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History of WalmartSam Walton, a businessman from Arkansas, began his retail career when he started work on June 3, 1940.On July 2, 1962, Walton opened the first Walmart Discount City store located at 719 Walnut Ave inRogers Arkansas.Since, then it has undergone several changes in its information system and its image.

The phenomenal growth of Walmart is attributed to its continued focus on customer needs and reducing cost through efficient SCM and MIS practices

Hub and Spoke SystemIn the early 1970s, Walmart became one of the first retailing companies in the world to centralize its distribution system, pioneering the retail hub-and-spoke systemGoods were centrally ordered, assembled at a massive warehouse, known as distribution center (hub), then dispatched to the individual stores (spoke).

The hub and spoke system enabled Walmart to achieve significant cost advantages by the centralized purchasing of goods in huge quantities; anddistributing them through its own logistics infrastructure to the retail stores spread across the U.S.

Using EDI for ProcurementThe company directly procured from manufacturers, by passing all intermediaries.The computer systems of Walmart were connected to those of its suppliers.EDI enabled the suppliers to download purchase orders along with store-to-store sales information relating to their products sold.On receiving information about the sales of various products, the suppliers shipped the required goods to Walmarts distribution centers.

ELECTRONIC DATA INTERCHANGE7Inventory ManagementWalmart invested heavily in IT and communication systems to effectively track sales and merchandise inventories in stores across the country.With the rapid expansion, it was essential to have a good communication system.Hence, Walmart set up its own satellite communication system in 1983.

Walmart was able to reduce unproductive inventory by allowing stores to manage their own stocks, reducing pack sizes across many product categories, and timely price markdowns.

Instead of cutting the inventory across the board, Walmart made full use of its IT capabilities to make more inventories available in the case of items that customers wanted most, while reducing the overall inventory levels.

Employees at the stores had the Magic Wand, a hand-held computer which was linked to in-store terminals through a radio frequency network.

These helped them to keep track of the inventory in stores, deliveries, and backup merchandise in stock at the distribution centers.

Order management and store replenishment of goods were entirely executed with the help of computers through the Point-of-Sales (POS) system.

Through this system, it was possible to monitor and track the sales and merchandise stock levels on the store shelves.

Retail link systemIn 1991, Walmart had invested approximately $4 billion to build a retail link system.More than 10,000 Walmart retail suppliers used the retail link system to monitor the sales of their goods at stores and replenish inventories.Details of daily transactions (~10 million per day) were processed through this system.

Retail Link connected Walmarts EDI network with an extranet, accessible to Wal-Marts thousands of suppliers.

The suppliers could find out how their product was performing against competitors products in a particular product category.

Walmart owned the largest and most sophisticated computer system in the private sector.

The company used Massively Parallel Processor (MPP) computer system to track the movement of goods and stock levels.

All information related to sales and inventories was passed on through an advanced satellite communication system.

Collaborative Planning, Forecasting and Replenishment (CPFR)By the mid 1990s, Retail Link had emerged into an Internet-enabled SCM system whose functions were not confined to inventory management alone

It also covered collaborative planning, forecasting and replenishment (CPFR).

In CPFR, Walmart worked together with its key suppliers on a real-time basis by using the Internet to jointly determine product-wise demand forecast.

CPFR is defined as a business practice for business partners to share forecasts and results data through the Internet, in order to reduce inventory costs while at the same time, enhancing product availability across the supply chain.

CPFR: Hard to implementThough CPFR was a promising supply chain initiative aimed at a mutually beneficial collaboration between Walmart and its suppliers , its actual implementation required huge investments in time and money

A few suppliers with whom Walmart tried to implement CPFR complained that a significant amount of time had to be spent on developing forecasts and analyzing sales data

Voice-based Order Filling (VOF)In 1998, Walmart installed a voice-based order filling (VOF) 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 waist belt.They were guided by the voice to item locations in the distribution centers.

18 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, Walmart eliminated mispicks and product labeling costs since the system did not require paper lists and labels to be affixed on the goods.

Quick ReplenishmentSince the floor area of any Walmart store varied between 40,000 to 200,000 square feet, movement of goods within the store was an important part of logistics operations.

Walmart made significant investments in IT to quickly locate and replenish goods at the stores.

Pretty Darn Quick displaysThe company asked its suppliers to ship goods in store-ready displays called pretty darn quick (PDQ) displays.Goods were packed in PDQ displays that arrived at the stores ready to be boarded on the racks.Walmarts employees could directly replace the empty racks at the stores with fully packed racks, instead of refilling each and every item at the racks.

VAN EDI vs Web-EDIIn October 2002, Walmart asked its 14,000 suppliers to switch over from the existing Value Added Networks (VAN) EDI to web enabled EDI

VANs route and manage EDI messages for their customers

By implementing web-EDI, Walmart can save millions of dollars in the form of license fees to the private VANs

VAN EDI WEB EDITransactions between the business partners are routed and managed through Private Value Added Networks.Transactions between the business partners are routed through the internet.It takes time for the messages to be communicated between the trading partners.Direct online communication between the trading partners.Transactions are not totally secure as they are routed through private players.Security of transactions is relatively high as the transactions are routed through a secured web server with a 128 bit end-end security.Charge transaction fees from those who utilize the service. Transaction costs are high.As internet is accessible to all ,no transaction fee is charged.

RFID Technology(Radio Frequency Identification)In efforts to implement new technologies to reduce costs and increase the efficiency, in July 2003, Walmart asked its top 100 suppliers to be RFID compliant and planned to replace bar-code technology with RFID technology.This replacement has reduced its supply chain management costs and enhance its efficiency.

Because of the implementation of RFID, employees were no longer required to physically scan the bar codes of goods entering the stores and distribution centers, saving labor cost and time.

RFID has reduced the instances of stock-outs at the stores.

CONCLUSIONWalmart has been able to efficiently USE and UPGRADE its IT tools, namely:EDIVOFCPFRRFIDAchieved EFFICIENCY and COST MINIMIZATION

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