FINAL EXAM

WAL-MART and S&OP EVOLUTION CASE STUDY

MM6041
SUPPLY CHAIN DESIGN

RANDY MARZEIND
29115238

MASTER OF BUSINESS ADMINISTRATION

SCHOOL OF BUSINESS AND MANAGEMENT
INSTITUT TEKNOLOGI BANDUNG
PT. CHEVRON PACIFIC INDONESIA CLASS BATCH 4
2016
 Wal-Mart

1. Other than a need to expand, what other reason would Wal-Mart have for opening
stores globally?
Answer:
Reasons for Wal-Mart to start global operations are:
a. Wal-Mart wants to increase the volume of its purchases so that it can have a
greater bargaining power with its suppliers.
b. Foreign economies remain strong and so the economic health of Wal-Mart
will remain sound if it opens stores abroad.
c. Global market forces involve the pressures created by foreign competitors, as
well as the opportunities created by foreign customers. A rival European
chain, Carrefour SA, has already a strong presence in the South American
market. Wal-Mart could lose the market totally if it did not respond quickly.
d. Much of the demand growth available to companies is in foreign and emerging
markets.
e. International operations would also help Wal-Mart identify potential new low-
cost suppliers for domestic operations.
f. Various subcomponents and technologies are available in different regions and
locations around the world, so Wal-Mart needs to have the ability to use the
resources quickly and effectively.
g. Global cost force. Cheaper labor wage is sufficient justification for overseas
manufacturing.

2. Why would it be beneficial for Wal-Mart to have suppliers in different countries?

Answer:
Having many suppliers in different countries would enhance Wal-Mart's
"Everyday Low Prices" policy by allowing it to hedge against cost increases due
to economic and/or political conditions in a given country, and would avoid the
risk of the changing in the exchange rate of the money. Besides, this can lower the
transportation cost and the lead time, as well as cheap labor resources.

3. Why would Wal-Mart want strong centralized control of its stores? Why would
Wal-Mart want strong local control of stores?
Answer:
Strong centralized control is helpful for aligning local operations with the overall
corporate objectives. Additionally, Wal-Mart's years of domestic expertise in
retail operations, e.g., distribution systems, can be leveraged to improve
distribution in South America if strong centralized control is implemented. On the
other hand, it may be impossible to analyze customer preferences and understand
cultural differences unless local managers control certain aspects of the business.
In addition, the reasons why would Wal-Mart want strong local control of its
stores are because it does not want to lose to the domestic market share, and also
they have to compete with other competitors around. Besides they may be concern
about the political stability, for example in South America, they may suffer from
the local policy. Also, the exchange rate between different kinds of foreign
currency is one of the reason. For example, the rate between RMB and US dollar
 is always changing. Therefore, acquiring a strong local control of its stores would
allow Wal-Mart to make the business more stable and sustainable.

4. What pitfalls and opportunities other than those mentioned in the Wall Street
Journal article would Wal-Mart face over the next few years?
Answer:
Pitfalls faced by Wal-Mart:
State of the economy
Value of the exchange rate
Domestic taxes rate
Customer services
Employee treatment

Opportunities implemented by Wal-Mart:

Dominate the Retail Market Everywhere
Growth by expansion in the US and Internationally
Create positive Brand and Name Recognition
Branching out into New Sectors of Retailing

5. What are the sources of risks faced by the global supply chain and how can the
firm mitigate the various risks?
Answer:
Firms with global supply chain face a wide range of risks that never make the
headlines, supply chain strategy teams should deal with the unexpected day-to-day
challenges that have just as much impact when taken on an organization. The team
would ideally get together in a one day field meeting to identify the risk facing the
firms global supply chain. Listed below as thought starters are some risks which
the firms with global supply chain may face:
a. Routine supply chain risk
These involve events like unexpected transit delays, changes in customers
orders, problem with suppliers, theft, and warehouse or production
malfunction, all of which can cause serious delays in customer shipments.
b. Quality Problems
A long supply line often exacerbates quality issues. This risk often causes
companies to carry more inventory. One firm, manufacturing consumer
durable products, discovered a quality problem and was mortified to find that
it had two months worth of supply in transit on the overseas region, all with
the same defect.
c. Forecast error
Long range forecasts required by long global supply lines are notoriously
inaccurate. Forecast error over long global lead times often results in major
availability issues and excess inventory problems.

d. Damage
In importing and exporting activities, there is significantly more handling in
the supply chain that exponentially increases the chance for damage.
e. Intellectual property loss.
This is a major problem that should not be underestimated. Many firms, to
their chagrin, have found inadvertently created a new global competitor.
f. Natural disasters
These are unpredictable. A few firms try to anticipate climatic disruption.
g. Political/civil unrest
While not a major concern, it should be on a companys risk list and
examined, depending on the countries of import and export.
h. Labor strikes
Strikes are a reality, strikes could also occur at production plants or facilities
that supply critical parts.
i. Laws and regulations
Unusual or unexpected application of regulations in a particular country must
be considered for example the Foreign Corrupt Practice Act (FCPA) in the
United States.

Firms with global supply chain need to develop mitigation plans, such plans
involve some art and some science. The plan should focus on significantly
reducing either the probability of occurrence (likelihood) and/or the degree of
impact (severity). It could also involve installing an early warning system. Like a
serious disease, risk events are caught early can often be managed successfully.
Some elements that companies routinely use in their risk mitigation strategy
include:
a. Insurance
Firms need to work with insurance providers and create a plan to use
insurance to mitigate risk where appropriate, based on objective cost-benefit
analysis.
b. Design for globalization
The simpler the product design and the fewer parts and SKUs involved, the
less risk there is in a global supply chain. Leading firms design for
globalization. They minimize component parts and SKUs and have rigorous
beginning of life tollgates and end of life processes for their products.
c. Supply chain event management
An early warning system is crucial if risks are to be identified quickly enough
to do something about them. Supply chain event management systems put in
place criteria that trigger alerts. For example if a container of critical parts
faces a delay at a port, the SCEM system should send an alert to allow the
problem to be responded quickly.
d. Lean/Six Sigma
When firms apply the principles of Lean and Six Sigma to their global supply
chain, along with value-stream mapping, they find a multitude of ways to
reduce cycle time and variation by eliminating wasteful activities in the
process. Risk diminishes as cycle time and variation decline.

e. Contingency Plan
Leading companies have documented contingency plans for risks that would
have a devastating impact. This would include detailing what would happen if
the company lost a major supplier, one of its factories, or one of its DCs.
f. Forward buying or hedging
Hedging is a way for company to minimize or eliminate foreign exchange risk,
as well as the risk of commodity price increase, at a cost.
g. Contracting
Supply shortages invariably happen. Some firms anticipate the inevitable and
work with suppliers to make sure their firms get more than their fair share
during serious shortage.
 S&OP Evolution

1. What are the major challenges facing supply chains that can be aided by IT?
Answer:
There are four major challenges facing supply chains management that can be
aided by IT as follows:
a. Information availability on each product from production to delivery point.
b. Single Point of Contact (SPoC)
c. Decision making based on total supply chain information
d. Collaboration with supply chain partners.

2. What is the impact of business processes on supply chain management IT?

Answer:
Companies that invest mostly in business processes do better than those who
invest in IT only and lack the appropriate business processes. Investment only in
IT without the appropriate business processes lead to negative returns. There are
several positive impacts for companies who had successfully mature their business
processes:
a. Lower inventory levels
b. Improvement in certain areas demand IT investments
c. Achieve superior financial performance
d. Lead to significant efficiencies (e.g. operation expenses)

Linking among business processes and IT systems with operations and financial
performance is shown on below figure

3. How can ERP vendors take advantage of Internet technology?

 Answer:
Companies adopted Enterprise Resource Planning (ERP) systems to improve
business processes, reduce cost, enforce a discipline of best practice &
consistency and prepare for future growth. While the investment of adoption of
ERP was very high, there was also much criticism for expensive overrun
implementations, restricted functionality, and inflexible complicated configuration
and set-up.

In parallel with the rise of ERP, the internet was moving from a messaging facility
used by academics and the military to a powerful communications tool that could
be used by consumers and businesses alike. ERP vendors were quick to take
advantage of this opportunity and new enterprise applications emerged. These
included supply chain integration (e-SCM), business to business eProcurement
(B2B eProcurement), and customer relationship management (CRM) all of which
could be integrated with the companies ERPs.

4. Compare the capabilities required to achieve supply chain excellence, according

to
a. Decision focus
b. Data aggregation level
c. Time to implement
d. The number of users involved in the analysis
Answer:
The main IT capabilities required for SC excellence are grouped into four layers
as follows:
a) Strategic Network Design
Pick the optimal number, location, and size of warehouses and/or plants.
Determine optimal sourcing strategy
Determine the best distribution channel
Objective is to minimize total cost including sourcing, production,
transportation, warehousing, and inventory, by identifying the optimal
trade-offs between the numb er of facilities and service levels.
Planning horizon typically a few months to few years.
Used aggregated data and long-term forecast.
b) Tactical Planning
Determine resource allocation over shorter planning periods such as weeks
or months.
Supply chain master planning
- Coordinates production, distribution strategies, and storage
requirements
- Efficiently allocates supply chain resources to maximize profit or
minimize system-wide cost.
Inventory planning
- Determines the optimal amount of safety stock
- How to best position inventory in the supply chain
c) Operational Planning
Enables efficiencies in procurement, production, distribution, inventory,
and transportation for short term planning.
Planning horizon typically daily to weekly
 System focused on generating feasible strategies, not optimized solutions
d) Operational Execution
Provide the data, transaction processing, user access, and infrastructure for
running a company.
Tend to be real time in the sense that the data are current and are
constantly being updated by users and events.

The difference between the various layers of capabilities are described on the
following table:
Strategic Tactical Operational Operational
network design Planning Planning Execution
Decision
Very High Very High Very High Very High
Focus
Data
aggregation Very High Medium Medium Medium
level
Time to Weeks or Days to
A few years Days to Weeks
Implement Months Weeks
The Number Large
Few number Large number
of users Few number of number of
of involved of users
involved in users involved in users
in the involved in the
the analysis the analysis involved in
analysis analysis
the analysis