Wal-Mart's Supply Chain Management Practices (B): Using IT/Internet to Manage the Supply Chain

 
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Case Details:

Case Code : OPER028
Case Length : 17 Pages
Period : 1992 - 2003
Organization : Wal - Mart
Pub Date : 2004
Teaching Note :Not Available
Countries : USA
Retail

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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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Introduction Contd...

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 benefits.

Operations Management Case Studies | Case Study in Management, Operations, Strategies, Marketing Management, Case Studies

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." 5

Background Note

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.

Under 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...

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5]  As quoted in the article, "Cutting Tools," posted on www.usbusiness-review.com, dated August 11, 2001.

6] The transfer or exchange of data between different companies using private networks and the Internet.

 

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