​ WalMart China Questions, management homework help

Anonymous
timer Asked: Apr 4th, 2017
account_balance_wallet $30

Question Description

Evaluate the costs of the Cross Dock and the Staple Stock center distribution models. Consider the advantages and disadvantages of each model,

What is the financial impact of stock outs caused by lower line fill rates in the cross dock DC model?

Besides costs, what other factors should be considered as part of the analysis?

How different will the needs of WM China be in five or ten years? What do WM China’s future needs represent in terms of its supply chain infrastructure?

What are the capabilities of WM China’s’s suppliers in 2015? How will their capabilities evolve over the next decade?

If you were in the position of Lesley Smith, what recommendations would you make and why?

Please answer these questions (and any other issues you wish to consider) as part of your report, providing detailed analysis and/or discussion. Be as specific as appropriate, but be careful of unsubstantiated decisions or sweeping generalizations. Key criteria for evaluation are the logic, application of concepts, and depth of thought in arriving at the decisions. Be concise (2- 3 pages of single-spaced text, with up to 3 additional pages for tables or figures. 1 “ margins, 12 point font). For sake of brevity, do not provide a review of the case at the beginning of the case analysis.

Unformatted Attachment Preview

facility costs Staple Stock Cross dock facility Costs Premuim cost Facility Size Sq.m. Monthly Lease Annual; Lease Rate Annual Total lease cost 20 Year lease cost Premium lease cost/year 2018 Picking cost/case Volume/day Numberof days/yr Total Annual Cost Premium annual cost 2025 Picking cost/case Volume/day Numberof days/yr Total Annual Cost Premium annual cost Facility and Picking Costs, Staple and Cross Dock Financial Cont 2018 2025 Volume/day Number of days/yr Total cases/yr Average value of case24.5 Gross Margin Revenue per case Gross profit Volume/day Number of days/y Total cases/yr Average value of c Gross Margin Revenue per case Gross profit Total Annual Contribution Total Annual Cont Break Even Analysis for 2018 and 2025 2018 #of cases Number of cases and total facility costs Number of cases and premium lease cost/yr Number of cases and Premium Picking costs Total Lease and picking costs 2025 Number of cases and premium lease cost/yr Number of cases and Premium Picking costs %cases Total Lease and picking costs Financial Contribution of casesz shipped from Dongguan D.C, for 2018 and 2025 018 and 2025 WalMart China Questions Evaluate the costs of the Cross Dock and the Staple Stock center distribution models. Consider the advantages and disadvantages of each model, What is the financial impact of stock outs caused by lower line fill rates in the cross dock DC model? Besides costs, what other factors should be considered as part of the analysis? How different will the needs of WM China be in five or ten years? What do WM China’s future needs represent in terms of its supply chain infrastructure? What are the capabilities of WM China’s’s suppliers in 2015? How will their capabilities evolve over the next decade? If you were in the position of Lesley Smith, what recommendations would you make and why? Please answer these questions (and any other issues you wish to consider) as part of your report, providing detailed analysis and/or discussion. Be as specific as appropriate, but be careful of unsubstantiated decisions or sweeping generalizations. Key criteria for evaluation are the logic, application of concepts, and depth of thought in arriving at the decisions. Be concise (2- 3 pages of single-spaced text, with up to 3 additional pages for tables or figures. 1 “ margins, 12 point font). For sake of brevity, do not provide a review of the case at the beginning of the case analysis. For the exclusive use of S. Reddy, 2016. W15534 WALMART CHINA — SUPPLY CHAIN TRANSFORMATION Professor Fraser Johnson wrote this case solely to provide material for class discussion. The author does not intend to illustrate either effective or ineffective handling of a managerial situation. The author may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com. Copyright © 2015, Richard Ivey School of Business Foundation Version: 2015-11-26 Distribution and transportation have been so successful at Wal-Mart because senior management views this part of the company as a competitive advantage, not as some afterthought or necessary evil. And they support it with capital investment. A lot of companies don’t want to spend any money on distribution unless they have to. Ours spends because we continually demonstrate that it lowers our costs. This is a very important strategic point in understanding Wal-Mart. 1 Joe Hardin Executive Vice President, Logistics and Personnel, Walmart, 1986–1997 As Lesley Smith, senior vice president of supply chain management at Walmart China, sat in her office in Futian District, Shenzhen, she reflected on the accomplishments of her team during the previous three years, but recognized that more work still needed to be done: A great deal has been accomplished since I arrived in late 2011. We have completed an aggressive warehouse management system transition and converted our suppliers from a direct-to-store delivery to centralized shipping through a Walmart DC [distribution centre]. Improvements to our supply chain have created capabilities that provide improved quality and service to our customers at lower costs. The team has been recognized for their accomplishments, but the journey is far from over. Our next step is to build a supply chain for perishable products that is scalable and sustainable — our next generation of supply chain infrastructure. It was Wednesday, August 26, 2015, and Lesley was preparing for a meeting in Bentonville, Arkansas, in late September, when she was expected to present a detailed plan for Walmart China’s network of distribution centres for perishable products (perishable DC). The investment in infrastructure would be the next major step in the organization’s supply chain transformation. However, Lesley needed to evaluate two distinct options before her plans could be finalized. Walmart used two different perishable DC models in its global operations. The traditional model used in United States was staple stock flow, whereas Walmart used the cross dock flow model in its European operations (ASDA Stores Limited in the United Kingdom). 1 Sam Walton with John Huey, Made in America: My Story, Bantam, New York, 1993, p. 262. This document is authorized for use only by Surender Reddy in 2016. For the exclusive use of S. Reddy, 2016. Page 2 9B15D018 The compelling arguments and trade-offs for both approaches needed to be balanced against Walmart China’s needs for its supply chain operations. Lesley recognized that the decision to adopt either option needed to be carefully evaluated since it would commit the organization to infrastructure that would significantly impact both its supply chain capabilities and performance for the next 20 years. WALMART STORES, INC. Based in Bentonville, Arkansas, Walmart Stores Inc. (Walmart) was the world’s largest retailer, with sales of $482 billion 2 in fiscal year 2015. The company employed 2.2 million associates worldwide and operated approximately 11,000 stores, under 72 banners, in 27 countries. It also provided online shopping in 11 countries. Each week, Walmart served more than 260 million customers. Online shopping had become an important part of Walmart’s strategy, and the company expected to invest more than $1 billion on ecommerce in fiscal year 2016. 3 In the late 1960s, Sam Walton, the company’s legendary founder, had pioneered the strategy of providing a broad assortment of quality merchandise at “everyday low prices.” Walmart’s three operating segments were Walmart U.S., Walmart International and Sam’s Club. Exhibit 1 provides a summary of Walmart’s financial results for fiscal years 2011–2015. Walmart China 4 Walmart entered China in 1996, opening its first Supercenter and Sam’s Club in Shenzhen, Guangdong Province. By August 2015, the company’s Chinese presence had grown to 416 retail stores, consisting of 404 Supercenters and 12 Sam’s Club stores, covering 166 cities among 19 provinces, two autonomous regions and four municipalities nationwide, and employing more than 100,000 associates. The Supercenters were approximately 17,000 square metres (182,000 square feet) and offered an assortment of approximately 20,000 items of general merchandise, consumables, grocery and fresh products. Sam’s Club stores in China offered an assortment of approximately 5,000 items of bulk groceries, general merchandise and fresh products to its members in its stores that spanned 20,000 square metres (215,000 square feet). The company was expanding its e-commerce presence in China. In May 2015, Walmart China announced the launch of its hypermarket online-to-offline (O2O) platform “Walmart To Go” in Shenzhen, where it had its highest concentration of Supercenters. The platform consisted of the newly launched Walmart mobile shopping app (application) and the “To Go Service Center” that allowed customers to place orders for pick-up or home delivery. In addition, in July 2015, Walmart had acquired Yihaodian, a Chinese online retailer, as part of its plans to accelerate development of its e-commerce business in China. DISTRIBUTION AT WALMART CHINA At any given time, large retailers in China, such as Walmart, carried 15,000 to 20,000 stock keeping units (SKUs) in a typical store, and the assortment varied across stores. It was inefficient and impractical for suppliers to ship all products directly to stores even though many retailers and suppliers in China followed this ship-direct-to-store model in 2015. Walmart DCs allowed suppliers to ship products using full truckloads, full container loads or in economic order quantities. Shipments to stores were consolidated at the DC and shipped on the basis of individual store needs (e.g., forecasted requirements or customer orders). Therefore, DCs provided several value-added activities to retail supply chains that could reduce 2 All currency amounts are shown in U.S. dollars unless otherwise indicated. Walmart Stores, Inc. 2015 Annual Report. 4 The text in this section is based on company records and information on the “Walmart China Factsheet,” www.walmartchina.com/english/walmart/index.htm, accessed August 28, 2015. 3 This document is authorized for use only by Surender Reddy in 2016. For the exclusive use of S. Reddy, 2016. Page 3 9B15D018 overall supply chain costs and improve customer service levels, by reducing transportation costs and optimizing inventory levels. The DCs also enabled consistent service and product fill-rates to every store regardless of its distance from suppliers and sales performance, resulting in increased in-stock positions and higher sales. Common DC functions included consolidation, break-bulk, cross-docking, seasonal storage and reverse logistics processing. Walmart China operated two types of DCs in 2015: 11 perishable DCs and nine dry DCs. The latter, also referred to as “ambient DCs,” handled dry grocery items, consumables and general merchandise products, such as electronics, apparel and toys. The volumes shipped through the dry DCs were primarily cross dock, which accounted for approximately 85 per cent of the total, with the balance as staple stock, which were pulled from inventory held in the DCs. Perishable DCs handled products that required temperaturecontrolled environments across three temperature zones: frozen (–8 degrees Celsius or below; e.g., frozen food and ice cream), chill (0 to 10 degrees Celsius; e.g., meat, dairy, deli and produce) and normal (12 to 18 degrees Celsius; e.g., tropical fruits, chocolate and eggs). These perishable DCs operated with a flowthrough design that used cross docking to bypass storage, transferring products directly from the receiving area to the outbound area for shipping to Walmart stores. The Evolution of Walmart China’s Supply Chain Lesley Smith had arrived in China in late 2011 as the new senior vice president of supply chain management. She had previously worked for Walmart Canada as vice president of logistics at its head office in Mississauga, Ontario, and had agreed to move to China to lead the transformation of the company’s supply chain network. Lesley reflected on the challenges that she faced: Our challenges were not just a supply chain–related, but were much broader enterprise issues. Business transformation was necessary and supply chain was an important driver in this process. The business was quite fragmented. We had 29 autonomous buying offices across the country, with a serviceable dry network made up of five DCs servicing all stores. Logistics charged a warehouse fee to suppliers for using our network, so suppliers and buyers were not interested in going through our DCs because of the high costs and horrible service. The logistics team’s KPI [key performance indicator] was cost. As a result, we commissioned large cube trucks that could hold approximately 7,000 cases that were dispatched to the store only when completely full, which sometimes took more than two weeks. So while we kept our costs in line, our store shelves were often empty. To compensate, stores over-ordered and rented outside warehouses to hold the excess inventory. We had over 20,000 suppliers, many of them distributors. Despite our large size, we had no leverage because most suppliers only received orders for volumes for six or so stores. As an example, a multinational supplier produced 18 items for us from its Chinese plant. However, this supplier sold exclusively to 144 distributors, which meant that we needed to place orders to 144 different sources for same 18 items, all with low order volumes. Often we did not meet minimum order quantity and the distributors would not deliver, affecting our order fill rates that cascaded into low in-stock and on-shelf availability. Or, we would overcompensate by ordering more inventory than needed, which affected our carrying costs. There was a general sense that this is the way it has always been and that it would likely stay this way. In early 2012, our country president rolled out a three-year business transformation plan. One area of focus and investment would be supply chain. We were challenged to decrease direct-to-store This document is authorized for use only by Surender Reddy in 2016. For the exclusive use of S. Reddy, 2016. Page 4 9B15D018 volume from suppliers, increase centralized shipment through DCs, increase service levels to stores and establish a fresh DC network, while keeping our costs in line. Current Situation Between early 2012 and mid-2015, Lesley and the supply chain team made several changes that transformed the supply chain at Walmart China. The centralization of the buying organization in Walmart China reduced the number of regional buying offices and suppliers for both dry and perishable products; at the same time, the supply chain team significantly improved the volume shipped to the DC network, by strengthening the capacity and capabilities of the DC network and collaborating with suppliers to change their shipment models. The initial capital investments in infrastructure focused on the supply chain for dry products (ambient DCs); and, in 2015, Lesley started to focus on the design of the perishable DC network (see Exhibit 2). She commented: We are currently operating a total of 20 DC locations for perishable and dry and have completed an aggressive warehouse management system transition. Supplier fill rates are up and so is instock performance. We are fairly comfortable with our ambient DC network, including processes. We run an ambient DC model similar to that of Walmart in U.S., with a combination of staple stock and cross dock. To better manage the infrastructure cost, we maintain the volume of staple stock in our ambient DC network at around 15 per cent, whereas in U.S., it is 50 per cent. Most of the nine ambient DC operations are operated by Walmart exclusively, but all of our 11 fresh operations are run by 3PLs. 5 They are all flow through operations and we share the space with other users that the 3PLs support. We recognized that this was the only way we could get the fresh operation established quickly to service all of our stores. This approach also required a much less initial capital investment. However, capacity is limited in many of these sites and they are not terribly efficient, with physical constraints at some of the sites, manual systems and processes. In addition, we are training our 3PLs how to operate in this environment. Our current fresh operation is not scalable and not sustainable for the long term. We have decided that our strategy is to take this business in-house and build our own infrastructure. Lesley wanted to start with the construction of a new perishable DC in Dongguan, with a planned opening in early 2018. It would replace the Guangzhou and Shenzhen 3PL operations, which were expected to run out of capacity by late 2017 and 2018 respectively. South China was the most strategic geographical region for Walmart China in terms of business performance and concentration of stores; to support this region, it was critically important to have a DC with sufficient capacity and the appropriate capabilities. The new facility would support Walmart China’s approximately 128 stores in Guangdong and Guangxi provinces, with a weighted average distance to store of approximately 170 kilometres. Walmart China’s headquarters were in Shenzhen, close to Dongguan, providing opportunities to leverage management and systems. The new DC would be the model for future investments in perishable DCs in China; however, Lesley needed to determine the appropriate facility design that would be the most effective for Walmart China’s needs in the future. Operating seven days a week on two shifts, the Dongguan DC would have capacity to ship approximately 150,000 cases per day, with an average value of $24.50 per case; peak demand was estimated at approximately 90,000 cases per day for the launch in 2018 (see Exhibit 3). Daily average throughput at the DC was expected to be approximately 70 per cent of peak demand and the product mix would consist of 5 3PLs refers to third-party logistics service providers. This document is authorized for use only by Surender Reddy in 2016. For the exclusive use of S. Reddy, 2016. Page 5 9B15D018 about 3,500 SKUs across a broad range of product categories, such as deli, seafood, dairy, frozen meat, produce, bakery, flowers, grocery, chocolate, ice cream and tropical fruits. Smith anticipated that approximately 300 suppliers would be shipping products to the new DC. By 2025, the DC would support approximately 200 stores and a peak day volume of 142,000 cases per day (see Exhibit 3). Lesley identified two options for Walmart China’s new perishable DC network: “staple stock flow” and “cross dock flow” models. These two DC models had unique advantages, and Walmart used both models in its global perishable supply chain. Staple stock flow DCs were the dominant model in Walmart’s U.S. perishable product supply chain, while its European operations most frequently used cross dock flow DCs. Staple stock flow DCs offered capacity for short-term storage of inventory, whereas the cross dock flow DCs used a flow-through model that did not maintain inventory. In a cross dock system, product was shipped to the DC in full truckloads, unloaded from inbound trucks and loaded directly onto outbound trucks for same-day delivery to stores. Consequently, the staple stock model required a warehouse with a larger physical footprint and thus a greater capital investment, including building construction costs and investments in equipment, such as racks and forklift trucks. Notwithstanding the additional costs of setting up a staple stock flow DC, the design provided better utilization of the total cubic footprint since racking exploited space up to the full ceiling height. Cross dock flow DCs did not require space for inventory storage, which resulted in a smaller footprint and a lower ceiling height. The ability to store inventory in the staple stock flow DC model provided additional advantages. Inventory could be held either for three to seven days, depending on the shelf life of the products before shipping, or for a single day, after which all inventory was forced out for items with very short shelf life. The latter was sometimes referred to as “pick to zero.” Whereas staple stock flow DCs provided greater fle ...
Purchase answer to see full attachment

Tutor Answer

chemtai
School: UIUC

please find the attached file. i look forward to working with you again. good bye

Running Head: WAL-MART CHINA

1

Wal-Mart China
Course Title
Student Name
Professor
Date of Submission

WAL-MART CHINA

2
Wal-Mart China
Introduction

Wal-Mart organization has effective distribution models especially in China. The firm
use leased facilities as well as the centers of distribution to make the sales. The organization also
has private distributers who aid in the selling of the merchandize. The report shows that the
company makes shipment of the products up to 80%. The rest of the commodity is however
transported directly by the firm to the customers. The company uses tools such as settling the
promise of e-commerce to satisfy the needs of the customers and techniques of achievement of
the economies of scale.
Q1
Cross docking is the process by which the manufacturer delivers the commodity to the
customer without necessarily having an intermediary. This method of supply is efficient as it
reduces extreme handling of a commodity as well as the period that the commodity could be
stored in the warehouse after production. Wal-Mart sends the products to the customer within the
deliveries that have been set outbound. However there are many instances where the commodity
reaches the customer when they have already been bought so the customer becomes the second
client of the same product. Shipments are expedited to customers through the loading docks. This
is after the company that shi...

flag Report DMCA
Review

Anonymous
awesome work thanks

Brown University





1271 Tutors

California Institute of Technology




2131 Tutors

Carnegie Mellon University




982 Tutors

Columbia University





1256 Tutors

Dartmouth University





2113 Tutors

Emory University





2279 Tutors

Harvard University





599 Tutors

Massachusetts Institute of Technology



2319 Tutors

New York University





1645 Tutors

Notre Dam University





1911 Tutors

Oklahoma University





2122 Tutors

Pennsylvania State University





932 Tutors

Princeton University





1211 Tutors

Stanford University





983 Tutors

University of California





1282 Tutors

Oxford University





123 Tutors

Yale University





2325 Tutors