Sam Walton, the founder and former CEO of Wal-Mart, was a stubborn, driven, hardworking, frugal man. After launching over 2,000 stores nationwide in 1993 (Wal-Mart Stores INC), a few investors realized the need for Walton to be able to communicate with all of Wal-Mart stores in a timely manner. These investors suggested that Walton invested twenty-four million dollars in a satellite system that would enable him to communicate easily with his fast growing Wal-Mart chain. Walton insisted that he would be able to visit every single store personally, yet he reluctantly agreed to the offer (Satellite Adds Speed To Wal-Mart).
From this point forward Wal-Mart’s management information systems expanded. As of today, Wal-Mart is praised as having one of the best, if not the best, management information systems. Within this essay, I will analyze a few management information system technologies and techniques of Wal-Mart INC and explain how the basics of MIS have supported the growth of Wal-Mart’s competitive advantage by creating value. Wal-Mart and Collaboration Information Systems
With Wal-Mart having over 10,000 stores worldwide, an important component of their management information system is their collaboration information system. The collaboration information system is the key to how the company communicates with their investors, retail stores, manufacturers, warehouses, and suppliers. As noted by Kroenke, the components of all collaboration information systems are: the computer side - hardware and software; the bridge -data; and the human side - procedures, and people.
How does Wal-Mart apply the collaboration information system into their daily use? Let’s begin with analyzing the computer side of the collaboration information system: Wal-Mart’s server hardware and software system. The basic hardware that is used by Wal-Mart employees daily are computers and handheld devices (both come equipped with scanners) that were built by Wal-Mart’s information technology department. One specific function of these computers and handheld devices is to help employees better locate and correctly place an item in the store.
Another specific function this hardware has is the ability for the scanner to read the RFID (radio-frequency identification) tags of products. An RFID tag helps keep track of the inventory inside and outside the store. By using this technique, managers know when and how much inventory needs to be ordered. This helps Wal-Mart companies to cut costs by not ordering too much inventory. Next, we will discuss a component of Wal-Mart’s software system. Wal-Mart uses SAP AG as their ERP software system. SAP AG, a vertical-market application, serves the specific needs of Wal-Mart’s growing global business.
This quote from Sap.com describes how Wal-Mart uses the software daily: “SAP software helps enterprises of all sizes around the world improve customer relationships, enhance partner collaboration and create efficiencies across their supply chains and business operations” After choosing SAP AG as their primary ERP software system, they were able to cut costs of the company significantly.
Data is used to bridge the computer side and the human side. NCR Corporation controls Wal-Mart’s data. In other terms, NCR is Wal-Mart’s database management system. Even though NCR controls the data, Wal-Mart makes the final decisions of what information the database will contain and how the information will be related to another (Using MIS). After the contractual agreement of Wal-Mart and NCR in 1996, the two companies share over 7.5 terabytes of data storage (Wal-Mart Selects NCR).
This, in turn, prompted Wal-Mart for their data warehouse, owned by Teradata. Wal-Mart uses their data warehouse daily, which is currently 4 petabytes, to study the way their consumers shop and make critical decisions about their business. Now, let us analyze the human side of the collaboration information system: procedures and people. As you could imagine, the different departments of Wal-Mart supercenters will have different procedures. Here I will discuss the procedure cycle of a daily employee, who will be conducting the collaborative procedures. Everyday Wal-Mart’s employees use procedures to get their job done at the best of their ability. For example, Wal-Mart employees Billy, Jim, and Bob must stock the shelves of aisle 7, the laundry detergent aisle, by six o’clock sharp.
They would begin with the starting phase setting the ground rules for the collaboration. What task is at hand? They would then move onto the planning phase which would determine “who will do what and by when”. Next is performing the action on stocking the shelves. Within this stage management should determine if the task at hand would be finished within the allotted time frame and make adjustments if needed. After that the team is wrapping-up. Are the shelves fully stocked? If yes, disband the team and move onto other projects. If no, contact a manager for more information.
Lastly, the team should provide positive and/or negative feedback to their manager. By Wal-Mart employees and managers communicating throughout procedures, Wal-Mart can modify their procedures to utilized the least time and cost needed. Last, but not least, of the collaboration information system is the most important component; the people. Without the people of the collaboration system, nothing else would be possible.
In this section I explained how Wal-Mart incorporated collaboration information systems into the daily demand and routine of its retail store. I also explained how each of the components (hardware, software, data, procedures, and people) was being used to maximize value and cut costs within the company itself. This is one way Wal-Mart incorporates the basics of management information systems into their value-based business. Wal-Mart Fundamentally Uses MIS to Gain Competitive Advantage
Wal-Mart’s business strategy is simple, “Save Money, Live Better”. Their slogan is what differentiates the company from all others. In regards to Porter’s Four Competitive Strategies, Wal-Mart is low cost across the industry as well as providing better products and services across the industry.
By simply focusing on value Wal-Mart is virtually untouchable. Wal-Mart tops the Fortune 500 Companies chart with revenue of $408,214,000, just in general merchandise, with Target coming in a far second with revenue of $65,357,000 (Money.CNN.com). How is Wal-Mart applying MIS to their business strategy to gain a competitive advantage? Fundamentally, Wal-Mart uses the value chain along with their business processes to obtain maximum value, which is critical to their strategy. The first step of the value chain is Inbound Logistics. Within this step, Wal-Mart makes contractual agreements with other manufacturers that want their products on the shelves of Wal-Mart stores.
This action is a Business to Business procedure. Before Wal-Mart makes that contractual agreement, they bargain with their manufacturers for the lowest price possible. After Wal-Mart receives their products, they will then move onto the second step of Operations/Manufacturing. Here, the products ordered are stored in appointed warehouses located worldwide. These products will only be shipped from the warehouse as instructed by the retail stores. In step three, Outbound logistics, the retail stores have communicated with the manufactures, ordered and received the products.
At this point, the items are stocked (placed onto the shelves), by the employees of Wal-Mart, in their rightful aisles. Next, step four, is Sales and Marketing. Wal-Mart have many marketing strategies, but I will only cover one tactical strategy, placement. Wal-Mart strategically places items on shelves by category: from top to bottom, smallest to largest; from outward to inner, most popular to least popular; and also by price point, from cheapest to most expensive. This type of placement will persuade the customer to buy a certain product based on the customer’s perceived value of the product.
The final step is customer service. Wal-Mart, just as any other business, thrives on the ability to help their customers in any way possible. Wal-Mart exceeds the standards of customer satisfaction. By following the basic structure of the value chain and business processes, Wal-Mart is able to obtain products with the most quality and control the products prices. Wal-Mart and E-Commerce
Another way Wal-Mart sought after creating more value for its customers is by engaging in what is known as E-Commerce. The company typically participates in a global Business to Consumer E-Commerce and have helped with growing sales in the United Kingdom and Brazil. Although Wal-Mart faces even greater competition online, the company still exceeds all other E-Commerce companies.
One way Wal-Mart is able to achieve this is by only offering certain items online. Another way Wal-Mart surpasses their competition is how the company uses the data information, now collected both in stores and online, to further supply their stores with products that the customer wants, where they want it, when they want it, and at the price that they want. Conclusion
The Wal-Mart company’s promise is “We Save Money So People Can Live Better” and without the fundamentals of management information system this could not be possible. In this essay I discussed: how Wal-Mart used the components of collaboration information systems to create value, how Wal-Mart used Porter’s Four Competitive Strategies to focus on differentiating its products from those of the competition with a lower cost than competitors, how the company used the value chain to support the continuous growth of value between each chain linkage, and also how the company uses E-Commerce to generate more revenue and create even more value for the customer. In Wal-Mart’s world, value is everything and MIS supports its business strategy to give them the competitive advantage.
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