Wednesday, October 2, 2013

How IT Saved Black Friday

Black Friday has long marked the beginning of the Christmas shopping season. Yet, in the past decade Black Friday has been taken to new levels as stores compete with one another not only for the lowest prices but also for the earliest time to open doors. An additional component has been added since the internet boom of Cyber Monday when stores continue to offer their low prices on the website the Monday after Thanksgiving. Every year, devoted Black Friday shoppers prepare by waiting in parking lots at 3 a.m., but how do the stores prepare to have a reasonable among of stock on hand? Given that this one day can alter whether or not a company has a successful fourth quarter, how can companies prepare for the onslaught of demand that is unleashed on Black Friday?

The answer lies with a strong information technology system in place. And no company is more technologically prepared for the chaos of Black Friday than Walmart. The behemoth retailer features sales on everything from flat-screen televisions to coffee makers to tickle-me-elmo, not to mention door-buster deals for those who get there extra early. According to Business Insider, a record of 247 million people shopped online and in stores between Thursday through Saturday. That is up 3.5% from 2011. [1] So how Walmart begin to anticipate the demand for any one of their 690 million different items?

1. Accurate Forecasting

All ordering processes begin with forecasting based on historical data. According to ATC Logistics and Electronics, "Forecasts should be based on current market conditions, as opposed to Black Friday sales cycles from previous years." This is crucial because Black Friday itself in an anomaly of shopping days. Walmart does not want to be left with shelves full of DVD players that customers are not going to buy after Thanksgiving weekend. Therefore, Walmart uses real-time data to monitor every single item in their stores. As soon as a customer purchases a Diet Coke, that item is deducted from their inventory and an algorithm recalculates whether or not more Diet Coke needs to be ordered. Furthermore, Walmart was the first company to implement Universal Product Codes. While UPCs are common place anymore, Walmart does it one better by sending this information via global satellite system to get this information to analysts in real-time.

2. Customizable Inventory Systems

Walmart has the largest IT structure of any private company in the world. Therefore, they are able to go beyond forecasting to automate every process of every product that ends up on the shelves of their stores. All of this is done at the individual store level. Because individual stores customize their delivery system, they have the option to have goods replenished in a day (depending on proximity to a distribution center) or have more inventory on hand. Walmart also deploys radio frequency identification tags which can be scanned at a distance while they are still on the Walmart trucks. More recently, Walmart has began just "smart tags" which all employees to scan to see how much of an item is left in stock. These tags also double as mechanisms to reduce theft. So on Black Friday stores located within a truck distance from a distribution center can actually monitor their current inventory and receive same-day shipments of high demand products.

3. Be flexible.

While Walmart has one of the most sophisticated supply chains in the world, they had to prepared for additional events in 2012 -employee strikes. Over 1000 Walmarts around the nation had to account for workers' who not be on the job come Thanksgiving. Yet, Walmart was able to report its best sales yet because Walmart factors missing workers into the equation of Black Friday. They recognize that on a normal year, employees may not have the patience to deal with frantic Black Friday shoppers so they account for employees missing work for a multitude of reasons. Therefore according to a Walmart press release, they did not have any more absent workers than on a normal Black Friday.

Therefore, because Walmart so actively monitors its inventory, it essentially treats everyday like it is Black Friday.

IT of Walmart


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