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HOW WAL-MART LOST ITS TECHNOLOGY EDGE
Transcript of HOW WAL-MART LOST ITS TECHNOLOGY EDGE
Sam Walton "Truthfully, I never viewed computers as anything more than necessary overhead."
Sold stores South Korea & Germany
Reduced new stores to be opened in U.S.
Lowered profits than expected
According to Wal-Mart,
Effect of high energy prices on low income core shoppers
According to Analysts,
Failure at new high-end apparel / home-decor
Inattention to customer service at home
Insensitivity to local market abroad
Setbacks to RFID system
Struggled online, website lags behind competitors
Delivering quality products at low prices
Store executions at the highest standards
At The Crossroads
Competitive advantage is not sustainable
“Centralized decision making / local input” conflict
Business intelligence & price-optimization tools are necessary to be up-to-date and effective
Conviction of superiority
Effective expenditure for supply chain management is essential
Wal-Mart is no longer considered as a technology pioneer
The Good Old Days
Sam Walton - Modern time Robin Hood
Investment in technology - “Technology should never get in the way of keeping our people”
Competitive and successful management team
Strong IT structure (B2B communication and data processing fields) copied by competitors (bar code scanning, satellite technologies, EDI-electronic data interchange).
The RFID Experiment
RFID vs. Barcode
New supply chain experiment, RFID, distracted Wal-Mart from concentrating on implementing new merchandising strategies.
The new system concentrates on Wal-Mart’s out-of-stock problem.
Lack of defined ROI
Financial and operational burden on suppliers who were left alone
RFID is hard to be ready for prime time
Lack of RFID talent
Unilever believes that the system is early adopted for consumer-packaged goods
Very low margins vs. enourmous amount of complexity // Cost-benefit
Only 3% of 20,000 supplier and 12 of 137 distribution centers reported implementation of RFID
Too much work still ahead at the time Ford became CIO
This generation’s Retail Link?!
IT focused on supply chain... What about new product initiatives and customer relationship strategies?
Operational Excellence (Retail-Link)
It’s a New,
WEB 2.0 World
13th web-sales volume among retail business (acc. to industry watcher Internet Retailer)
3rd most popular retailing web-site (after Amazon.com, Target.com) (acc. to Alexa)
Disconnect between what Wal-Mart is selling and its low-income customers want to buy (upscale cloths, home decor) Wal-Mart should market online for high-income customers.
The more channels the consumers use for shopping, the more loyal they are.
GSD&M urged Wal-Mart to utilize online marketing strategies such as blogs to reinforce the value of its brand and new products.
New features enabled customers to review and rate products.
80% of shoppers give importance to customer reviews (acc. to Bazaarvoice)
Wal-Mart is a customer of Bazaarvoice but bound not to talk There is a need for change
Facebook college students are taken focus to but back-to-shcool products
There occured detractors&negative feedback Wal-Mart accepts this.
MySpace failure; fake users praising Wal-Mart products
10 weeks life-time of MySpace site; claims of fooling youth like politicians
Site to Store - free shipping to local stores
5$ mio shipping fee saving for customers making online purchasing with Site to Store 50% of them were first-time online purchasers - customer loyalty increase
Best Buy and Circuit City had already implemented this system.
The online endeavor is critical - 33rd acc. to “Top 40 Online Retail Satisfaction Index” (ForeSee Resuls, 2006)
A brand new system is needed to be implemented for quick benefit.
Wal-Mart is very good at data collection but this advantage should be used for good decision making. (currently it just throws these data to Retail Link, using it for decision making is next level)
Oracle - retail price optimization (apparel example) - DECISION SUPPORT SYSTEM
HP - data warehousing (local sales info)
On the other hand, there are certain areas where IT has little effect for a change:
POORLY STOCKED SHELVES
Wal-Mart is late...
POS system which is updated continually
Price checkers, interactive kiosks
Fast checkout experience
Associates for support
According to Executives effect of high IT needs to catch “today”, just like past years of Wal-Mart.
IT is not directly contributed Wal-Mart’s problems, but it could have provided better support.
Wal-Mart should open to the expertise of current technology and good ol’ computers.
RFID SYSTEM - TOP DOWN MANDATE!!
RE-ENGINEERING - Radical change in product identification and supply chain management - TRANSACTION PROCESSING SYSTEM CHANGE
Steps are not followed properly; pain points (supplier aspect) are dismissed, process quality, time and cost are not considered for suppliers.
CONVERSION: DIRECT CUTOVER - (Phased approach; ex. supplier by supplier)
FEASABILITY ANALYSIS - May be suitable for Wal-Mart from economical, technical and operatioanal aspects, but suppliers are not analyzed
Top management support - OK
Good IS project management - OK
User involvement during analysis - SUPPLIERS WERE NOT SUPPORTED OR TRAINED
Try to avoid gaps - SYSTEM WORKS IN ITS WAY
While the system is not still completed for the whole suppliers of Wal-Mart, one of the goals of CEO Lee Scott, in 2007, was accomplished: FOCUSED ON INVENTORY IMPROVEMENTS.
Complimentary Assets (Social Investment) - unsuccessful except Site to Store
“Technology and customer service go hand in hand.” But customer needs to see the real response in-store.
İdil UĞUR YİĞİTOL
M. Fatih YİĞİTOL
H. Özgür YILMAZ
REASONS OF SLUMP
GOALS of Wal-Mart For Improvement
Continuous replenishment system
Retail-Link system integrated POS&store-shelf data automatically triggered manufacturing when stocks were low
“The gorillas dance together, but the monkeys dance to not to get stepped on.”- Access for suppliers to sales number in return.
Top management requires IT to be highly centralized
CIO’s act from bottom up, from customers and work backward