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Wal-mart’s Inventory

Management System

The Use of RFID Tags In 2003, Walmart initially asked all their suppliers to embed RFID tags to all of their merchandise for better tracking and managing.

In 2010, Walmart officially rolled out RFID tags to track their clothes, and since then, RFID tags has been becoming the main force of Walmart’s inventory management system.

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Walmart Inventory Management System Involved Elements & Process

The process of IMS can be described as four following parts:

1\ Manufacturer

2\ Warehouses

3\ Stores

4\ Customers

Every RFID tags on a product have a unique number and all Walmart’s manufacturers know each number of their products. They create a database with all the numbers, and Walmart has the access of that database. So when Walmart want some products from their suppliers, they just need to check the database through the Internet and place an order.

Once the order generated, the manufacturer will package those items and send them to the warehouse. And at the same time, Walmart will know automatically that their products are on their way. “The initial idea of Walmart”, stated by Professor Knox, “is implementing RFID tags systems in their warehouse and dock doors”. So, as

According to the interview with Professor Knox (Michael Knox, the industry professor of NYU Polytechnic School of Engineering), the involved elements of Walmart Inventory Management System (IMS) can be divided into three parts:

• People

All the staff working in the Walmart’s supply chain management system. The manufacturers, salesman, warehouse keeper, all employees and managers from logistic department and IT department…etc.

• Hardware

Wireless RFID readers, warehouse, convey belt, Walmart stores.

• Software

IMS, database, EDI system.

“Walmart buy equipment from different vendors. But they writing a lot of their own software---this is the key for their success. The IT team optimizes their supply chain.” said by Pr. Knox.

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we can see, when the products come into the dock door of warehouse, the wireless RFID readers will automatically identify the RFID tags and create data to the system. In the mean time, Walmart stores enable to check the updated information and ask for a number of cases of those products.

Then, the warehouse will physically pick the cases and put them on convey belt so that the cases can be delivered to each city stores.

For Walmart stores, they don’t need to hold a scanner and scan each of the barcodes on the items to check their status, which is what they used to do before implementing RFID tags system. The Electronic Data Interchange (EDI) system can help Walmart get all the information they need from the Internet. This system is part of Walmart inventory system, which is used for electronic communication of business transactions between organizations. Those transactions include order, invoices, and confirmations. (http://team2walmart.blogspot.com/2009/05/wal-mart-is-known-for-their-efficiency.html).

The following picture can better explain how EDI system works:

Problem Solved by RFID Tags

Walmart is a giant worldwide company. It has a huge number of merchandises and customers. Obviously, if they can’t manage their inventory well, the shelves will have higher possibility to be out of stock. The worst consequence that Walmart doesn’t want to see is losing their customers and revenues because of that.

In the old days, Walmart used barcodes to manage their merchandises. Each item has one barcode, and staff has to scan every single one on the shelf to get the information of it. This method is very time-consuming. The company has to hire more workers to do this job. And since Walmart has 11,462 stores in the world, this means a huge number of costs.

The Electronic Data Interchange (EDI) System

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But things have changed in 2010, when Walmart started to use RFID tags to track and manage their clothes. This technological innovation increases the efficiency of Walmart inventory management, achieve better laborsaving, and bring more customers to their stores.

The Inventory Problem of Walmart

In April 2014, Wal-Mart announced that the company lost $3 billion in last year sales because of its inventory problem. Although Wal-Mart stores keeps a faster supply rate of their inventory than the goods they sold, their merchandise still usually faced the dilemma of out of stock so that customer loyalty had been decreasing.

While the company attributed its lose to bad weather, higher tax rates and an economically challenged customer base, the inventory problem was certainly one of the major reasons of its lose. In fact, Wal-Mart is not the only one who gets into this kind of trouble. Many of retailers are on the business challenge and have to face their inventory problems every year. “For the past three years, respondents have cited unproductive inventory even more frequently than out-of-stocks as a top-three business challenge.” said by Paula Rosenblum, a retail analyst from Forbes.

Professor Knox and I both think the limits of RFID tags are part of the reasons for Walmart’s inventory problem ----- the radio frequencies are unable to pass through metal and liquids. Although RFID tags can achieve real-time tracking, things cannot work with items consist with metal and liquids. In other words, for instance, RFID tags have a very poor performance on a can of soup so that no reader can read that number on RFID tags. So far, if Walmart want to make RFID tags work on a can of soup, the only way is to package each can with a paper box and paste RFID tag on that box. “They can also put a layer of foam on the can and put RFID tags on that foam.” said by Professor Knox, “But people don’t want to pay two more cents for packaging. They can just go to the store from Walmart’s competitors in which do not use RFID tags but cheaper.”

In conclusion, Walmart now still have to deal with the inconvenience of RFID tags’ limits. Adding payroll hours, which is announced by Walmart, may be is an effective way to tackle this problem, at least ameliorate this problem. However, since Walmart has a great number of stores all over the world, they still cannot totally eliminate the out-of-stock problem by using RFID tags. Unless one day in the future, RFID tags get over its limits, or Walmart find a new way to both better managing goods with metal and liquids and keeping cheaper price.

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Reference

C, A. (2009, May 20). Team 2. Retrieved April 26, 2015, from

http://team2walmart.blogspot.com/2009/05/wal-mart-is-known-for-their-

efficiency.html

Parker, B. (2013, September 22). Walmart's Inventory Management System.

Retrieved April 26, 2015, from https://prezi.com/qefihcomutia/walmarts-

inventory-management-system/

Rosenlum, P. (2014, May 22). How Walmart Could Solve Its Inventory

Problem And Improve Earnings. Retrieved March 29, 2015, from

http://www.forbes.com/sites/paularosenblum/2014/05/22/walmart-could-

solve-its-inventory-problem-and-improve-earnings/

Bustillo, M. (2010, July 23). Wal-Mart Radio Tags to Track Clothing. Retrieved

March 29, 2015, from

http://www.wsj.com/articles/SB1000142405274870442130457538321306119

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