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Walmart : Inventory Management

Simeng Feng, Daniel McElhenney, Brittany Parker, Nam Tran

Inventory Management

Global Growth

Summary

Overview of Walmart

Features of Inventory Management

In this presentation we will discuss the Inventory Management System used by Walmart.

An Inventory Management System is used to track all of the items that are kept in a Walmart store using technology. This has proved to be an invaluable tool at keeping so many stores running efficiently. By keeping track of their inventory Walmart has been able to save money maintaining stock and increase sales through the use of collected data.

Technology/System: Retail Link

  • Database system, developed by Walmart, that allows the company to track sales, manage inventory, review trends, and communicate with suppliers, among other tasks (Joe, 2010).

Infrastructure, Architecture, & Resources:

  • Linked computer network with intranet connection to all stores and corporate offices
  • Servers and software capable of processing massive amounts of data
  • Scanners
  • Barcodes or radio frequency identification (RFID) technology
  • Transmits data about a product to a scanner or data collection device

(Crosby, n.d.)

In 1962, Sam Walton opened the first Walmart store. Walton’s dedication to providing quality goods at low prices and friendly customer service have helped Walmart to thrive throughout the years. Today, Walmart is a global leader and holds a secure position in the global industry ("History Timeline").

Products Manufactured/Sold:

  • Food
  • Clothing, shoes, and accessories
  • Electronics & entertainment
  • Home decorating items
  • Home improvement tools
  • Automotive tools & parts

Revenues: $443.9 billion in 2012

("2012 Walmart Annual Report")

Competitors: Target, Kmart, Costco, Best Buy, supermarket chains

  • Monitoring
  • Monitors inventory levels in all locations
  • Tracking
  • Tracks movement of all inventory
  • Automation
  • Automating routine functions like order fulfillment helps increase efficiency
  • Optimization
  • Data is used from inventory management systems to optimize inventory; examples of data used include fast-moving inventory, slow-moving inventory, and "dead" inventory
  • Radio Frequency Identification (RFID)
  • Sensors and barcodes are used to track the flow of inventory
  • Reporting
  • Inventory management systems can easily generate detailed, reliable reports of inventory statistics
  • Prediction
  • Uses collected data to predict future sales trends, allowing for more precise management of physical inventory

(Hamlett, n.d.)

(from "2012 Walmart Annual Report")

Benefits & Costs

Inventory Management

Conclusions

Vs. Competitors

Retail Link Reports

Benefits:

  • Effectively manages supply in regards to demand; this leads to better customer service and more sales
  • Streamlines operations
  • Reduces overstock
  • Increases inventory turnover
  • Allows each store to customize its inventory
  • Walmart also owns its own transportation system for inventory, which allows it to stock shelves 4 times faster than competitors
  • Simplifies tasks for many low level employees
  • In some cases prevents ownership until point-of-sale
  • Information sharing allows for closer supplier relations

Costs:

  • Inventory management systems can be expensive and complex, particularly if not used properly/inefficiently

(Meng, 2011)

According to an article on Trefis, Walmart experiences more efficient inventory turnover than Target.

When compared to Costco, Walmart turns over its inventory about 12 times per year on average, while Costco averages about 13.8 times per year. This is partly due to the differences in the way the two stores sell their products. Costco sells in bulk, and therefore attracts more small businesses.

The net working capital for Walmart is also better than that of Best Buy. Best Buy's net working capital was around 0.75% in 2009, while Walmart's net working capital was around -2.6%. The negative value indicates better management and more cash in hand.

(Trefis Team, 2011)

Impact of Information Systems:

Walmart's inventory management process would not be possible without information systems. The entire organization relies on the linked inventory management and POS systems to maintain their standards for business and sales.

  • Allows for just-in-time stocking methods that reduce cost and resource requirements.
  • Provides all necessary information in one place
  • Provides more information for upper-management and other decision makers
  • Reduces responsibility on lower-level employees, which reduces training costs
  • The system increases the need for an effective Information Technology (IT) department

Information Management Issues:

  • Even with their complex and efficient inventory management system, Retail Link, Walmart often has a hard time keeping shelves stocked ("Is Walmart's Supply Chain Really That Good?", 2011).

Overall, Walmart's Inventory Management System provides many benefits:

  • Faster inventory turnover
  • Decreased need for warehouse space
  • Reduction in safety stock
  • Better working capital utilization

(Atkinson, 2006)

These all contribute to improved performance and sales and better value for customers.

Walmart is able to provide better customer service due to its increased efficiency in operations.

This sample report shows the history of Walmart's dollar sales for 10 years. This is just one of the examples of the capabilities of Retail Link, Walmart's inventory management system.

("Retail Link Performance Reports")

References

  • "2012 Walmart annual report". (2012). Retrieved April 23, 2013 from http://www.walmartstores.com/sites/annual-report/2012/CEOletter.aspx
  • Atkinson, C. (2006). Walmart increases its supplier’s inventory levels. Inventory Management review. Retrieved April 23, 2013 from http://www.inventorymanagementreview.org/2006/04/walmart_increas.html
  • Crosby, T. (n.d.). How inventory management systems work. How Stuff Works. Retrieved April 23, 2013 from http://www.howstuffworks.com/how-inventory-management-systems-work.htm
  • Hamlett, K. (n.d.). The features of an inventory management system. eHow. Retrieved April 23, 2013 from http://www.ehow.com/list_6636015_features-inventory-management-system.html
  • "History timeline". (n.d.) Retrieved April 23, 2013 from http://corporate.walmart.com/our-story/heritage/history-timeline
  • "Is Walmart's supply chain really that good?" (2011). Retrieved April 26, 2013 from http://retailingtoday.com/article/walmart%E2%80%99s-supply-chain-really-good
  • Joe. (2010). What is walmart’s retail link system?. Retail Link Blog. Retrieved April 23, 2013 from http://retaillinkblog.com/what-is-walmarts-retail-link-system/3
  • Meng, J. (2011) Inventory management system in walmart. Blogspot. Retrieved April 23, 2013 from http://jiangmeng19880806.blogspot.com/2011/10/inventory-management-system-in-wal-mart.html
  • "Retail Link Performance Reports". (n.d.). Retrieved April 26, 2013 from http://www.retailright.ca/samplereport.htm
  • Trefis Team. (2011). Stacking up wal-mart's inventory management vs. costco and best buy. Trefis. Retrieved April 23, 2013 from http://www.trefis.com/stock/wmt/articles/38093/stacking-up-wal-marts-inventory-management-vs-costco-and-best-buy/2011-02-03
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