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Currently, information technologies are regarded as a valuable tool for improving various processes within an organization. They can greatly benefit both private companies and public organizations.
This paper is aimed at discussing the strategies adopted by such a corporation as Wal-Mart since this example can demonstrate how information technologies can contribute to the financial performance of a business and its long-term sustainability.
It should be noted that Wal-Mart began to use IT in the early seventies at the time, when these tools were not widely adopted (Odih 161). This policy was supposed to improve the functioning of the supply chain in this corporation, especially the procurement of products.
The most important objective was to minimize the levels of inventory and reduce the operational costs of the corporation. One can say that this approach enabled this company to gain competitive advantage of its major rivals.
Finally, the initial principles underlying this strategy have not become obsolete. These are the main issues that should be considered during this discussion.
The case study of Wall-Mart
One should take into account that Wal-Mart had to adopt an alternative approach to their supply change management. They faced a challenge that was encountered by many growing retailers. In particular, some of the products that the customers requested could often be out of stock (Ray 73).
In contrast, other goods could be oversupplied, but they were not often requested by buyers. These deficiencies resulted in extra expenses for the company and they prevented the corporation from achieving growth.
Moreover, it was evident that the supply management strategies did not enable the organization to respond the changes in clients’ demand. The most important goal was to minimize the levels of inventory while avoiding stockouts (Ray 73).
This task was critical for the sustainability of this corporation especially at the point when it was opening new stores in different cities and towns. These were the major rationale for introducing information technologies. There were several actions that the management of Wal-Mart took.
First of all, they required the major suppliers to install information technologies that gave them access to the sales data of Wal-Mart stores (Odih 161). These information systems could tell the suppliers when it was necessary to replenish the stores of Wal-Mart (Odih 161).
More importantly, Wal-Mart insisted that different suppliers should share information with one another (Ireland and Crum 21). One should note that these organizations could be closely related to one another.
Therefore, it was unreasonable for them to conceal information from one another since this approach prevents many businesses from improving their performance (Odih 161). This approach was adopted in the early seventies, and it allowed Wal-Mart to build an extensive network of stores throughout the United States.
The senior managers of Wal-Mart invested capital in the creation of the central database which tells business administrators about the quantity of products available at different stores of the corporation (Schermerhorn 471). These are some of the initiation actions that were taken by the management.
Apart from that, the supply chain management in this organization involves an information system called Retail Link, and it plays a critical role for the competitive strength of this corporation (White and Bruton 8).
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Its main function is that it continuously updates the records about inventory. These changes are registered when a certain product is purchased by a client. The main strength of this information technology is that it updates records almost instantaneously.
Again, this system is accessible to suppliers that can see what kinds or products should be delivered to Wal-Mart as soon as possible (Ireland and Crum 21). Thus, business partners of Wal-Mart can see the changes in demand and supply and respond to these changes (Ireland and Crum 21).
Thus, one can say that this technology ensures effective cooperation and its business partners, and it was essential for the growth of this corporation. Moreover, the data that it provides enables this organization to forecast the demand for products for a certain period.
Certainly, one should not assume that these forecasts are always accurate, but they can give the management at least some idea about the quantities or products that will be purchased by clients in the future.
The main benefit of this system is that it helps Wal-Mart to avoid the shortages of good while keeping their inventory at the minimum level (White and Bruton 8). Certainly, this software solution has been modified several times, but the main principles of this application are still relevant to this corporation.
This is one of the reasons why this company was able to grow very rapidly, especially in the early nineties. During that period, the company turned into the largest retailer in the United States. Currently similar software solutions can be used by other firms, especially retailers that try to compete with Wal-Mart.
These organizations have to take similar initiatives in order to operate effectively at a national or international level. Thus, one can say that the decisions that the management of Wal-Mart took were quite successful. This is one of the main arguments that can be put forward.
It should be considered Wal-Mart intends to implement other strategies to improve the work of the supply chain. For example, they intend to use the RFID or radio frequency identification technology (Schermerhorn 471).
This tool enables the company to track the location of a product from the moment when it leaves the premises of a supplier until the point when it is brought by a customer. This initiative is also related to the supply chain management and the reduction of operational expenses.
First of all, this strategy is supposed to prevent the theft of goods or their misallocation. In this case, close attention should be paid to misallocation because this problem results in the increase of operational costs and delays since employees have to spend much time while searching for these goods.
Apart from that this technology enables the management to identify possible problems at an earlier stage. This opportunity is particularly important in those cases when some of the suppliers fail to meet the deadlines set by the company. This is the main benefit of this technology.
It should be taken into account that this project is expected to cost approximately $ 8 billion per year, however, the management is going to accept this price (Schermerhorn 471). Currently, a significant part of the suppliers have already introduced this technology.
Therefore, it is possible to argue that the management is willing to invest into the IT infrastructure of this corporation (Schermerhorn 471). In their opinion, this policy can ensure the sustainability of this corporation.
They usually focus on such aspects as supply chain management, namely the procurement and storage of products. On the whole, this strategy can be quite justified because it has already enabled Wal-Mart to become the leading retailer in the world. Apart from that, its competitive position has not been disputed.
It is also worth mentioning that Wal-Mart was one of the first retailers that began to share its sales data with its suppliers. In the past, many retailers were reluctant to give away this information and it was strictly confidential (White and Bruton 8). In fact, suppliers could only purchase these data.
This is one of the reasons why many firms could not decrease their operational expenses. Wal-Mart chose to depart from this tradition because this policy was counter-productive.
Thus, one can say that the management of Wal-Mart did take some innovative decisions and these decisions were critical for the success of new information technologies.
These are some of the main initiatives that should be considered. Additionally, the management of Wal-Mart invested not only in the technological infrastructure. They also focus on the expertise of employees who had to know how to use various software solutions.
For example, they needed to know how to interpret the data provided by Retail Link (Pride and Ferrell 37). This is one of the issues that business administrators should keep in mind. One cannot assume that only by purchasing the most up-to-date applications, one gain competitive advantage.
Furthermore, senior executives of Wal-Mart continuously work on the development of their information systems. One can even say that this task is implemented for almost several decades. These principles were important for the growth and sustainability of Wal-Mart.
Overall, it is possible to argue that the strategies of Wal-Mart were based on several important assumptions. First, the senior officers emphasized the importance of information and exchange of information within and between organizations.
This issue was vital for the growth of this organization especially at the time when its stores were located in different parts of the United States as well as other countries. Without this cooperation, the effective functioning of the supply chain would not be possible.
Overall, this approach enabled the company to become agile or responsive to the changes in the market. Furthermore, this corporation had to work with various suppliers that could be located in different states or even continents.
Moreover, Wal-Mart was able to avoid many of the challenges that were faced by other retailers. The problem is that many companies tend to become less effective when they grew. The management of Wal-Mart was able to avoid this pitfall.
Additionally, one can point out that effective implementation of information technologies enabled Wal-Mart to set lower prices for its products and gain the loyalty of clients (Hill & Jones 2).
Therefore, the initiatives of management can be called successful. Currently, this corporation adheres to the principles that were outlined by the past decades. These are the main aspects of this case.
Overall, the developments that were described in the previous section can produce some far-reaching implications for both private and public organizations.
First of all, one can mention that large retail chains try to implement sophisticated information systems that enable them to track the flow of inventory within an organization. To a great extent, they emulate the strategies of Wal-Mart which they regard as a role model (Simons 225).
Furthermore, similar approaches have been adopted by many manufacturing companies that are also dependent on their supply chains. Nevertheless, it is possible to say that the developments described in the case can have other implications in the future.
For instance, the use of RFID can become even more widespread during the following decade. As it has been said before, this technology can be used for tracking products, component parts, or other physical objects (Schermerhorn 471).
This tool can be of great use to manufacturing companies that have to minimize their inventory. This policy will be particularly widespread among large corporation that have to work with business partners from various countries.
Certainly, such a strategy can be very costly, but it can greatly improve their long-term results of any organization. This is the most important trend that can greatly affect many businesses and organizations in the future.
Furthermore, companies will rely on information technologies as a way of linking different business processes such as sales and supply chain management. This approach has already been adopted by the most advanced firms, but in the future, other firms will have to emulate this strategy in order to remain competitive.
This necessity can become even more acute at the time when businesses outsource their manufacturing processes to other countries. These organizations can function effectively provided that they can monitor the activities of their suppliers and business partners.
This tendency can give many opportunities to IT companies since their products will enjoy significant demand among various organizations, especially those ones that are engaged in the production and retailing. These are some of the main trends that can be identified in this case.
Nevertheless, one has to acknowledge that it is difficult to make predictions about further developments of businesses like Wal-Mart as well as other firms.
The problem is that the development of technologies is unpredictable and it can profoundly affect manufacturing processes or exchange of information within companies. A single invention can dramatically transform the business processes of many corporations.
Therefore, one should take into account that the forecasts about the future of companies can be inaccurate. The main limitation of such predictions is that they cannot take into consideration the possible impact of future technologies.
This discussion suggests that the competitive strength of many organizations depends on their ability to manage information. Close attention should be paid to the transfer of data within an organization.
Wal-Mart gained competitive advantage by implementing an information system that dramatically improved their supply chain. This application enabled the company to detect the changes in demand or supply.
More importantly, this corporation succeeded in minimizing the levels of inventory. As result, this organization was able to reduce operational expenses and avoid extra costs.
Thus, this corporation managed to lower the price for their products. In the later years, this strategy was implemented by other retailers and manufacturing firms. There are several lessons that business administrators need to consider.
First of all, the development of information system should be a continuous process. A single investment is not likely to improve the performance of a company significantly. Moreover, employees should be involved in this process.
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Pride, William, and O. Ferrell. Marketing Express, Cengage Learning, 2010. Print.
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Schermerhorn, John. Management, New York: John Wiley & Sons, 2011. Print.
Simons, Rae. Operations Management: A Modern Approach, Boston: CRC Press, 2011. Print.
White, Margaret, and G. Bruton. The Management of Technology and Innovation: A Strategic Approach, New York: Cengage Learning, 2010. Print.