Wal-Mart's Supply Chain Management Practices (B): Using IT/Internet to
Manage the Supply Chain
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Case Code : OPER028
Case Length : 17 Pages
Period : 1992 - 2003
Organization : Wal - Mart
Pub Date : 2004
Teaching Note :Not Available
Countries : USA
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Analysts appreciated Wal-Mart for setting a benchmark for all the companies
operating in the retailing industry to employ the best practices in SCM.
Wal-Mart had established state-of-the art SCM systems, using the most advanced
communication technologies to link its retail stores, distribution centers,
headquarters and all its suppliers.
Over the decades, Wal-Mart had always been
the first mover in the retailing industry to embrace new technologies for
managing the supply chain processes. At the same time, Wal-Mart helped its
suppliers adapt to the new SCM technologies, so that both the parties derived
Appreciating the company, Duane Weeks, CEO and President of California-based
Exemplary Software said, "Wal-Mart has become a textbook case of how to gain
significant competitive advantage... By passing point-of-sale data to its
suppliers and empowering them to manage replenishment according to accurate
demand data, it surpassed its competitors in operational performance."
Ever since its inception, in 1962, Wal-Mart has been renowned for
employing innovative business practices in all its business processes
especially the supply chain. In the early 1970s, Wal-Mart became one of
the first retailing companies in the world to centralize its
distribution system, pioneering the retail hub and spoke system.
the system, goods were centrally ordered, assembled at a specially-built
massive warehouse, known as the distribution center (hub), from where
they were dispatched to the individual stores (spokes) as per the orders
received by the stores.
The hub and spoke system enabled Wal-Mart to achieve
significant cost advantages by the centralized purchasing of goods in huge
quantities and distributing them through its own logistics infrastructure to the
retail stores spread across the US.
Apart from an efficient distribution system, Wal-Mart was always among the
front-runners in employing IT to manage its supply chain processes. The company
started using IT to facilitate cross docking in the 1970s, followed by the use
of bar codes for inventory tracking, Electronic Data Interchange (EDI)6
for establishing direct links with the stores and installation of satellite
communication systems to co-ordinate all the activities of its supply chain...