Theme
of the week of our Supply Chain Management course is “Inventory.” Inventory
management is a crucial step for the entire SC of a company. Its goal is to fulfil
suitable levels of customer service while keeping inventory costs within reasonable
boundaries.
Focusing
on the inventory, Walmart has been able to stand out among similar stores,
becoming “the world’s largest and arguably most powerful retailer with the
highest sales per square foot, inventory turnover, and operating profit of any
discount retailer (see here).”
A
considerable percentage of its success is based on technology, starting back in
1975, with the first utilization of an electronic cash register, which was able
to keep track of each purchase, providing a constant update of the inventory.
In 1983 came the bar code for scanning POS (point-of-sale) data. After almost
20 years, RFID (radio frequency identification) technology literally revolutionized
Walmart’s inventory management.
Let’s
start with the introduction of bar codes. With the utilization of barcodes, Walmart
was able to track “what is being sold … [and] what prices are popular” (see here)
obtaining competitive advantage and leverage over its suppliers. As pointed out
in the
article mentioned above, Walmart’s strategy was quite powerful: 'We want to
sell this at a certain price. You make it at a certain price, or we're not
going to work with you.' This approach affected Walmart’s SC in two ways: it
allowed them to buy products at a lower price and to revise the inventory based
on customers’ demand (stocking up on products loved by customers while reducing
the not-so-loved ones).
Then,
in the early 2000s, RFID technology burst into the scene and immediately had a
strong effect on Walmart’s inventory management. The technology was able to
identify and track any object, transferring its information from the tag directly
to the biggest and most powerful computer in the world involved in inventory management.
In this way, there was a substantial cut
of “the volume of excess inventory in Walmart’s massive supply chain,” “by
almost one-third,” according to this
article, thus decreasing the inventory costs.
What
other technology will Walmart embrace in the next future in order to maximize
the result of its SC? Walmart knows the products that its customers buy now, so
it might focus on what its customers would like to buy tomorrow.
References:
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