Wednesday, October 9, 2013

The Mighty Giant

Walmart seems to be the epitome of efficient supply chain management.  They are the #1 chain in the United States; in fact, they are the only grocery store that has nationwide presence [1].  They sit in their leadership spot thanks to their everyday lowest price strategy, their ridiculously large amount of data collected through their millions of transactions (they have the biggest sets of data in the world), and their almost flawless logistics model.  How did they get to where they are today? There’s no secret formula to their success; it is known that their two biggest (and most impenetrable) assets are low prices and a sophisticated supply chain to support their operations.

The Real Secret

Despite their perceived simplicity, Walmart has learned how to successfully incorporate technology into their strategy, making their business more efficient.  It is often thought that their ability to sell at such low prices comes from their size and bargaining power over their suppliers.  Their real savings come from their well-organized supply chain, since it benefits not only them, but their suppliers as well.

During the early stages, suppliers were hesitant to provide information, concerned of compromising their own competitive positions.  However, they have now adopted Walmart’s system.  Both store and supplier share and integrate data so that they can have a better understanding of what products sell.  This enables the store to keep its low storage prices and suppliers to adjust their production depending on the demand (sales).

Moving Forward

Because they are almost considered an empire, Walmart can afford to experiment and pioneer technologies that have not gone through deep testing.  This has helped them restructure their business.  They use technology to simplify work and increase efficiency, besides automating existing processes.  Part of their experimentation has been the implementation of RFID; they tag products (or their labels) with tiny chips that emit radio signals to small receivers [2].  This technology was adopted with the objective of making barcode scanning technology even simpler and more efficient.

Is this the Right Move?

The use of RFID chips might increase as their price decreases [3].  However, this technology has yet to prove its value.  There is concern on security; can you imagine driving home and as you approach your driveway, you’ve picked up information on how many rolls of toilet paper are in each of your neighbors’ houses?

Maybe Walmart sees something we don’t; maybe they have learned how to recognize and see potential in new technologies and they’ve made sure that the mindset of “invest only in what will guarantee returns” is embedded in every employee.  Could it be a cultural thing? I don’t know, but they sure do seem to be very aware of every penny they invest, which leads to more intelligent decision making.

What’s the Panorama Like Today?

According to IDTechEx, RFID is rapidly growing for apparel tagging [4].  Walmart continues to use RFID, but they now asked their suppliers to put the RFID chips on the packaging or removable labels, instead of the product itself, to address the security issue mentioned before.  Smart move Walmart.  The incorporation of RFID enables them to locate and quantify merchandise faster than they could before, which is an essential advantage for supply chain managers, and also drives business value. 

This is all very positive and nice, but I cannot let this topic go under the radar.  Since this is the last blog, I now encourage the reader to be the one who challenges this new trendy concept.  Imagine being a supply chain manager and having visibility to absolutely everything; how difficult (or possible) would it be for this sole person to have control of all the information being channeled to him/her? Do you think this could lead to a more centralized -and difficult to control- chain management structure? Can we even call it a “chain” or are we looking at a very complex supply network now?


By: Elisa Taymes

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