INVENTORY MANAGEMENT AT WAL-MART

In the market for shaver blade replacements? A printer? First-aid supplies? Dog
food? Hair spray? If so, you expect that the store you shop at will have what
you want.

However, making sure that the shelves are stocked with tens of thousands of
products is no simple matter for inventory managers at Wal-Mart, which has
1,276 Wal-Mart stores, 1,838 Supercenters, 556 SAM’S CLUBs, and 92
Neighborhood Markets in the United States, and an additional 1,617 stores in
nine other countries.

You can imagine in an operation this large that some things can get lost. Linda
Dilman, CIO at Wal-Mart, recounts the story of the missing hair spray at one of
the stores.

The shelf needed to be restocked with a specific hair spray; however, it took
three days to find the case in the backroom. Most customers will not swap hair
sprays, so Wal-Mart lost three days of sales on that product.

Knowing what is in stock, in what quantity , and where it is being held is

critical to effective inventory management. Without accurate inventory
information, companies can make major mistakes by ordering too much, not
enough, or shipping products to the wrong location.

Companies can have large inventories and still have stockouts of product
because they have too much inventory of some products and not enough of
others. Wal-Mart, with inventories in excess of $29 billion, is certainly aware of
the potential benefits from improved inventory management and is constantly
experimenting with ways to reduce inventory investment.

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For example, Wal-Mart realizes that effective inventory management must
include the entire supply chain. The firm is implementing radio frequency
identification (RFID) technology in its supply chain.

RFID chips with small antenna are attached to cases or pallets of a products.
When passed near a “reader,” the chip activates, and its unique product
identifier code is transmitted to an inventory control system.

Readers used by Wal-Mart have an average range of 15 feet. RFID readers

installed at dock doors will automatically let Wal-Mart’s operations teams as
well as its suppliers know when a shipment arrives inside a building, whether it
is a distribution center or a store.

Wal-Mart uses the data to decide when to bring additional stock to the store
shelf and to figure out whether a store ordered too much of a product (by
monitoring how long a case of the product sits in the stock room before its
contents are emptied) or whether too much stock sits in the supply chain (if the
case does not get shipped out of a distribution center for days). Better
merchandise availability provides a major consumer benefit.

The potential for this technology is awesome, however it is still in its

infancy stage for application to inventory management in the supply chain. Must
technological development is needed before the benefits become truly evident.

Nonetheless, it appears that Wal-Mart may have solved the problem of the
missing hair spray. One handheld RFID reader could have found the missing
case in a few minutes.