Wal-Mart Used Technology to Become Supply Chain Leader

by Todd Traub  on Monday, Jul. 2, 2012 12:00 am  

“Two IBM 370-148 computers record performance of each store daily,” Wal-Mart bragged in its 1979 annual report.

Wal-Mart streamlined supply chain management by constructing communication and relationship networks with suppliers to improve material flow with lower inventories. The network of global suppliers, warehouses and retail stores has been described as behaving almost like a single firm.

“Wal-Mart’s whole thing was collaboration,” Crowell said. “That’s a big part of what made them so successful.”

Even in its early years, Wal-Mart’s supply chain management contributed to its success. Founder Sam Walton, who owned several Ben Franklin franchise stores before opening the first Wal-Mart in Rogers in 1962, selectively purchased bulk merchandise and transported it directly to his stores.

In 1989 Wal-Mart was named Retailer of the Decade, with distribution costs estimated at a mere 1.7 percent of its cost of sales — far superior to competitors like Kmart (3.5 percent) and Sears (5 percent).

The company’s supply chain has only become more effective since then.

Wal-Mart developed the concept of “cross docking,” or direct transfers from inbound or outbound truck trailers without extra storage. The company’s truck fleet and corps of non-unionized drivers continuously deliver goods to distribution centers (located an average 130 miles from the store), where they are stored, repackaged and distributed without sitting in inventory.

Goods will cross from one loading dock to another, usually in 24 hours or less, and company trucks that would otherwise return empty “back haul” unsold merchandise.

Collaboration

Companies within the supply chain synchronize their demand projections under a collaborative planning, forecasting and replenishment scheme, and every link in the chain is connected through technology that includes a central database, store-level point-of-sale systems and a satellite network.

Wal-Mart implemented the first companywide use of Universal Product Code bar codes, in which store level information was immediately collected and analyzed, and the company devised Retail Link, a mammoth Bentonville database. Through a global satellite system, Retail Link is connected to analysts who forecast supplier demands to the supplier network, which displays real-time sales data from cash registers and to Wal-Mart’s distribution centers.

“The big piece of supply chain management is Wal-Mart has the retail link,” Crowell said, “the information from point-of-sale data, the cash register, that they put into their system and share with all their partners.

“What makes that so innovative is at one time a lot of companies weren’t sharing that. In fact, they were using third parties where they had to pay for that information.”

 

 

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