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PREPARED BY

AJAI GOVIND G (191065)

AMBIKA GUPTA (191067)

ANKIT JETHANI (191073)

ANKIT JAIN (191074)

CHANDRIKA MITTAL (191082)

KULVIR SINGH GILL (191092)



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EXECUTIVE SUMMARY

With more than 6,500 discount stores, Sam's Clubs and Supercenters in the US and across 13
countries in the world, and earning revenues more than $250bn, US based Wal-Mart is the
largest retailing company in the world. The company is much bigger than its competitors in the
US - Sears Roebuck, K-Mart, JC Penney and Nordstrom combined.

In 1979 K-Mart was one of the leading companies in the retail industry. At that time, Wal-Mart
was a small niche retailer in the South with only 229 stores and average revenues about half
those of K-Mart stores. Today Wal-Mart is the largest and highest profit retailer in the world.
How did Wal-Mart do it? A competitive business environment made Wal-Mart focus on
innovative processes and systems to overhaul its supply chains and make them more efficient.
Over the decades, Wal-Mart had always been the first mover in the retailing industry to embrace
new technologies for managing the supply chain processes, which has helped it to provide low-
cost merchandise to its customers and undercut its competitors. Wal-Mart established state-of-the
art SCM systems, using the most advanced communication technologies to link its retail stores,
distribution centers, headquarters and all its suppliers. At the same time, Wal-Mart helped its
suppliers adapt to the new SCM technologies, so that both the parties derived benefits.

The starting point was a relentless focus on satisfying customer needs; Wal-Mart¶s goal was
simply to provide customers with access to goods when and where they want them and to
develop cost structures that enable competitive pricing. The key to achieving this goal was to
make the way the company replenishes inventory the centerpiece of its strategy. This was done
by using a logistics technique known as cross-docking. In this strategy, goods are continuously
delivered to Wal-Mart¶s warehouses from where they are dispatched to stores without ever
sitting in inventory. This strategy reduced Wal-Mart¶s cost of sales significantly and made it
possible to offer everyday low prices to their customers.



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TABLE OF CONTENTS

INTRODUCTION ................................................................................................................................ 4

BUSINESS MODEL ............................................................................................................................. 6

a L-M RT HISTORY Ȃ TECHNOLOGY TIMELINE ................................................................ 8

M N GING THE SUPPLY CH IN Ȃ TECHNOLOGY T a LM RT ....................................... 10

›  
    


 
   

     

BIBLIOGR PHY ............................................................................................................................... 23



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1. INTRODUCTION

Wal-Mart Stores, Inc. (formerly branded as Wal-Mart), an American public corporation that runs
a chain of large discount department stores and a chain of warehouse stores, was founded
by Sam Walton in 1962. He started off by opening "Walton's Five and Dime", a Ben Franklin
franchise (a chain of variety stores owned by a regional retailer Butler Brothers) in Bentonville,
Arkansas. The company was incorporated as Wal-Mart Stores, Inc. on October 31, 1969. By
1970, he had eleven Walton's stores. Inspired by the successes of other discount department store
chains, Walton opened the first store in his own discount chain in Rogers, Arkansas that
year. Walton's assistant, Bob Bogle, came up with the name "Wal-Mart" for the new chain. It
began trading stock as a publicly held company on October 1, 1970, and was soon listed on
the New York Stock Exchange. The company's first stock split occurred in May 1971 at a market
price of $47. By this time, Wal-Mart was operating in
5 states: Arkansas, Kansas, Louisiana, Missouri and Oklahoma, and entered Tennessee in 1973,
and Kentucky and Mississippi in 1974. As the company moved into Texas in 1975, there were
125 stores with 7,500 associates, and total sales of $340.3 million. By 1977, Wal-Mart made its
first corporate acquisition, assuming ownership and operation of the Mohr-Value stores
in Michigan and Illinois. This was followed by the acquisition of the Hutcheson Shoe
Company in 1978. In the same year Wal-Mart also branched out into several new markets,
launching its pharmacy, auto service center, and jewelry divisions.

In April 1983, the company opened its first Sam's Club store, a membership-based
discount warehouse club, in Midwest City, Oklahoma. By the company's twenty-fifth
anniversary in 1987, there were offices to track inventory, sales, and send instant communication
to their stores. Continuing their technological upgrades, they had equipped 90% of their stores
with barcode readers by 1988, to further assist in keeping track of their large inventory. In 1988,
the first Wal-Mart Supercenter opened in Washington, Missouri. The supercenter concept
features everything contained in a standard Wal-Mart discount store, in addition to a tire and oil
change shop, optical center, one-hour photo processing lab, portrait studio, and numerous alcove
shops such as banks, cellular telephone stores, hair and nail salons, video rental stores, and
other fast food outlets. The 1990s saw an era of furious growth on an unprecedented scale and
the incorporation of several new ideas and technology into the business. In 1990, Wal-Mart



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surpassed key rival Kmart in size. Two years later, it surpassed Sears. Wal-Mart entered the
international market in 1991, with the opening of their first store in Mexico City.

Wal-Mart suffered a setback in 1992, when Walton died after prolonged illness. But it continued
its impressive growth by focusing more on establishing its stores overseas. The company still
continued to grow rapidly and it now operates four retail divisions -- Wal-Mart Supercenters,
Wal-Mart discount stores, Neighborhood Market stores and Sam's Club warehouses. By 1997,
Wal-Mart had become the largest volume discount retailer in Canada and Mexico. By 2002,
Wal-Mart had emerged as the largest company in the world in terms of revenues. It was ranked
first in the global Fortune 500 list in the financial year 2001-02 earning revenues of $219.81
billion. The company had come a long way since 1979, when it generated annual revenues of
more than a billion dollar for the first time, to 2001 when it generated a billion dollar every 1.5
days.

Analysts attribute the phenomenal growth and achievement of leadership status of Wal-Mart in
the retail industry, to its continued focus on customer needs and reducing costs through efficient
supply chain management practices. The company was able to offer a vast range of products at
the lowest costs in the shortest possible time, mainly due to 2 factors ± Wal-Mart¶s highly
automated distribution centers, which significantly reduced shipping costs and time and its
computerized inventory system, which speeded up the checking out time and recording of
transactions.



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2. BUSINESS MODEL

A Business model is central to any successful business. Wal-Mart is no exception. Wal-Mart has
always been innovating and improving its business model to suite its organizational goals and
also meet customer requirements, and so has managed to stay on top year after year. Wal-Mart
has employed a mixed-business model for its business for the same.

To understand the Business models used by Wal-Mart, first it is important to know the factors,
which go in defining those models, and how does it relate to Wal-Mart specifically.

Market Strategy of Wal-Mart

Wal-Mart stresses mainly on their Everyday Low prices (³EDLP´) pricing philosophy, in which
they price items at a low price every day that builds & maintains customers trust in their pricing.
Since they employ both the ³clicks and bricks´ and ³bricks and mortar´ methods to market their
products, consumers get to choose their products either the traditional way or online anytime of
the day. Though Wal-Mart has not advertised in Advertising, as many of its competitors do, the
trust people have built on the Wal-Mart brand has taken them far from their competitors.

Organizational Development

Wal-Mart has restructured its business into two parts to handle specific organizational needs.

Specialty Division

- Tire & Lube Express


- Wal-Mart Optical
- Wal-Mart Pharmacy
- Wal-Mart Vacations
- Wal-Mart's Used Fixture Auctions
- Wal-Mart Alaska Bush Shopper

Retail Division

- Wal-Mart Stores
- Super centers



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- SAM'S CLUBS
- Neighborhood Market
- International walmart.com

Competitive Advantage

Wal-Mart has been an undisputed leader in offering the markets lowest prices to consumers. It
has always given a ³price match guarantee´, and has challenged other stores to offer lesser prices
and has agrees to reimburse the difference, the difference of price if any. No other store could
meet this and Wal-Mart has been leading the pack for years.

Market Opportunity

Wal-Mart employs a combination of two Business Models viz.

Y Y
 Y  ± SAM¶S CLUB segment of Wal-Mart supports small
businesses. Its main focus in this segment is to create its own network of trusted partners to
coordinate supply chains and provide exceptional value on brand-name merchandise at
³Members Only´ prices.

Y    Y   ± Wal-Mart uses ³clicks and bricks´ methodology to provide
millions of its customer¶s online version of its retail store, where customers can shop at any hour
of the day or night without leaving their home or office.

Wal-Mart employs Sales revenue model as it is mainly involved in sale of goods and services.

These two models help Wal-Mart in achieving its business perspectives related to its firms
organizational needs and the second helps in its interaction with the customer and manages
goods and services offered by Wal-Mart to the end users.




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3. WAL-MART HISTORY ± A TECHNOLOGY TIMELINE

For nearly half a century Wal-Mart has led the information technology charge to cope with
growth and fuel its global expansion. Following are the key changes over the years.

1962: First Wal-Mart opens in Rogers, Arkansas.

1975: With more than 125 stores and $340.3 million in sales, Wal-Mart leases an IBM 370/135
computer system to maintain inventory control for all merchandise in the warehouse and
distribution centers and to prepare income statements for each store. Electronic cash registers in
more than 100 Wal-Mart stores record point-of-sale (POS) data to maintain inventory.

1977: Wal-Mart builds a companywide computer network and deploys a system for ordering
merchandise from suppliers.

1979: Wal-Mart sales top $1.2 billion, making it the first company to reach more than $1 billion
in sales in a mere 17 years. The company builds a computer center and installs the first terminal
in a store: an IBM 3774.

1983: The Company begins to use bar codes for scanning POS data.

1984: Store associates start using Texlon handheld terminals when reordering merchandise.
Upon scanning a shelf label, the unit provides a description of the merchandise, information on
prior quantities ordered and other data. Bob Martin is named CIO.

1985: Wal-Mart has 882 stores and sales of $8.4 billion.

1987: Wal-Mart completes what is at the time the largest private satellite communication system
in the United States. It links all operating units of company and headquarters with two-way
voice, data and one-way video communication. A check-in system designed to take full
advantage of container bar-code labeling is in the back room of every Wal-Mart store.

1990: A data warehouse prototype is created to store historical sales data.

1992: Wal-Mart deploys the Retail Link system to strengthen supplier partnerships. The system
provides vendors information on sale trends and inventory levels.



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1993: Randy Mott becomes CIO.

1995: Wal-Mart has stores in 50 states, for a total of 1,995 Wal-Mart stores, 239 Supercenters,
433 Sam's Clubs and 276 international stores. Sales top $93.6 billion.

1996: Wal-Mart makes Retail Link and EDI available via the Internet and begins using the
Internet as an application platform. Wal-Mart and Sam's Club launch online stores.

2000: Kevin Turner becomes CIO.

2002: Wal-Mart chooses the Internet for data exchange with thousands of its global suppliers.
Linda Dillman becomes CIO. Wal-Mart has its biggest single-day sales in history: $1.43 billion
on the day after Thanksgiving.

2004: Wal-Mart announces it will deploy radio frequency identification (RFID) technology on
Jan. 1, 2005.

2006: Rollin Ford is named CIO. Wal-Mart redesigns Walmart.com, starts experimenting with
Web 2.0 and social networking tools, and contracts with Oracle and Hewlett-Packard to use their
price-optimization and BI retail applications. The company ends the year with $349 billion in
sales, nearly 2 million employees and 6,775 stores worldwide.

2007: Wal-Mart launches Site to Store service, enabling online customers to pick up
merchandise in stores.



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4. MANAGING THE SUPPLY CHAIN - TECHNOLOGY AT WAL-MART

Supply chain management (SCM) is the coordination of a network of facilities and distribution
options that performs procurement of materials, processing the materials into finished products,
and distribution of the products to customers. SCM is seen as involving five core processes.
These include planning, sourcing, making, delivering, and returning.

Fig 1: Typical supply chain showing interrelations between all involved parties.

SCM exists in both service and manufacturing environments. A typical supply chain consists of
many interactions between suppliers, manufacturers, distributors, retailers, with the ultimate goal
of providing either a service or a product to customers. This also works in reverse with the
customer at the head of the process when returning a product.

SCM is used as a means to integrate planning, purchasing, manufacturing, distribution, and


marketing organizations that normally do not work together to achieve a common goal. Each
works toward goals specific to their own organization that accomplish narrow objectives. SCM
is a way of integrating these varying functions so that they work together to maximize the
benefits for all involved.



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The overall goal of SCM is to optimize supply chains in an attempt to provide more accurate and
time sensitive information that can be used to improve process times and cut costs. Supply
chains have been around for decades and a constantly being improved. Since the core of Wal-
Mart business is perpetual improvement in its Supply Chain implementation, it believes in no
compromise on implementing an innovative IT infrastructure and strong communication system
as they are the important links in the chain for a smooth functioning of the complete system. The
Supply Chain can be represented pictorially as shown in figure 2:

Fig 2: Wal-Mart supply Chain



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Supply chain management at Wal-Mart can be described in 3 sections.

4.1 PROCUREMENT AND DISTRIBUTION

Wal-Mart¶s process of procurement involves reducing its purchasing costs as far as possible so
that it can offer best price to its customers. The company 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. Each distribution centre is divided in different
groups depending on the quantity of goods received. The inventory turnover rate is very high,
about once every week for most of the items. The goods to be used internally in US arrive in
pallets & imported goods arrive in re-usable boxes.

Fig 3: Wal-Mart Distribution Center

The distribution centers needed to ensure steady flow & consistent flow of products. They work
on pull strategy for supplying materials to stores. Wal-Mart has excellent infrastructure in IT and
communication. With this, the information of any smallest of sale is recorded in the system and
transferred to the rest of the linkages in the chain. This sales record is then compensated with the
replenishment of that item right from manufacturer to the Wal-Mart store within 2 days. This
time for replenishment is 5 days for Wal-Mart¶s competitors. Distribution centers also act as
central point for cross docking.

Wal-Mart uses a robust and extensive communication network for its procurement. All its
retail stores, DCs and manufacturers are connected through a common network. Any sales



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data from store can be received directly at the manufacturer¶s end and thus he can plan its
production schedule to meet the replenishment and order fulfillment requirement. By that
time, the store is replenished with that item from the nearest DC, and in case of non-
availability, it is supplied from different DC in minimum possible delay.

Wal-Mart has also entered into collaboration with its suppliers for maintaining their inventory in
Wal-Mart source and also to streamline the replenishment process. One example of what Wal-
Mart has done with SCM and its suppliers is that of its strategic collaboration with Proctor &
Gamble (P&G). These two built a software system that hooked P&G up to Wal-Mart¶s
distribution centers. This system would then monitor supply levels and when products run low,
automatic alerts are sent out to require the shipment of more products to that distribution center.
Wal-Mart has taken this as far as going to the individual store locations. The shelves are
monitored in real time via satellite links that send inventory messages whenever P&G products
are scanned at a register. This allows P&G to be fully aware of up to the minute product
inventories at the actual store locations and ship additional products as necessary. This concept
is a huge step in making SCM as efficient as it can be.

Wal-Mart being so huge needed to keep track of men and material sent across different countries
and had to maintain hundreds of warehouses across the world. Managing the center is
economical with the large-scale use of sophisticated technology. Bar-codes were initially
identified as a suitable technology to meet the purpose. Wal-Mart pushed the retail industry to
establish the universal bar code, which forced manufacturers to adopt common labeling. The bar
allowed retailers to generate all kinds of information - creating a subtle shift of power from
manufacturers to retailers. Wal-Mart became especially good at exploiting the information
behind the bar code and is considered a pioneer in developing sophisticated technology to track
its inventory and cut the fat out of its supply chain.

But due to the limitations of barcodes, a new emerging technology called RFID was identified to
meet the demands. RFID is low cost Radio Frequency Identification system which requires
minimum human intervention to carry out tasks ranging from billing to materials tracking and
supply chain management. RFID technology provides real-time information that will allow
manufacturers to get better readings of customers and markets thus further improving supply



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chains. RFID helps retailers provide the right products at the right places at the right times
ultimately maximizing sales and profits.

Wal-Mart has been leading the charge with RFID technology. They have begun requiring all
their major suppliers to implement RFID technology on all products supplied to Wal-Mart. It
consists of a small wireless device which can store good amount of data and can virtually be
tagged to anything. The picture:

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Stock management, reduced labor costs, increased efficiency and decreased transaction times all
equal roughly $7-9 billion in savings for Wal-Mart.

4.1.1 RFID ± The Technology

RFID is an electronic tagging technology as shown in figure 4 that allows an object,


place, or person to be automatically identified at a distance without a direct line-of-sight,
using an electromagnetic challenge/response exchange.

Fig 4: RFID Devices

The ability to read without line-of-sight is the best advantage of RFID over bar-code
systems. RFID readers can sense items even when the tagged items are hidden behind
other tagged items. This enables automation. The challenging part of implementing RFID
is that tagged items should not be missed by the reader due to interference, multipath



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fading, transient effects etc. Missed reads are an unfortunate reality with RFID systems.
RFID uses a serialized numbering scheme such as EPC (Electronic Product Code). Each
tag has a unique serial number. Serial number information is extremely powerful in
understanding and controlling the supply chain and provides much more detailed
behavior of the supply chain than can non-serialized bar codes such as UPC (Universal
Product Codes) and EAN (European Article Numbering). Serial numbers have many
advantages such as food freshness/expiration. This can tell how for how long an item has
been in the supply chain where as such information is not captured in bar code system.
Hence items can be reached the right place at the right time. Furthermore RFID
implementation monitors theft too. For example if number of items reached at the
retailer¶s outlet is less than that was departed from supplier¶s location, it can be easily
tracked for.

In addition, Wal-Mart is planning to enhance mobility to its existing RFID tag readers by
implementing RFID-enabled forklift. These readers will have the capability to read the
tags on the pallets and transmit data through the RFID network, which would help the
users to be better informed about the supply-chain data. In all these ways, RFID systems
have stronger sensor networking system or monitoring system than bar code systems.

4.1.2 RFID Infrastructure


Many software systems used in enterprise systems today are not designed to handle
serial numbers as required by the RFID systems. The problem in synchronizing RFID
systems to software system can be best described as the problem in synchronizing a
speaker to a hi-fi amplifier. If the hi-fi amplifier is not synchronized to speaker there
will be distortion in sound signal. Likewise there will be mismatch in capabilities and
requirements if RFID system is not synchronized with enterprise software properly. A
solution to this problem is to introduce a layer between RFID readers and the
application software commonly known as RFID middleware. It has two levels of
functionality - a lower level device and data management and a higher level
interpretation level.

Data management layer provides some functionality of filtering of data due to


intermittent appearances and disappearances. This can be achieved by setting some



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time threshold levels. For example you could tell the software to record tags as missing
only after they have not been seen for a certain number of seconds. This is important
because if the reader cannot read certain tags due to interference of certain objects, the
software should not conclude that the tagged item is being sold or stolen. This
mechanism would reduce false reads.

Device management is one of the most challenging parts of RFID implementation.


RFID readers interact with other devices such as motion sensors, programmable logic
arrays and human interfaces. RFID readers operate in ISM (Industrial, Scientific and
medical) bands at 13.56 megahertz, 915 megahertz and 2.45 megahertz. Because
implementing RFID is an extensive ubiquitous task, there is a complication of different
bandwidth standards around the world. For example, Japan has very different
bandwidth standard than U.S.A. Security intrusion is also an issue in RFID deployment
because RFID readers operate automatically unlike bar code scanners which are
operated by humans.

Fig 5: Two Levels of Functionality

After the data management layer yields data, the data interpretation layer must extract
inference from such data and forward it to the applications that deploy RFID. This
inference mechanism is a very sophisticated task. For example if a tagged pallet
carrying tagged items out of the door should not be confused with the one that just
passes by the door and does not go outside it. This high level of reasoning involves a lot
of inferences and associations.

Tags can be associated with each other when they are assembled.



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Integrating RFID into the enterprise is one task but extracting value for the enterprise at
the systemic level is another challenging task which requires lot of control and effort.

Fig 6: Architecture with Independent EPC Visibility Layer

The EPC visibility layer keeps track of RFID data in many level of detail. The
architecture for such a system can be shown as in figure 6. The enterprise EPC systems
can then be a single source of all EPC data. The enterprise system can keep a true and
multi resolution record of all EPC data permitting different applications to access EPC
data at the appropriate resolution. The Auto-ID center has developed software called
savant which serves as the edge and the enterprise software. They also built a prototype
of the ONS. EPCglobal operates ONS. EPCglobal also sell EPC codes to users who
want to place EPC tags on their products. EPCglobal run a number of hardware and
software modules of the EPC system. The EPCglobal system includes a number of
standards for communicating with readers, for middleware of the edge, and for the edge
and enterprise EPC systems. This emergence of EPCglobal system has changed the way
supply chain is operated today.




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Every employee thus has access to the required information regarding the inventory
levels of all the products in the center. They make 2 scans- one for identifying the
pallet, and other to identify the location from where the stock had to be picked up. Bar
codes & RFID are used to label different products, shelves & bins in the center. The
hand held computers guide employee to the location of the specific product. The
quantity of the product required from the center is entered in the hand held computer,
which updates the information on the main central server. hus, at any moment, any
information about inventory, goods in transit, supply schedules is known and shared
with all the supply chain members through the network. The computers also enabled
the packaging department to get accurate information such as storage, packaging &
shipping, thus saving time in unnecessary paperwork. It also enables supervisors to
monitor their employees closely in order to guide them & give directions.

This enables Wal-Mart to satisfy customer needs quickly & improve level of efficiency
of distribution center management operations.

4.2 LOGISTICS MANAGEMENT

This involves fast & responsive transportation system. More than 7000 company owned trucks
services the distribution centers. These dedicated truck fleets enables shipping of goods from
distribution centers to the stores within 2 days and replenish the store shelves twice a week. The
drivers hired are all very experienced & their activities are tracked regularly through ³Private
Fleet Driver handbook´. This allows the drivers to be aware of the terms & conditions for safe
exchange of Wal-Mart property, along with the general code of conduct.

For more efficiency, Wal-Mart uses a logistics technique called ³Cross Docking´. In this system,
finished goods are directly picked up from the manufacturing site of supplier, sorted out and
directly supplied to the customers. This system reduces handling & storage of finished goods,
virtually eliminating role of distribution centers & stores. The manufacturer directly forwarded
the goods to a place called the ³staging area´. The goods were packed here according to the
orders received from different stores and then directly sent to the customers. Because of ³cross-
docking´ the system shifted from ³supply chain´ to ³demand chain´ which meant, instead of



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retailers µpushing¶ the products into the system, the customers could µpull¶ the products, when &
where they required.

4.3 INVENTORY MANAGEMENT

What sets Wal-Mart apart from the other retail stores is its ability to cater to the individual needs
of the stores. A number of delivery plans are available to the stores and it is up to the stores to
choose the best delivery plan that suits its needs. No matter how remotely a store is located,
goods are delivered to it within 24-48 hours from the time the store places the order.

Wal-Mart has been a pioneer when it comes to application of Information Technology. It


invested heavily on IT infrastructure and solution as early as 1975, when its competitors had no
idea about the IT systems. Below is a chronological flow of Wal-Mart¶s IT investments:

> 1975 ± IBM computer systems to track inventory


> 1979 ± Started using bar codes
> 1987 ± Set up its own private satellite network
> 1992 ± 125,000 square foot data center
> 2000¶s ± Usage of RFID
> Wal-Mart¶s e-business venture µwalmart.com¶ similar to Amazon.com

Considering the rapid expansion of Wal-Mart stores, it was essential to have a very good
communication system. For this, Wal-Mart had set up its own satellite communication system in
1987. This allowed the management to monitor each and every activity going on in a particular
store at any point of the day and analyze the course of action taken depending on how the things
went.

Inventory management on Wal-Mart is fully managed by IT. It employs Point of Sales (POS)
system which helps it to track the sales and merchandise stock levels on the store shelves. The
forecasting method used by Wal-Mart is the best in the retail industry. It uses complex algorithm
systems which enables it to forecast the exact quantities of each item to be delivered, based on
the inventories in each store. Wal-Mart also used bar coding and radio frequency technology to
manage its inventories. Through these technologies, the goods could be directed to the



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appropriate dock, from where they are loaded on to the trucks for shipment. Bar coding also
enables easy picking, receiving and proper inventory control of the goods apart from enabling
easy order packing and physical counting of the inventories. Employees use ³Magic Wand´,
which is linked to in-store terminals through a Radio frequency network, to keep track of the
inventory in stores, deliveries and backup merchandise in stock at the distribution centers. A
centralized inventory database allows the personnel at the store to find out the level of
inventories and location of each product at a given time. It also shows the location of the product
like distribution center or transit on the truck. When the goods are unloaded at the store, the
inventory system is immediately updated.

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. Wal-Mart makes full use of its IT infrastructure to make more inventories available
in case of items that customers wanted most, while reducing overall inventory.

Wal-Mart owns the ³Massively Parallel Processor (MPP)´, largest & the most sophisticated
computer system in private sector, which enables it to easily track movement of goods & stock
levels across all distribution centers and stores. For emergency backup, it has an extensive
contingency plan in place as well.

4.3.1.Retail Link

Successful inventory management, an important part of maintaining low prices at Wal-


Mart, requires up-to-date information about sales as well as good communication with
suppliers. This scenario is critical when there are thousands of stores, tens of thousands
of suppliers, and hundreds of thousands of products. Wal-Mart turned to technology in
the early 1980s, first for collecting and analyzing sales data and then for transmitting
orders to suppliers with Electronic Data Interchange (EDI). By the 1990s, Wal-Mart
was collaborating electronically with thousands of its suppliers, using EDI initially and
then developing its own applications, collectively known as Retail Link.

The inventory management solution developed by Wal-Mart is completely in-house


and it is its core competency as it is better than most of the traditional software¶s

 

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developed by the IT companies. The below figure shows the functionalities done by the
inventory management software developed by Wal-Mart:

Fig 7: Functionalities done by the inventory management software developed by Wal-Mart

Suppliers use modems to dial into the Wal-Mart database for up-to-date, store-by-store
information on sales and inventory for their products. This information, and the various
applications of Retail Link, allowed Wal-Mart suppliers to work with the company's
buyers to manage inventory in the stores-forecasting, planning, producing, and shipping
products as needed. The result was faster replenishment, a product mix tuned to the
needs of local customers, and lower inventory costs for Wal-Mart. With Internet
technology and the Cisco network, Wal-Mart has elevated Retail Link to a new level of
efficiency and usefulness. It was transformed from a traditional dial-in network to an
Internet application. It became easier for vendors to use, because they just need a Web
browser. More international suppliers could get access, because it's on the Internet and
it's easier and less expensive to maintain.

In the past it seemed that Wal-Mart was in the software business, sending Retail Link
software to its vendors, making sure that they had the proper versions, and maintaining
its bank of modems in working order. When Retail Link is an Internet application,
modems were not needed, and software updating could be done on the Web, and

 

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vendors are able to use their own browsers. Another advantage was that data
transmission was no longer limited to the speed of dialup modems. Because vendors are
all accessing the same database, Wal-Mart uses password protection to designate what
they can see. Users in different locations within a vendor company get different
passwords, depending on their need to know.

With Retail Link, vendors can see how their products are selling, use it to do what-if
scenarios, and then work with Wal-Mart on sell-through and pricing. It is a very rich
and functional tool. Automated replenishment and the smooth functioning of the Wal-
Mart supply chain depend on reliable connectivity between the stores, the centralized
database, and the distribution centers. Speed is important, and so is the optimum
functioning of the logistics system. With the Cisco network, speed was increased
dramatically and outages also substantially cut.

4.3.2.Voice-based Order Filling (VOF)

In 1998, Wal-Mart installed a Voice-based Order Filling system in all its grocery
distribution centers. Each person responsible for order picking was provided with a
microphone/speaker headset, connected to the portable VOF system that could be
worn on the waist belt. They were guided by the voice to item locations in the
distribution centers. The VOF system also verified quantities picked, and could
respond to a variety of requests such as providing product detail (type, price, barcode
number etc). By installing the VOF system, Wal-Mart eliminated mis-picks and
product labeling costs since the system did not require paper lists and labels to be
affixed on goods.

Hence by making effective use of Information Technology in all its company


operations, Wal-Mart was successful in providing uninterrupted service to its
customers and suppliers alike.



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