- 1.Distribution Systems in the Retail Industry a Walmart Case
Study Irina Antonescu Julius Knig
2. Learning GoalsDeveloping a framework Distribution Centers
Logistics Learning from the best! Conclusions and discussion 3.
Establishing a Distribution NetworkStrategyPlanningExecutionCosts
Distribution Strategy Transportation Network Design Distribution
Planning Transportation Planning Vehicle Planning Tour Planning
Inventory carrying costs Lost quantity costs Transportation costs
Warehousing costs 4. Distribution Centers Models and Economic
Benefits Consolidation and Break-Bulk 5. Distribution Centers
Models and Economic Benefits Sorting Mixing Sorting and Assembly
Cross-docking 6. Cross-DockingBenefits Direct processing of
materials and supplies when they are received no storing Massive
reduction of distribution costs Requirements: tight sheduling and
accurate inbound product identifications Reduced lead times
improved customer satisfaction and flexbility Suitable products:
perishable goods and ready for sale products 7. Distribution
Centers Service Benefits Spot-Stocking Full-Line Stoking To support
customer requests For seasonal productsUsed by retailers One-stop
shopping experience Restocking is done in large
shipmentsValue-Added Services Postponement of customization Low
inventory Low risk 8. Location Analysis Techniques Location factor
rating Ability to consider multiple factors SubjectiveCenter of
gravity techniqueService Location Strategy 9. Choosing the right
locationDelivery service (customer expectations vs
competition)Labour forceType of distribution area (concentration of
demand)Transport and storage costsDemand development (shifting of
demand)Infrastructure (rail, ship, plane, trucks, etc.) 10.
Choosing the means of transportation Concerns about
costsEnvironmental factorsSpeedFlexibility 11. Choosing a mode of
transportation Direct Shipping Direct Shipping with milk runs
Shipping via Distribution Center Shipping via Distribution Center
with milk runs 12. 2013 Top Retailers WorldwideProfits 2012 Walmart
15.7 bn Kroger 1.5 bn 13. StrategyEveryday low priceEffective use
of logistics managementEffective inventory controlBargaining power
over suppliersGlobal Expansion for new market opportunity 14.
Walmart Distribution SystemSuppliers Vendors = suppliers Delivery
to DC or directly store High volumeWal-Mart Distribution Center
Cross-docking Lead time 48 hours Hub and spokeWal-Mart
StoreWal-Mart Shopper Items placed on shelves rural and urban towns
very low prices 15. Hub and Spoke Pioneers in centralizing their
distribution system with the help of hub-and-spoke systemGoods were
centrally ordered, assembled at a distribution center (hub), from
where they were dispatched to the individual stores (spoke)Lead to
significant cost advantages caused by the centralized purchasing of
goods in huge quantities (economies of scale)Cost advantages
increased through its own, independent logistics infrastructure 16.
Source: Adapted from Garrison Wieland for Wal-Marts Supply Chain,
Harvard Business Review 70(2; MarchApril 1992), pp. 6071. 17.
Distribution Centers 158 distribution centerseach 1 million square
feet in size, 5-12 miles of conveyor belts in each, operate
24/79000 different lines of merchandiseeach RDC supports 90 100
stores within a 200-mile radius 18. Cross-Docking at Distribution
Center 19. Video Walmart Cross-Docking 20. Inventory Management
Vendor managed inventoryRelies on communication between suppliers,
DCs and POS in storesPOS data is sent directly to 4000 vendorsOwn
satellite communication systemStores manage their own stockUse of
IT to reduce inventory levels 21. Wal-Mart Transportation System
Fast and responsive systemMore than 7200 company owned trucks,
53000 trailers, 8000 driversExperienced drivers committed to
customer serviceMerchandise replacement system in less than
48hServices stores within a 200 mile radius of the DC 22. Reducing
transportation costsEfficient vehicle routing resulting in fuel
efficiency and less CO2 emmisionsEliminating empty
backhaulsIntroducing GPS Vehicle Tracking and mobile technologies
23. RFID In efforts to implement new technologies, 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 replaced
bar-code technology with RFID.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. 24. Green Transportation at
WalmartFuel saving technologies to make distribution fleet 25% more
efficientLoad trucks more efficientlyImprove routingAlternatively
fueled trucks 25. Long-term Goals Reduce stock at the retail
storesMinimize costs in the supply chainSupport its green
initiativesMove towards collaboration and innovationIncrease
visibility in the distribution chain 26. Discussion What are, in
your opinion, the disadvantages of cross-docking in the
distribution network system?How do you think distribution systems
will develop in the next 5 years?How have the new IT developments
changed supply chains?Thank you for your attention!
