Chain Management • 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.

13. 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.

14. Supply Chain Technology at Wal-Mart 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

15. Supply Chain Technology at Wal-Mart 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.

16. 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.

17. Benefit of SCM to Wal-Mart 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

18. Benefit of SCM to Wal-Mart “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

19. Benefit of SCM to Wal-Mart Benefit of SCM to 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

20. 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

21. Best of Breed Practice 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)

22. Best of Breed Practice 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.

23. Best of Breed Practice • 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.

24. Benefits of SCM to others Benefits of SCM to other businesses and organizations can be viewed as • Streamlined inventories and reduced costs • Reduced errors and redundant labor • Increased visibility of all business transaction • Improved return on inventory investment • Optimized transportation costs, routes, and load times • Increase cost savings from outsourcing for low cost materials • E.g. Dell and Intel have created an increasingly streamlined supply chain model with mass-customization and customer-direct capabilities. Cost and Financial • Retailers • Manufacturers • Distributors Improvements

25. Benefits of SCM to others Benefits of SCM to other businesses and organizations can be viewed as • 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. Processes • Manufacturers • Construction companies • Automotive industry Improvements

26. Benefits of SCM to others Benefits of SCM to other businesses and organizations can be viewed as • 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. Services • Retailers • Service companies Improvements

27. Questions ?