Dillon Lanners
MGMT 370
Methodology (Part 4)
Walmart is no stranger to applying new management information systems in the pursuit
of successful business. The superstore giant has shown tremendous upward mobility as a
corporation and it owes most of its financial success to the Information Systems that have been
adopted in the last 30 years. With a strong focus towards supply chain management, Walmart has
been able to redesign its operations into a more cost efficient and customer driven model. The
lowest prices around are found at Walmart due to a strong SCM and that is the main reason why
more customers become, and remain, loyal to the “rollback” supercenter than any other business
of its kind. A second major utility in the corporation’s success is the ability for upper
management to make highly educated decisions about future product purchases, advertising, and
choosing suppliers. The accuracy of such decision depends on the amount of information that
Walmart has on its operations. In this portion of the essay we will discuss in more detail, the
supply chain management, the decision support system, and the technology involved in both
areas. Let’s begin by taking a closer look at Walmart’s supply chain management and the
technology that has shaped it.
The text describes the function of supply chain management (SCM) as planning,
organizing, and optimizing the various activities performed along the supply chain. It goes even
further to outline the goals of a SCM system as to reduce the problems, or friction, along the
supply chain. The sharing of information between two or more business firms allows for a supply
chain management system to exist. When businesses share information like this it results in
reduced daily operational costs for a business firm and/or its suppliers. This type of information
relationship is especially true in Walmart’s case.
It’s not uncommon knowledge that Walmart has virtually every type of product one
would need excluding, of course, specialty good like livestock, John Deere tractors, or Uranium
in bulk. A business selling this many different products surely require the offerings of many
different suppliers. This is, in simple terms, how Walmart works. In fact, one might consider this
principal as the cornerstone of the company’s economic appeal. With this many suppliers,
however, keeping track of what’s needed from which distributors, while simultaneously
managing orders in a cost friendly way, would take a legion of resources (if it weren’t for the
MIS technology that’s been applied in the last 30 years).
There are three technologies that work together in the common task of managing the
supply chain. The first of these technologies was the Universal Product Code (UPC), or more
commonly known as the bar code. What the bar code is able to do for Walmart is it collects and
stores data for each product scanned in a very easy, very quick manner. Products can either be
scanned with a hand held scanner or at the Point-of-Sale system (POS). The information that is
retrieved from scanning the bar codes is then sent to the massive database, Retail Link.
By 1991 Walmart had long observed the benefits of using a UPC and decided to invest $4
billion towards building Retail Link. Walmart and all of its suppliers are all connected to the
database where each supplier can find how much of its product the superstore needs, how well
their products are selling, and other trends in sales that can be used for future use towards
decision making. Retail Link is not just beneficial for suppliers but, it is also very useful for
Walmart. Incorporating UPC data allows for the data warehouse to accurately gauge inventory
levels. The gigantic database uses this data to save inventory space by ordering supplies when
they are needed, instead of on a set demand schedule. Retail Link’s capabilities do not end there;
it also saves Walmart time by cutting out the process of individual orders; and time is an
economic resource in itself. All of these tasks can be fulfilled by Retail Link, including decision
making support (which we will discuss later), but the database must be connected to suppliers for
the supply chain system to even exist.
The third and final technological piece of the proverbial puzzle is the global satellite.
This global satellite system connects all of Walmart’s distributors together, sharing information.
Without the satellite system, resources would be spent on elaborate communication with
suppliers for each shipment. The satellite network is a DS3 network, which basically means the
signal transmitted between the headquarters, Walmart stores, and distributors, is digital. Another
substantial advantage that the satellite system provides is its ability to track the movement of
merchandise as it makes its way from factory to Walmart stores. A small but important
technology called a Radio Frequency Identification Tag (RFID) allows this to take place. The
RFID tag provides a numerical code to each item that can be scanned from a large distance, thus
allowing the tracking of items in transit to (or from) Walmart. Linking all of Walmart’s partners
with Retail Link is done very effectively though the global satellite system.
The three fore-mentioned technologies synergize gracefully to facilitate the actions of
Walmart’s supply chain. Some of the same technologies used in the supply chain are also used to
give Walmart a competitive edge in their decision making process. The most important multi-use
technology is the Retail Link data warehouse. Retail link contains so much information that its
regarded as the largest data warehouse that isn’t used by the military. With this massive bank of
information, Walmart can send its sales numbers to specialized analysts that will decipher the
gibberish of numerical data. The sales data can then be used by the decision support staff to learn
a great deal about the company to help it in the future.
One example of the decision making applications that Retail Link provides is the analysis
of ad campaigns. If Walmart was curious how effective their new ad campaign did in Georgia
enticing citizens to take advantage of a Sunday “rollback” they would look at the data provided
by the data analysts. An increase in revenue would be a good sign that the campaign was
successful but, perhaps the overall income decreased since the campaign started. Decision
makers could then take a look to see if the rollback sale was economically favorable or whether
changes need to be made to sale prices.
A second illustration of using Retail Link as a decision support system is the prediction
of product sales. Let’s examine how a product’s past data can help Walmart know how many to
order from suppliers. We will use an umbrella as a simple item to explain this. If last year’s
umbrella sales were 3 million units in the first 6 months and 900,000 in the second 6 months then
it can be easily figured that Walmart should purchase more umbrellas in January through June
and less in July through December. This is a highly simplified example of the decision making
support that product purchase history can give but, nonetheless, its applications are countless.
It should be clear by now that Walmart relies heavily on many specific technologies to
keep its rank as the Fortune 500 most profitable company in the world. Throughout its time as a
business, there have been huge changes in the company’s structure as well as huge changes in its
economic results. The MIS technology adopted by Walmart should be recognized for most of the
growth. Next, we will take a closer look at some of these changes and the results that came with
them.