B2B
HA PT ER 1 2
E- c o m m e r c e
WAL-MART DEVELOPS A PRIVATE
I NDUSTRI AL NETWO RI<
W al-M a rt is a we l l-known leader in
over t he In t er net int o Wal-M a r t' s invent ot y
t he applicat ion of network technol ogy
management system. In 2000, W al - M ar t hi red an
to th e coordinat ion of it s supply chain.
out side firm t o upgrade Retail Link f rom being a
W it h sales of more t han $348 bi l lion for
supply cha i n management tool toward a more
t he f iscal year ending J anua ry 31, 20 07,
coll aborat ive forecasting , planni ng, anc rep­
W al - M a rt has been able to use informat ion
leni shment syst em. Usi ng demand aggreg at ion
te chnology t o achieve a decisive cost advant age
softwa re provi ded by Atlas Metap ri se Software,
over com pet it ors. As yo u m ig ht imag ine, the
W al- M a rt purch asing agents can now aggregate
w or ld' s la rgest reta il er a lso has t he world' s
demand from Wal -Mart's 4,000 separate store,
la rgest supp ly chai n, w ith more tha n 60,00 0
in th e Uni t ed States in to a sin gl e RFQ from
suppl iers w or ldwi de. In th e next f ive year s, the
suppl iers. This gives Wa l-Mat't trem endous clout
com pany plan s t o ex pand fro m arou nd 4,000
w ith even t he la rgest suppl iers. Wa l-M a r t and
stores in the Un it ed St at es to over 5,0 00 , and
Atl as plan t o f irst bui ld a globa l sourc ing
increase its select io n of
include
netw ork . Previously, Wal-Mart's forei gn locat ion
high-fash ion
buy er s relie d on a mix of te lephon es, f ax, and
cloth ing, and persona l comput ers. In other words,
e-mai l to commun icate their spending fore casts.
Wal- Mart 's strate gic plan is t o be w here t hey are
The new syste m allowed them to submi t f orecasts
not now. A ll of t his w ill requi re an even mo re
via th e In tern et. Wa l-Mart headquarters in turn
automobi les, p ianos,
goods
g roceri es,
to
capable private indust r ia l netw ork than w hat is
issued worldwi de RFQs fo r all sto res. The Atl as
now in place.
softw are hel ps Wa l- Mart purcha si ng agent s
In the lat e 198 0s, W al - M art developed the
select a w inning bi d and negot iat e fin al contract s.
beginnings of coll aborat ive commerce using an
In addit ion, suppliers can now im mediately
EOI -based SCM system t hat required it s la rge
access inf ormat ion on inventories, purchase
supp lier s t o use Wa l-Mart's proprietary EOI
orders, invoi ce status, and sales forecast s, based
netw or k to respond to orders f rom Wal-M art
on 104 wee ks of onl ine, rea l-tim e, item- level
purchasing
W al - M art
data. The system now does not requ ire small er
expanded the capabi li t ies of its EOI -based network
supplier fi r ms t o adop t expensive EOI software
by int roducing Ret ail Link . This system connect ed
solutions . In stead, th ey can use stand ard browse rs
Wa l- M art' s la rgest suppliers t o Wa l- Mart's own
and
managers.
In
199 1,
with free
PCs loaded
inventory management system , and it requi red
W al - M a rt.
large suppliers t o t rack act ual sales by stores and
suppliers- small
to replenish suppl ies as dict at ed by demand and
Wal-Mart' s netw or k.
f oll ow ing r ules imposed by Wal - Mart. Wa l-Mart
Ther e
are
an d
now
software from
over
20,0 00
la rge-parti cip at i ng in
In 200 2, W al - M a rt switched to an ent i rely
also int roduced f inancial payment systems that
I nt er net -based
ensure t hat Wal- M art does not ow n the goods until
ad opted A S2 , a software package fr om i Sof t
t hey arr ive and ar e shelved.
Corporatio n, a Dall as-based software com pany.
I n 199 7, W al-M art moved Retai l Li nk to an
pxtrri n pt t h ri t ri l l n w p r! <; I lnn ! jpr" tn
rli~prtl\l
l i n l/
pr ivate
network .
W al - M art
AS2 i m plement s EOI -I NT (an Inte rn e -based
P r i v a t e In du s t ri al
Ne t w o r k s
radica l red ucti on in commu nicati ons cost s. Wa l-
NetXchang e (no w Agen tri es) i n an effort to
M art uses Sterli ng Commerce (th e largest si ngle
dup l ica t e th e success of W al -M art. W al -M art
pr ov ider of EDI comm uni cation syste ms t o
executives have said Wal-Mart wou ld not j oi n
indust r y) and I B M to suppo rt th is ED I i nit ia-
th ese networ ks, or an y
industry- spon sor ed
t ive. The A S2 ini ti ati ve let s suppl iers connect,
con sorti um or independent exch ange , because
del iver, va lid at e, and rep ly t o dat a secur ely over
doing so wou ld on ly help it s comp et itors ac hieve
t he I nte r net. I B M uses it s exp er t ise t o assist
what Wal -Mart has alre ady ac compli shed with
Wa l-Mart suppli er s i n select ing and im ple ment-
Reta i l Link . To compete with the effici enci es
in g t he appr opr ia te AS 2-cert if ied solutions th at
atta ined by W al - M ar't , ot her r et a il er s, such as
best meet t hei r needs. St er l ing
J CPenney, have imp lemented thei I' own exten-
Com m er ce
pr ovides i nte r oper abi l ity ser vic es for EDI -I NT
sive priv ate i ndust r ia l networ ks to link suppli er
A S 2 con nect ivi t y betwee n W al - M art an d it s
to the ir sto res : i nvent or ies directly ove r t he
suppl iers.
Intern et . J CPenney has even given over' it s
W al-Marf s success spur red it s comp et itor s
i nve nto ry co ntrol and product sel ect ion t o it s
in t he ret ai l indu st ry to develop industr y-w i de
la r gest appa re l prov ider, T AL Apparel Ltd . of
pri vat e i ndust ri a l netw or ks such as Gl obal
Ho ng I<ong.
SOU RCES: "Who Gains, Who Loses, from RFI D's Growing Presence in the Marketplace?," Knowledge@Wh arton, March 23, 200 5; "Fruit Vendor
Updates Systems to SatisfyWal-Mart" by Stacy Cowley, C/O, Augu st 1, 2004; "Suppliers May Miss Tracking Mandate Set byWal-Mart," byAnn Zimmerman,
Wall Street Journal, March 31, 2004; "To Sell Goodsto Wal-Mart, Get on the Net," by Ann Zimmerman, Wall Street Journal, November 21 , 2003; "Made to
Measure: InvisibleSupplier Has Penney's Shirts All Buttoned Up," by Gabriel Klein, Wall StreetJournal, September 11, 2003; "Can Wal-Mart GetAny Bigger 7"
by Bil l Saporito, Time, January5, 2003; "IBM Selected byWal-Mart to Help ItsSuppl iers Conduct Web-Enabled EDI," IBM, October 10, 2002 . "Data Integrity:
Wal-Mart's Djrty Secret," Forbes, October 7, 2002; ·'A New Supply Chain Forged," byAmy Helen Johnson, Computerworld, September 30, 2002; "Wal-Mart
Mandates Secure, Internet-Based EDI for Suppliers," by Richard Karpinski, InternetWeek, September 12, 2002.
DaimlerCh rysle r, for instan ce, developed a collaborative commerce application
called the Supply Partner In form ation Network (SPIN) for its 20,000 suppliers. SPIN is
an extranet-bas ed supply chain management and sup port syste m th at permits 12,000
supplier em ployees at 3,500 locations around the world to access DaimlerChrysler's
real-time procurem ent, inven tory , and deman d forecastin g systems, as well as longerterm strategy applicati on s. DaimlerChry sler's Part Qu ality Supply System operating
within SPIN tracks all production parts from supplier to sh ipper, factory installation , an d
after-m arket replacement. Chrysler estimates it h as incre ased productivity of its entire
"exten ded enterprise" family of suppliers by 20% (IBM, undate d).
IMPLEMENTATION BARRIERS
Alth ough private industrial n etworks repres ent a large part of the future of B2B, there
are many b arri ers to its compl et e im pl em entatio n (Watson and Fenne r, 2000).
Particip ating firms are requ ired to sh are se n sitive data with their business partners, up
and down th e su pply ch ain . What in the past was conside red propriet ary an d secret
must n ow b e sh are d . In a digital environme n t, it can b e difficult to control the limits
of inform ation sh aring. Inform ation a firm gives gla dly to its largest cus tomer may