Information System Used by Wal - Mart - Term Paper Example

About Information System – Wal - Mart The Wal - Mart stores was the organization was selected owing to the curiosity of knowing more about the business strategy and information system used by the no 1 rated company in fortune 500 list, which would be quite a rewarding experience as always success is never achieved in single step. Organization’s overall business strategy Wal - Mart store inc. is one of the world’s largest retailers, rated as the number one company by the fortune 500. It has the revenue of $351,139.0 millions that has increased by 11.2% in the current year. This year it has shown the profit of $11,284.0 millions, with the stock holder’s equity rising up to 61,573.0. Its annual growth rate through the year of 1996 was a woofing rate of 15.1%. Sam Walton when open his first store in Arkansas 1962, had 3 basic beliefs on which he built the entire empire, which has now 1.3 million associates world wide with 3200 stores in Unites States with 100 millions customers visiting per week world wide. The belief which on technical term was later transformed as strategy was respecting individual offering the best service to customer and always striving for excellence. This belief with 10 factors ranging from motivating the partners to controlling the expenses better than the competitors became their underline principle. Sam Walton, with innovative vision, used unusual business practices that let the company straight forward, with the organization still facing significant amount of controversy over several different issues, but none of them was altering the gigantic operation. Future of Wal - Mart is also looking comfortable with the proper balance between increasing its profit and recognizing its social and ethical responsibilities. (Wal – Mart annual report, 2003) It is undeniable fact that Wal - Mart huge success is due to its sound strategic management decision couple with innovative implementation. The business strategy features 3 key points in its background, customer value and service; partnership with its associates and community involvement. Thus the key feature of implementing these strategy by Wal - Mart is putting a strong emphasize on solid working relationship with suppliers and employees, taking into notice many integrate details in store layouts and merchandizing techniques, capitalizing on every cost saving opportunities and create a high performance spirit. The strategic formula of company is very simple, in that to provide access to quality goods for customers together with making the goods available when and where the customer wants, on the sides developing a cost structure that would given an inch up in competitive pricing summing up in building and maintaining the reputation for absolute trust worthiness. (Biesada, Alex,2006) Wal - Mart store’s main philosophy of operation is “every day low price “and “their roll back prices”. Owing to this Wal - Mart has emerged as world leaders by operating on the very clear strategy, by containing its cost, the organization passes on the saving to the customers, which had put them in fort of the race in the competitive price in market. As an add on to this the Wal - Mart is continuously improving and innovating its business process, with managing all activities centrally and carefully investing in long term pay back. It has never backed itself from testing, adapting and applying the wide range of cutting edge approaches and it has never led to die down its capacity to learn from its competitor’s success and failures. It was in fact acclaimed by strong competitor that Wal - Mart not only copies their concepts but also had strengthen it, which proves the returns. (The Story of Wal-Mart, 1995) In the inventory system Wal - Mart has invested in a unique cross docking inventory system, which has paved way for its reduced cost of sales. With this system they are able to continuously deliver goods to the stores in 48 hours without having to inventory them. Wal - Mart also has brilliantly owned a transport system that enables them in shipping goods at a faster rate, at a rate of 4 times faster than the competitors in replenishing their shelves. Wal - Mart also is one of the proud possessors of massive parallel processor computer system that helps them to track the stock movements, which gives the upper hand in adjusting to the rapid changes in the market. For disseminating the information related to sales and inventory they use the advanced satellite communication system. (Wal- Mart annual report, 1994) Wal - Mart’s another best business strategy is that it negotiates the best price from its vendors and they are very tough in negotiating the prices though they maintain a mutual respect with the suppliers. Thus in nutshell the success strategy of Wal - Mart is that it is let from the top but is run from the bottom. Implication of the Strategy We can clearly understand the implication of the business strategy by analyzing the organization success and failure. The Wal - Mart’s biggest success factor is making the stores unavoidable at any cost. Wal - Mart makes it as a point that it is hard for a consumer to get Wal - Mart out of the mind, though it cost lots of money for it to built its empire across the globe, it is very profitable unit. Wal - Mart differs from other similar organization in another point that it doesn’t spend it profit but invest to reap more profit. Wal - Mart from the beginning is able to under cut its rival by cheaply buying in bulk, commanding a huge database that gives un failing data about shopping habits, customer preference and consumer trends. The key weakness factor is that though not technical is its injustice behavior to the employees and bad publicity but still it continuous to be a giant profit maker. (Thompson, A. A., Jr. & Strickland, A.J. III. ,1995) The information system used by Wal - Mart ICT – The information and communication technology are set of ubiquitous technologies that is now wide spread in public, private and voluntary sectors. These are convergent technologies that helps them to streamline information processing and communication within and between organization which helps them to achieve crucial mission, strategy and business objectives. Electronic networking allows innovative potential of ICT to be exploited, that thus enables and supports their functional spatial and temporal flexibilities. ICT usage has effectively shown to increase administrative savings, reduce paper cost, cut transaction times, overall reducing the communication costs. (Stalk, Evan, & Shulman, 1992). The Wal - Mart history of technology could be traced to 1975 when more than 125 stores were existing. Then Wal - Mart least the IBM computer system to maintain their inventory controls of all merchandize in the warehouse and distribution center. By 1977 Wal - Mart build in a country wide computer network for facilitating the ordering of merchandize from suppliers. By 1979 the company owned its computer center. By 1983 the company used barcode for scanning data. By 1987 Wal - Mart completes the largest private satellite communication system in United States with operations like 2 way voice data and one way video communication. By 1990 Wal - Mart came up with a data warehouse prototype to stores its sales data. By 1992 the Wal - Mart deployed retail link systems that provided vendor information on sales trend and inventory sales. In 1995 Wal-Mart started data sharing in real time with suppliers and started a collaborative planning and replenishing program. By 1996 Wal - Mart entered the internet domain and used internet as an application platform. The same year it launched its online store. By 2002 Wal - Mart became a leading efficient user of internet to exchange data successfully with 1000s of global suppliers. From 2004 the Wal - Mart is deploying the radio frequency identification technology (RFI). (Saporito, 1994) .By 2007 Wal - Mart has successfully launched the revolutionary site to store service that enables online customer to pick merchandize from store. The Wal - Mart has successfully used IT to such a extend that a effect called Wal - Mart effect is very famously coined in the industry. The Wal - Mart successfully centralized automated its warehouse based on old IT but has functionally re organized by exploiting new techniques that has changed the face of the industry. This helped Wal - Marts productivity advantage to 48%, with the contributing factors being scale effects in warehouse, electronic data interchange and barcodes scanning.(www. Wal-mart.com) To effectively understand the implication of ICT technology, let’s take the example of supply chain management, and see how the technology is applied for advantage. At the outline, the supply chain management could be described as the mix of art and appropriate science, by which, a company finds raw material needed to make the product or service and deliver to customer. The importance given by the Wal - Mart in implementing tight supply chain management has made them the leader in their field. The birds eye view of the pattern they follow is that, suppose the pieces of flash light fall below with the last purchase, then that is notified by the bar code reader to the warehouse, that in turns notify the manufacturer and even the raw materials suppliers. Thus Wal - Mart is able to replenish the shelf in three days not from the warehouse but from the manufacturer, thus with lower level of inventory is able to meet the customer demand. This also allows them to maintain space for things but also is able to avoid oversupply of fad item.( Verdisco, 1994) The latest technology used by the Wal-Mart in this aspect is the RFID technology that has brought in advantageous change to the concern. The RFI D is a tag like barcode that can be had on anything as Wal - Mart has successfully used the innovative ICT as an important tool in competitive strategy. Wal - Mart as could be seen has used the advanced technology both at transactional level and also as intelligent application. RFID is a small device, that has a small electronic tags, that includes a tiny chip plus and antenna, which transmits data to the receiver (RFID readers and related hardware and software infrastructure as radio signal. Unlike barcode, the major advantage here is that, the transmitters could be placed anywhere to track the movement of goods as on containers, pallets, materials handling equipment, cases or even on individual products. This information on tags is then read by an RFID reader, and that movement is captured and managed by the infrastructure. This way, organizations are able to link the physical world to the digital world without any human interaction. (Landt, 2001) Thus from start the RFID revolutionize supply chains and usher in a new era of cost savings, efficiency and business intelligence. The potential applications are vast as it is relevant to any organization engaged in the production, movement or sale of physical goods. It has the potential to improve efficiency and visibility, cut costs, delivers better asset utilization, produce higher quality goods, reduce shrinkage and counterfeiting, and increase sales by reducing out-of-stocks. At its core, RFID is simply an enabling technology that has the potential of helping retailers provide the right product at the right place at the right time, thus maximizing sales and profits. RFID provides the technology to identify uniquely each container, pallet, case and item being manufactured, shipped and sold, thus providing the building blocks for increased visibility throughout the supply chain. (Wilding, R., Delgado, T, 2004) ECommerce Systems employed by the organization The ecommerce venture by the Wal - Mart though was a hit was of moderate success in the early age when it ventured in the internet by opening its website in 1990. (Lewison, M. D. (1991)The offline success was not replicated online, mainly because its customer base was entirely different than that of e Bay and Amazon. Com, but in the case of Wal - Mart the customer wanted to buy from shelf. But in late 1999, Wal-Mart decided to challenge the Web rules. After several years of loitering around with its website ideally, the brains were working and came up with a bounce back idea. Up to that point, Wal-Mart.com had realized modest success online, ranking forty-third among Internet shopping sites according to Media Metrix. It trailed Web pioneers like eBay ad Buy. The company announced plans to expand its online store offerings before the end of 1999 to match more closely the breadth of its traditional outlets. To facilitate this expansion, Wal-Mart entered into a agreement with Fingerhut Business Services and Books-a-Million, as both had expertise in distributing individual orders directly to customers' homes, quite a different set of skills from bulk shipments, which had been Wal-Mart's force. From then, the Wal-Mart became a direct competitor to Amazon.com. In July 1999 Amazon announced its expansion from books, music, and videos into toys and consumer electronics. Wal-Mart already has become a powerhouse in these product categories through its traditional stores. It announced that it is planning to offer products from all 25 categories that are carried in a typical Wal-Mart discount store. Moreover, it expected to offer a broader array of higher-priced items than its traditional stores-for instance, DVD players and digital cameras. Mover over, customers would be able to return products ordered online to any of Wal-Mart's 2451 U.S. discount stores. Like Amazon, it planned to prove tailored online specials to match the shopping habits of its repeat customers. According to research from Jupiter Communication, e-commerce is expected to continue to grow from approximately $12 billion in 1999 to an estimated $41 billion in 2002. Much of this expansion would be concentrated in Wal-Mart's existing lower- and middle-class customer base. Jupiter analyst Kenneth R. Gasser noted, "Internet users are increasingly coming to resemble the population at large." ("walmartfacts.com,2006) Over all view about the Information systems effect: In Wal - Mart, the RFID technology has alone saved $8.35 billion annually with RFID - that's more than the total revenue of half the companies in the Fortune 500. This massive total is made up as follows: $600 million through avoiding stock-outs; $575 million by avoiding theft, error and vendor fraud; $300 million through better tracking of a billion pallets and cases; $180 million through reduced inventory; and a huge $6.7 billion by eliminating the need to have people scan barcodes in the supply chain and in-store. Small wonder, then, that Wal-Mart is investing $3 billion in RFID over several years and is one of the leading proponents of RFID implementation. (Roberti, M.,2005) Thus it could be seen that the technology has helped to put Wal – Mart in a high advantageous position in competition. What is Wal-Mart? Wal-Mart is an American public corporation founded by Sam Walton in the year 1962 and 10 years later in 1972 was incorporated in New York Stock Exchange. It is considered as the largest retailer and largest company in the world based on its revenue. It is the largest grocery retailer in US, spreading also its roots into consumables business and toys retailing, still standing out as largest private employer in US. Internationally apart from many places in US Wal-Mart has its branches and franchise all over the world as Mexico, Canada, Japan, Argentina, Brazil, UK, South America and Germany with negotiations ongoing in India. Wal-Mart’s business model is to sell wide variety of merchandise in cheap rate and the company refers to its members as associates. Wal-Mart is governed by a board of 13 members with H. Lee Scott as its executive manager. (walmartfacts.com,2006) References: Biesada, Alex. "Wal-Mart Stores, Inc." Hoover's. Retrieved on October 13, 2006 Staff Writer. "Fortune 500." CNN/Fortune. April 16, 2007. Retrieved on April 16, 2007. Daugherty, R. (1993). New approach to retail signals strong future for point of purchase displays. Paperboard Packaging, pp. 24-27. Lewison, M. D. (1991). Retailing. New York: Macmillan. Longo, D. (1994). New generation of exec's leads Wal-Mart into the next century. Discount Store News, pp. 45-47. Landt, J. (2001), Shrouds of Time: The History of RFID, AIM Publications, Pittsburgh, PA, Roberti, M. (2005), "Wal-Mart begins RFID process change", RFID Journal, February 1, available at: www.rfidjournal.com/article/articleprint/1385/-1/1/ (accessed February 23, 2005), Saporito, B. (1994, May). And the winner is still . . . Wal-Mart. Fortune, pp. 62-68. Stalk, G., Evans, P., Shulman, L. (1992, March-April). Competing on capabilities: the new rules of corporate strategy. Harvard Business Review, pp. 55-70. Thompson, A. A., Jr. & Strickland, A.J. III. (1995). Strategic management concepts and cases (8th ed.). Chicago: Irwin. Vance, S., & Scott, S. (1994). Wal-Mart: a history of Sam Walton's retail phenomenon. New York: Twayne. Verdisco, R. J. (1994, October). Superstores and Smallness. Discount Merchandiser, p. 8. Wilding, R., Delgado, T. (2004), "RFID demystified: supply-chain applications", Logistics and Transport Focus, April, pp. 42-8, Wal-Mart Stores, Inc. (1995). The story of Wal-Mart. Bentonville, Arkansas: Corporate Offices of Wal- Mart Stores, Inc. Wal-Mart Annual Report, 1994 Wal-Mart Annual Report, 1995 Wal-Mart Annual Report, 2003 www. Wal-mart.com Wal-Mart Corporate Facts PDF (48.7 KiB)." Wal-Mart. Retrieved on August 12, 2006 "walmartfacts.com (official public relations website)." Wal-Mart. Retrieved on August 1, 2006. Read More