Has Wal-Mart Lost Its IT Advantage?
Written by Evan SchumanNovember 22nd, 2007
Has the Web succeeded in taking away perhaps just a touch of the advantage that comes from being a massive retailer? This well-reasoned CIO Magazine story does a nice job of exploring that question by looking at whether Wal-Mart’s IT department has lost its edge and started to hurt Wal-Mart’s dominance.
The piece looks at the mixture of corporate ideas forced onto the stores and whether RFID efforts distracted the company from more practical objectives. A good read.
-Marc
November 23rd, 2007 at 11:14 am
My take as to what happened to Wal-Mart’s RFID initiative is as follows:
1. Wal-Mart made good use of barcode based software for their distribution centers, taking advantage of standards like EDI to accurately move case goods from supplier to store backrooms.
2. At Point of Sale (POS), they failed to make use of data collection beyond the simple task of item price lookup.
3. This created an item level control gap for moving inventory from the backroom to the store shelf that resulted, in what Wal-Mart has referred to on many occasions as “The Chaotic Store Backroom”. Furthermore, this condition is responsible for a high level of Out-of-Stocks (OOS).
4. To solve this problem Wal-Mart executives bought into the “Pie-in-the-Sky” RFID system pushed by the prestigious AutoID Center of MIT. At the top of the list of MIT promises for RFID was the concept of instantaneous and continuous item level shelf inventory. With this capability, the gap in item level inventory could be breached and the chaotic backroom could be eliminated.
5. Automatic shelf inventory was the first pilot attempt by Wal-Mart in 2004 and it failed very quickly, primarily due to the fact that RFID could not provide the level of accuracy, and location granularity needed for success. In Addition, it was frightfully expensive.
6. Next, they moved to apply RFID at the pallet and Case level in order to improve the supply chain between suppliers, distribution centers, and stores.
Here they found that the distribution centers were already running very efficiently using barcode, EDI, ASN etc.., and RFID did not make an improvement that could be cost justified.
7. Wal-Mart executives need to admit that they made a mistake with RFID, and move on to use a small WMS system for the store backroom, and apply POS data to drive the replenishment cycle from the shelf all the way back to the supplier. They have all the infrastructure in place to do this if only they could admit that RFID is not the answer.