SCOR At Wal Mart | Analysis

The Supply Chain Operations Reference Model, or SCOR, was introduced by the Supply Chain Council to provide all companies a framework or tool they can use to improve their company’s supply chain internally and externally. It allows supply chain managers to analyze their current situations as well as guide them to supply chain decisions for improvements and future resolutions. A major strength of the SCOR model is that it can be used across industries and applied to a variety of different companies.

There are five levels in the SCOR model. The first level, the process types, includes plan, source, make, deliver, and return. These process types describe the overall scope and content of the SCOR model. The following levels further penetrate each of the process types to analyze their operations strategies, quantify and measure their processes, as well as provide tools for companies to develop new processes that will give their supply chain a competitive advantage as well as the ability to efficiently adapt to market changes.

PLAN

The first phase of the supply chain according to the SCOR model is the process of planning. Planning is a crucial first step to set-up, manage, and organize the processes necessary for a flexible and efficient supply chain. The planning phase consists of several processes such as demand forecasting, product pricing, and inventory management.

Wal-Mart utilizes a sophisticated algorithm to calculate their forecasts that allows the company to forecast the exact quantities of each item to be delivered while taking into account each store’s current inventory. This is also possible because of Wal-Mart’s computerized inventory structure that uses the Point of Sales (POS) system. This not only tracks all the company’s inventory and stock at retail stores and distribution centers, it also monitors when products are sold and is able to predict the future quantities needed. It is this production scheduling and the ability to monitor inventory so closely that allowed Wal-Mart to accurately predict where, when and how much of a product will be needed and in turn develop a distribution network that works hand in hand with these needs. This reduces their costs by reducing leftover inventory and optimizing the transportation of their products by delivering only exactly what is needed. Super retailer Wal-Mart has spent considerable resources to ascertain how best to minimize transportation costs. Efforts such as owning their own fleet, standardizing processes, and capitalizing on information technology have resulted in transportation costs that are 3% of total costs versus the industry average of 5%. By analyzing how to cut costs in all aspects of their transportation, Wal-Mart was able to pass these savings onto consumers and support their ‘always low prices’ strategy.

SOURCE

The second phase of the supply chain, sourcing, focuses on the procurement of materials and resources. Choosing suppliers that best meet the company’s needs is the main part of this phase. Transportation not only serves as a link between the company and its suppliers, but transportation providers are essentially a supplier in and of themselves as well. In this case as wal-mart is retailer it doesn’t has to go for sourcing that is procurement of raw-material is not required. The suppliers in this case will be the companies who are selling their product through wal-mart retailers that are:

Grand ocean star (Supplier of sea food it takes 5 to 10 days after order)

Procter & Gamble Co (it takes lead time range of 8.5 to 14.0 days to deliver the food product)

Nestle

Gillette

Hewlett-Packard

Johnson & Johnson

Kimberly-Clark

Kraft Foods Nestlé Purina Pet Care

Unilever

MAKE

The third phase in the Supply Chain Operations Reference model is make, defined as the “process that transforms a product to a finished state to meet planned or actual demand” (Bolstorff & Rosenbaum, 2003). There are three parts to this phase which include product design, production scheduling and facility management.

Wal-Mart exemplifies how the construction of a product affects transportation costs. Wal-Mart recently asked its 60,000 suppliers worldwide that by 2008 they decrease the amount of overall packaging they use by 5%. Wal-Mart believes this packaging proposal will save the company $3.4 billion. When Wal-Mart previously did this in 2005 with the packaging of its private clothing label, Kids Collection, the company saved $3.5 million in one year.

By reducing the amount of packaging, Wal-Mart is not only cutting costs, but they are reducing the weight and volume of their products. This increases the ability of their trucks to carry more per truckload, possibly even making less runs in a given day. Wal-Mart’s packaging decisions illustrate the direct impacts supply chain decisions and transportation can have on each other.

Wal-Mart had just over 40 distribution centers located around the United States. Stocked in these centers were over 80,000 items. 50% to 65% of Wal-Mart’s competitors directly supplied the inventory to their retailers from their warehouses, in comparison to Wal-Mart’s 85%. Wal-Mart replenished their stores on average within two days compared to the five days their competitors took. The shipping costs were approximately 2% less of total cost than competitors (Chandran, 2003). The location of a facility can cut transportation costs dramatically as shown by the Wal-Mart example.

DELIVER

The fourth phase in the Supply Chain Operations Reference model is the delivery of the product. This phase is most associated with the role of transportation in the supply chain process as it is the most visibly connected. The delivery part of the process can be broken down into two different segments, order management and delivery scheduling. Transportation plays a role in each in that “processes that provide finished goods and services to meet planned or actual demand, typically include order management, transportation management and distribution management

Wal-Mart has a private fleet of their own truck drivers and by somewhat integrating backward in their supply chain, they have needed to become efficient in documenting and tracking their products. To do this, Wal-Mart employees use hand held computers, a form of EDI systems, which contain information about the product’s storage, packaging and shipping and eliminates the need for actual paperwork saving them time. Because there is no third party, Wal-Mart must self manage the ordering of their products with great accuracy.

What makes Wal-Mart’s distribution process so efficient is that they use a logistics technique known as “cross-docking” .It breaks down the distribution of the products into five simple stages. The unique aspect of Wal-Mart’s system is that their drivers deliver the trucks to their distribution centers at specific times and set intervals. Their entire distribution system is a consistent flow of goods adjusted to the individual needs of each retail store. Wal-Mart’s delivery system works so well because it is developed in accordance with the demands of each store and the communication between each point allows the process to be effective.

Wal-Mart believe that the widespread implementation of RFID technology marks a sea change in the supply chain, much as the introduction of bar codes was as seen as revolutionary two decades ago. But while bar codes can tell a retailer that it has two boxes of product XYZ, Wal-Mart’s EPCs can help distinguish one box of product XYZ from the next. This allows retailers greater visibility in monitoring product inventory from supplier to distribution centre to store.

RETURN

Most store items can be exchanged or refunded with a receipt within 90 days of purchase.

Walmart’s No Receipt policy applies to items returned in a store only. You have the option of a cash refund (for purchases under $25), a Gift Card for the amount of the purchase (for purchases over $25), a credit to your credit card or an even exchange for the product. We can make up to three No Receipt returns within a 45 day period.

All merchandise sold and shipped by Walmart.com may be returned to a store within 90 days of receiving it. If there is an error on our part related to your order, we will issue a credit for your order and any applicable shipping and gift-wrapping charges.

An item must be returned in the original manufacturer’s packaging, so we recommend you keep your packaging for at least the first 90 days after purchase.

Plants, Food, and certain Health and Beauty items: To return perishable items, the following information is to be required and send to customer care link of wal-mart i.e

Order number for the item

Date of arrival

Condition of item at time of arrival

Detailed explanation of the issue