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Walmart inventory system analysis
- 1. RFID Systems atWalmart By (Johannes) Severin Glade, Derek Humphreys, and Tyler McFarland
- 2. What are RFID -RFID (Radio Frequency Identification) - Consists of a micro chip and an antenna - When it is scanned by an RFID scanner, important information can be read - They do not need a battery to function
- 3. RFID effect onSCM -> SCM (supply chain management) + Completely autonomous warehouses via automatic filing through RFID + Can remove human error by making physical listings obsolete - High initial costs on restructuring (Roughly 25 cents per tag)
- 4. Importance of EfficientInventory Systems ● Helps retailers locate where goods are ● Allows suppliers to recognize when inventory levels are low ● Minimizes SCM delays ● Decreases overtime cost of inventory management
- 5. Inventory System Decisions ●Walmarts “Top 100 Suppliers” are required to have RFID on their shipping crates ○ Each RFID contains an Electronic Product Code (EPC) ● Walmart RFID breaks down inventory into categories: ○ Finished Goods Inventory ○ Transit Inventory ○ Buffer Inventory ○ Anticipation Inventory ● Reduces misplaced inventory & out-of-stock products ● Allows companies to easier track what items are selling at which rates. (Precise analytics)
- 6. How Can RFIDHelp Efficiency ● Allows suppliers to recognize when inventory levels are low so they can send goods before the store sells out ● Product location in seconds ● Employee Productivity ● RFID does NOT require a “direct line of sight” ● Significantly faster inventory deliveries
- 7. Privacy concerns withRFID - As long as RFID is solely used for warehouses and distribution centers there is no need for concern - RFIDs can be read remotely without the owners knowledge - The EPC can identify an object and retrieve origin, production date, and more from that particular item - RFID is also used in credit cards
- 9. Porter's 5 forcesmodel Competition - Strong - Large number of firms in the retail market - Large variety of retail markets Threat of substitution - Weak - Higher cost of substitutes Bargaining power of suppliers - Weak - Large population of suppliers Bargaining power of customers - Weak - Large population of consumers Threat of new entry - Strong - Brand development is relatively easy - Low cost of brand development
- 10. Supply chain atWalmart - 2 levels of distribution centers - Shipments arrive in consolidation centers - Consolidation centers distribute to regional distribution centers - Regional distribution centers distribute to stores - Stores only have small storage spaces, because restocking happens very frequently
- 11. Competitive Advantage Analysisof Walmart - Low-cost leader by minimizing costs - Market penetration via explosive expansion - Diversification by offering a large variety of products - Incredibly fast restocking of items
- 12.
- 13. Challenges ● Implementation costand time ● More Self Checkout = More Theft ● Backlash of laying off employees
- 14. Solutions to challenges ●Hire additional customer service ● Security (RFID reader above exits) ○ Higher additional security ● Long term value for both consumers & company ○ Promotes brand loyalty
- 15. Connection to Chapter11 Analyse Information for business decision making ● Restock Efficiency ● Identify complementary products ● What products are selling well
- 16. Question 1 How doesRFID improve the efficiency of Walmart's Supply Chain Management?
- 17. -Helps retailers locatewhere goods are -Allows suppliers to recognize when inventory levels are low -Minimizes SCM delays -Decreases overtime cost of inventory management
- 18. Question 2 What doesWalmart do that sets it apart from its competitors?
- 19. - Walmart decreasestheir prices to become a low cost leader - It is very convenient because its massive expansion makes Walmart almost omnipresent - Huge selection of goods - Saving expenses by outsourcing their storage into distribution centers that restock stores frequently
- 20. Question 3 Which challengesis Walmart facing in implementing RFID?
- 21. - The amountof time and money it takes to implement them is huge - Higher amount of theft due to self checkouts - Social repercussions due to firing of many employees in need
- 22. Sources Greenspan, Roberta. “Walmart'sInventory Management.” Panmore Institute, 21 Feb. 2019, http://panmore.com/walmart-inventory- management. Neil Mathews. “Improving Supply Chain Visibility through RFID.” Warehousing | Supply Chain Digital, Neil Mathews, 6 Feb. 2015, https://www.supplychaindigital.com/warehousing/improving-supply-chain-visibility-through-rfid. Lowry Solutions. “The 3 Biggest Benefits of RFID Asset Tracking in the Supply Chain.” Lowry Solutions, 13 June 2018, https://lowrysolutions.com/blog/the-3-biggest-benefits-of-rfid-asset-tracking-in-the-supply-chain/. Rosenblum, Paula. “How Walmart Could Solve Its Inventory Problem And Improve Earnings.” Forbes, Forbes Magazine, 2 Sept. 2014, https://www.forbes.com/sites/paularosenblum/2014/05/22/walmart-could-solve-its-inventory-problem-and-improve-earnings/#3153cb1f5db1. Kaplan, Deborah Abrams. “The Rise, Fall and Return of RFID.” Supply Chain Dive, 2019 Industry Dive, 21 Aug. 2018, www.supplychaindive.com/news/RFID-rise-fall-and-return-retail/530608/ contributor, Guest. “RFID and Its Effect on Supply Chain Management.” Fronetics, 16 June 2016, https://www.fronetics.com/rfid-and-its- effect-on-supply-chain-management/. Ferguson, Edward. “Walmart's Generic Competitive Strategy and Intensive Growth Strategies.” Panmore Institute, 22 Aug. 2018, http://panmore.com/walmart-generic-competitive-strategy-intensive-growth-strategies.
- 23. Sources 2 Malone, Robert.“Can RFID Invade Your Privacy?” Forbes, Forbes Magazine, 13 July 2012, https://www.forbes.com/2006/12/05/privacy-rfid- tags-biz-logistics-cx_rm_1207rfid.html#aa19d685b22 Hoffman, Chris. “What Is RFID, and Is It Really a Security Concern?” How, How-To Geek, 22 Sept. 2016, https://www.howtogeek.com/189936/htg-explains-what-is-rfid/. Greenspan, Roberta. “Walmart Inc. Five Forces Analysis (Porter's Model), Recommendations.” Panmore Institute, 22 Feb. 2019, http://panmore.com/walmart-five-forces-analysis-porters-model-case-study.
Editor's Notes
- #6 Finished goods inventory. The finished goods inventory type is the most significant in Walmart’s business. Finished goods arrive at the company’s stores. These goods are stored and the inventory is replenished regularly. Thus, the role of this type of inventory is to support Walmart store operations, where the finished goods are moved from the company’s merchandise distribution centers to be sold to the retail buyers at the stores. Transit inventory. Walmart uses the transit inventory type as the second most significant in supporting its retail operations. This type of inventory refers to the goods that are held while in transit. The global extent of Walmart’s supply chain means that some goods are in transit for days or weeks. The role of this inventory type is to support the replenishment of the finished goods inventory in the merchandise distribution centers and Walmart stores. Buffer inventory. Walmart uses the buffer inventory type in its stores by keeping a small margin of extra goods in order to maintain business continuity when demand suddenly fluctuates. For this purpose, there will always be an extra stock of goods at Walmart stores. The role of this type of inventory is to ensure the adequate capacity of the company to satisfy sudden increases in demand, considering that current retail market prediction models may be accurate, but not perfect in modeling such fluctuations. Anticipation inventory. Walmart uses the anticipation inventory type to ensure optimal capacity to satisfy consumer demand. This type is similar to the buffer inventory because the company maintains extra stocks of goods to address an increase in demand. However, the anticipation inventory type is based on seasonal changes and corresponding empirical data on seasonal changes in the market. For example, Walmart dramatically increases its inventory size right before and during Black Friday to satisfy the massive increase in demand during this special shopping day. The company also uses anticipation inventory for the Christmas season and some long holiday weekends. Walmart does not use the anticipation inventory type during regular shopping days, which are basically the rest of the year. The role of this inventory type is to enable the company to satisfy expected seasonal increases in demand.
- #11 https://www.youtube.com/watch?v=0iQ5PEILcgg
- #13 n 2003, Walmart told its top 100 suppliers and vendors they had to tag all pallets and cases with RFID tags within two years meant for the supply chain, and for pallets and cases only - Unuseful data (bad implementation) 2006 - improved implementation leads to improved efficiency in warehouses and stores alike by making sure they had items stocked 2013 - RFID gains steam in retail Release date to present -$0.50-0.75 to $0.03-0.05 Today - 100% accuracy on orders