Effective and Efficient Control Systems of Wal-Mart

Thesis

The first year of operation for Wal-Mart was 1962. At this time, Sam Walton's stores in Arkansas and Kansas were already facing competition from regional discount chains, such as K-Mart and Target. Sam traveled the country to study this radical, new retailing concept and was convinced it was the wave of the future. Today, Sam Walton has a global company with more than 1.8 million associates worldwide and nearly 6,500 stores and wholesale clubs across 14 countries.

This kind of success could not have been achieved without implementing the proper control systems in order to understand the expectations of what consumers want and need from a retailer.

ISD is the Information Systems Division. Wal-Mart depends on technology to increase their efficiency and provide more information. From registers to Radio Frequency Identification (RFID), Wal-Mart leads the retail industry by implementing ISD around the world.

"The secret of successful retailing is to give your customers what they want," Sam wrote in his autobiography. "And really, if you think about it from the point of view of the customer, you want everything: a wide assortment of good quality merchandise; the lowest possible prices; guaranteed satisfaction with what you buy; friendly, knowledgeable service, convenient hours, free parking, a pleasant shopping experience.

Wal-Mart got the boost it needed in 1970, when its stock was offered for the first time on the New York Stock Exchange. The public offering created the capital infusion that grew the company to 276 stores by the end of the decade. By focusing on customer expectations, Wal-Mart was growing rapidly in 11 states.

In the 1980s, Wal-Mart became one of the most successful retailers in America. Sales grew to $26 billion by 1989, compared to $1 billion in 1980. At the end of the ten years, there were nearly 1,400 stores. The first Super Center, featuring a complete grocery department along with the 36 departments of general merchandise, opened in 1988.

Ironically, technology plays an important role in helping Wal-Mart stay customer focused. Wal-Mart invented the practice of sharing sales data via computer with major suppliers, such as Proctor & Gamble. For example, every time a box of Tide is rung up at the cash register, Wal-Mart's data warehouse takes note and knows when it is time to alert P&G to replenish a particular store. As a result, Wal-Mart stores rarely run out of stock of popular items.

Fortune Magazine as the most admired company in the world has recognized wal-Mart Stores. Some of the reasons that Wal-Mart was the most admired are because; Wal-Mart has the largest civilian database. 90% of Wal-Mart business solutions, from an ISD perspective, are written in-house. Wal-Mart has consistently been ranked as one of the top places to work in the Information Systems Industry. Wal-Mart drive's many of the largest technology suppliers businesses with input concerning the technology they create.

Wal-Mart Information Systems division touches every aspect of Wal-Mart's business by developing, implementing and maintaining strategies in Wal-Mart stores, clubs, distribution centers, specialty divisions and aviation division.

In April 2004, Wal-Mart began a pilot program in 150 stores and clubs in and around Dallas, TX, to test the efficiency of using radio frequency identification (RFID) to track items from manufacturers to distribution centers and then back to the stores. The initial launch was so successful, that by the end of 2004 fiscal year, they brought another 500 stores and clubs online with the Radio Frequency Identification initiative, bringing the total to more than 1,000 locations using the technology.

Radio Frequency Identification (RFID) is an automatic identification method, relying on storing and remotely retrieving data using devices called RFID tags or transponders. An RFID tag is an object that can be attached to or incorporated into a product, animal, or person for the purpose of identification using radio waves. Chip-based RFID tags contain silicon chips and antennae. Passive tags require no internal power source, whereas active tags require a power source.

An independent study, completed in October 2005 by the University of Arkansas, concluded that the impact of RFID had on merchandise included: out of stocks being reduced up to 16 percent and out of stock items with electronic product codes (EPC) were replenished three times faster than non-tagged items. Also, stores with RFID were 63 percent more effective in replenishing tagged items than control stores and experienced a 10 percent reduction in manual orders, which reduced excess inventory.

RFID has also been positive in that it helps to make sure that promotional displays are delivered and in place so that products are in Wal-Mart stores and ready for sale when the advertising begins. It shortens the amount of time it takes for new items to make it to store shelves. In fact the process is three times faster than for non-tagged products. RFID also aids in proof of delivery and purchase order reconciliation by providing visibility of product even after it has left the receiving dock. By the end of 2005, more than 200,000 tagged pallets