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Inventory control of Wal-Mart

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Hui Li

on 8 October 2013

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Transcript of Inventory control of Wal-Mart

Inventory
control

DATE: 10/1/2013
CREATED BY: Lishan Dou
Lei Wang
Hui Li

Types of IT Methods Used
Point of Sales (POS)
This system identifies each item sold, finds its price in a computerized database, creates an accurate sales receipt for the customer, and stores this item-by-item sales information for use in analyzing sales and reordering inventory.
Radio Frequency Identification (RFID)
RFID helps track goods throughout the supply chain and ultimately will help them get the right products into the right stores at the right time.
Satellite System
links all of the stores to company headquarters, giving Wal-Mart's centralized IT department real-time inventory data.
Types of IT Methods Used
Retail Link
which provides sales data – by item, store, and day- to its vendor. This information extends the cost savings up the supply chain by linking thousands of suppliers to Wal-Mart headquarters
Texlon Hand held computer
The hand held computer is linked to in-store terminals through a radio frequency network which helped keep track of inventory in stores, deliveries and backup merchandise in stock at the distribution centers.
YES!
NO!
The impact of inventory management
Walmart’s inventory management process would not be possible without information systems.
Allows for just-in-time stocking methods that reduce cost and resource requirements.
Provides more information for upper-management and other decision makers.
Reduces responsibility on lower-level employees, which reduces training costs.
The system increases the need for an effective IT department.
Benefits
Effectively manages supply in regards to demand; this lead to better customer service and more sales
Reduces overstock
Increases inventory turnover
Allows each store to customize its inventory
Simplifies tasks for many low-level employees.
Information sharing allows for closer supplier relations.
Costs
Inventory management systems can be expensive and complex. Particularly if not used properly and inefficiently.
Technology of Inventory control
Wal-Mart invested heavily in IT and communication systems to effectively track sales and merchandise inventories in stores across the country.

With the rapid expansion, it was essential to have a good communication system.

Wal-Mart set up its own satellite communication system in 1983.

Inventory control
Wal-Mart set up its own satellite communication system in 1983.

Wal-Mart ensures that unproductive inventory is as less as possible, by allowing the stores to manage their own stocks, thereby reducing pack sizes across many categories and timely price markdowns.

Inventory control of
Overview of Wal-Mart
The world's second largest public corporation
The largest retailer
Operates more than 10,900 retail units, over 4,000 stores in the U.S.
Products Manufactured / Sold:
Food
Clothing, shoes, and accessories
Electronics and entertainment
Home decorating items
Home improvement tools
Auto motive tools & parts
Wal-Mart procures goods directly from the manufacturers, bypassing all intermediaries.
Wal-Mart has distribution centers in different geographical places in US.
Wal-Mart’s own warehouses supplies about 80% of the inventory.
The distribution centers ensured steady flow & consistent flow of products.

Procurement and Distribution
Logistics Management
More than 7000 company owned trucks services the distribution centers.

“Cross Docking”. Finished goods are directly picked up from the manufacturing site of supplier, sorted out and directly supplied to the customers.

The main objective of inventory control is to determine an optimal levels of inventory.

Make sure inventory has enough merchandise to satisfy customer needs, but at the same time not to have an overload of products so that the products will not go to waste or devalue.
Technology of Inventory control
Wal-Mart was able to reduce unproductive inventory by allowing stores to manage their own stocks, reducing pack sizes across many product categories, and timely price markdowns.

Instead of cutting the inventory across the board, Wal-Mart made full use of its IT capabilities to make more inventories available in the case of items that customers wanted most, while reducing the overall inventory levels.

Employees at the stores had the “Magic Wand,” a hand-held computer which was linked to in-store terminals through a radio frequency network.

These helped them to keep track of the inventory in stores, deliveries, and backup merchandise in stock at the distribution centers.
Hand-held computer
The order management and store replenishment of goods were entirely executed with the help of computers through the Point-of-Sales (POS) system

Through this system, it was possible to monitor and track the sales and merchandise stock levels on the store shelves.
POS system
Retail Link System
In 1991, Wal-Mart had invested approximately $4 billion to build a retail link system.

More than 10,000 Wal-Mart retail suppliers used the retail link system to monitor the sales of their goods at stores and replenish inventories.

Details of daily transactions (~10 million per day) were processed through this system.
Retail Link System
Retail Link connected Wal-Mart’s EDI network with an extranet, accessible to Wal-Mart’s thousands of suppliers.

The suppliers could find out how their product was performing vis-a-vis competitors’ products in a particular product category.
RFID Technology
(Radio Frequency Identification)
In efforts to implement new technologies to reduce costs and increase the efficiency, in July 2003, Wal-Mart asked its top 100 suppliers to be RFID compliant by January, 2005.
Wal-Mart planned to replace bar-code technology with RFID technology.
The company believed that this replacement would reduce its supply chain management costs and enhance efficiency.
Because of the implementation of RFID, employees were no longer required to physically scan the bar codes of goods entering the stores and distribution centers, saving labor cost and time.
Wal-Mart expected that RFID would reduce the instances of stock-outs at the stores.
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Walmart fiscal year financial report
VS. Competitors
We can see how Walmart’s inventory turnover compares to Target corporation and Best Buy.

This chart shows “inventory days outstanding”. We can find out Walmart’s dominance across the metric. The lower is better.

Inventory control
Conclusion
Walmart’s inventory management system provides many benefits:
faster inventory turnover
decreased need for warehouse space
reduction in safety stock
better working capital utilization

Walmart is able to provide better customer service due to its increased efficiency on operations.
an order is placed for the same constant amount whenever the inventory on hand decreases to a certain level
a continual record of the inventory level for every item is maintained
Fixed-order quantity model
Cross docking system
Walmart began with the goal to provide customers with the goods they wanted when and where they wanted them. Walmart then focused on developing cost structures that allowed it to offer low everyday pricing. The key to achieving this goal was to make the way the company replenishes inventory the centerpiece of its strategy, which relied on a logistics technique known as cross docking.
With this system, goods are continuously delivered to stores within 48 hours and often without having to inventory them. The manufacturer directly forwarded the goods to a place called the "staging area". The goods are packed there according to the orders received from different stores and then directly sent to the respective customers.

Lower prices also eliminate the expense of frequent sales promotions and sales are more predictable. Cross docking gives the individual managers more control at the store level.
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