Wal-Mart’s Approach to Information Systems

Wal-Mart is one of the largest retail companies in the world and has operations in 15 countries across the world (Johnson 2006, p. 1). Wal-Mart’s remarkable success is attributed to the adoption of information systems (IS) as early as 1966 when Walton (the founder) joined an IBM school in New York with the aim of enlisting the brightest student in the class to automate his business operations (Johnson 2006, p. 1). In mid 1980s, Wal-Mart invested in a satellite network, store-level point-of-sale systems and a central database to manage its supply chain operations. It also integrated sales information with external data (i.e. weather forecasts) to offer extra support to shoppers and enhance the precision of its purchasing forecasts operations (Johnson 2006, p. 7).

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Wal-Mart also developed Retail Link in early 1990s. The Retail Link had information on each sale made by the retail firm. Wal-Mart’s suppliers were given access to synchronized sales data on the merchandizes they supplied as well as individual stock-keeping entries at the store level. Wal-Mart was also among the first retail stores in 1990 to implement collaborative planning, forecasting and replenishment (CPRF); a synchronized model for planning and forecasting. The CPRF enable Wal-Mart to share crucial supply chain (i.e. information on daily sales, inventory levels and promotions). Wal-Mart also developed a vendor-managed inventory (VMI) program which required vendors to handle inventory levels at the distribution centres of the firm (Johnson 2006, p. 7).

In order to augment Wal-Mart’s VMI, vendor analysts collaborated with Wal-Mart’s supply chain staff to synchronize the flow of merchandizes from suppliers’ factories and solved supply chain problems such as dealing with unexpected spikes in demand for trendy products. What’s more, the satellite network, owned by Wal-Mart, not only received and transmitted point-of-sale information but also endowed senior managers with the capability to transmit video messages to the stores. In spite of the fact that senior managers resided and worked in Arkansas, regular video transmissions to every Wal-Mart store in their network kept the staff at each store up to date about new developments in the company (Johnson 2006, p. 7).

Wal-Mart has also adopted radio frequency identification (RFID) to manage its global operations. It is worthy to mention that RFID entails small tracking devices that basically work in a similar fashion to bar codes. The only difference is that RFID utilizes wireless readers. At first, Wal-Mart used bar codes to collect sales data. However, the retail firm currently requires its major suppliers to embrace RFID technology. By using RFID technology, the retail firm expects to save about $8 billion in overhead costs. Wal-Mart aims to use this amount to augment its market share by offering products to consumers at competitive prices (Ehring 2006, p. 4).

Thus, the information system (IS) employed by Wal-Mart is an integral component that integrate all operations within the retail company’s supply chain. Wal-Mart’s information system is based on two fundamental principles which are: A central information system to manage global operations; and common platforms and systems within the whole organization. As of now, the application of RFID and CPRF enables a scan to mechanically correct inventory level, activate payments and signal stock replenishment at all Wal-Mart stores (Johnson 2006, p. 7). As a result, the management as well as suppliers are able to access latest data about sales and inventory levels.

References

Ehring, D 2006, The Wal-Mart Model, Mortgage Bankers association, California.

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Johnson, P 2006, Supply Chain Management at Wal-Mart, Ivey Publishing, London.

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