When we look at the Five Forces model as applied to Walmart, we can determine that the Buyer Power of their customers is high because patrons have many other choices. However, customers expect and demand the lowest prices from Walmart, and they are willing to overlook, but not ignore, other factors like customer service, store location, and atmosphere
Walmart's Suppliers have little power because of the sheer size of Walmart, and because being a Walmart supplier can provide huge sales potential. The suppliers must do what Walmart wants regarding business processes and technical requirements. They will also be pressured for lower prices, which may cause the suppliers to move production to lower priced labor markets.
The threat of substitute products means that customers can go elsewhere for the same or substitute items. There could be some threat here only because of web based stores as they may be able to have lower prices because of low overhead,
Threat of new entrants in the Brick and Mortar Store area is low, because of the costs involved in building stores and the infrastructure to support the business processes. New entrants in the Internet market would be high, because of the low costs involved and the potential to specialize in different areas with especially low prices.
Rivalry between competitors at a store level would be high and could be affected by the breadth of products and quality of customer service or even the cleanliness and appearance of the store. On a company level, Walmart’s Sales are $418 Billion and Target, their closest competitor’s has annual sales of $67 Billion, so while it may seem there is a large rivalry, the size of Walmart limits the threat.
For new entrants to compete with the Supplier:
If we look at the Five Forces Model from a Walmart Supplier’s perspective, we see that the Buyer Power that Walmart exerts is very high, because they will switch suppliers or eliminate the product if the pricing and process are not what they want.
The Supplier Power of the Supplier’s Supplier is low, because if they do not adhere to economic processes and furnish their products at low prices the Walmart Supplier cannot meet the requirements of Walmart.
Threat of new entrants will be high, because in this case we are not talking about new startup companies, but rather companies that want to enter the competition for sales to Walmart or foreign affiliates of US companies that can supply the same items cheaper. These would be existing companies who can supply products the same or similar to the ones that we supply. School supplies, clothing, shoes and healthcare products for instance.
Threat of substitute products is high because of Walmart’s concentration on price, low cost domestic and foreign substitutes would provide a significant concern.
Rivalry, would be high with similar companies because of the size of the potential sales and the limited shelf space. Faster service, better processes, lower prices or higher quality would be areas where the rivalry would take place.
When we looked at the Walmart Business Model we identified the relative importance of the Direct Variables and noted that the two most important are Suppliers and Customers. If we look at page 20 in the text, we can see that the Generic Strategy for Walmart is in the upper left quadrant, Broad Market and Low Cost, and these make sense looking at the variables, Customers and Suppliers. (Baltzan, 2012)
The broad market will bring in the largest number of buyers, which would have the effect of lowering buyer power. The Low Cost indicates that many things could affect Walmart’s costs, but their biggest Cost is for the goods that they sell and therefore the Suppliers are important and Walmart uses their size to decrease the Supplier power. The Generic Strategy identified makes sense.
Therefore, that would indicate that two strategic areas of higher concern for Walmart would be Supplier related activities like Supply Chain Management (SCM), supplier training, supplier selection, supplier facilitation and Customer related activities, like easy payment, easy return of merchandise, hours of operation, web purchasing with free delivery to the nearest store, stocking the items wanted in the community. Either of these strategic areas would help achieve the Generic Strategy.
The processes designed for suppliers to use are necessary for Walmart to achieve their objective of low costs leading to everyday low prices. For it to be effective and achieve the desired results all suppliers must adhere to the process as laid out by Walmart and use the required technology that enables the processes to function at the required level to achieve their goals.
Each of these strategic areas is made up of many different things, but both have processes that support them. Some of the Supplier related processes would be inventory replenishment, supplier payment, supplier qualification or supplier quality management. Some of the related customer related processes would be in-store purchase processing, in-store and online payment process, returned item process and customer Internet sale pickup.
Note that in the Model and in the Strategic Areas there is no mention of IT or computer systems for two reasons, they are not a strategic area and our focus is improving the business processes, which may or may not have anything to do with IT.
Now, Walmart would assemble a team of individuals from different areas that are involved in the process, and are familiar with the current process. Each process that needs to be improved would have its own team. The next step is for the team to document the As Is process, its objective, its inputs and outputs and the steps in the process.. This is usually done with some kind of a process diagram or written step by step description of the how the process works.
Below is a partial sample:
Below is a partial diagram at a greater level of detail.
Once this analysis is complete, it is reviewed to determine where and how it can be improved. At this point technology can be added as an enabler to the business process that has been reengineered.
To Be Process and Solution-Walmart Expedited Return Process (WERP)
When a purchase is processed at the POS, the printed receipt will include the Sales Receipt Number and the Product Bar Code. When a customer enters the store and meets the Greeter, who determines if the customer has a return. If there is no return, he assists the customer with a cart.
If there is a return necessary he inquires if the customer has a receipt, If the customer says no, the Greeter attaches a “To be returned tag” to the item and assists the customer with a cart. If the customer has a receipt, the Greeter scans the Sales Receipt Number on a hand held wireless POS and if the item(s) are Bar Coded, the Greeter will scan the Bar Codes of all items to be returned into the hand held and indicate return.
If there is no Bar Code on the item the Greeter will select the appropriate item from the Sales Receipt image on the hand held and indicate return. If he cannot identify the item, he will attach a “To be returned tag” to the item process the other items and assist the customer with a cart. If the item was purchased using a Debit or Credit Card the system will credit the card used for the purchase, if the purchase was made for cash or check the hand held will print a Cash Credit slip that can be redeemed at any cashier.
The handheld will also print 2 copies of a return receipt attach one with the returned items and give one to the customer along with the original receipt with the returned items crossed out. The greeter will assist the customer with a cart. The greeter will attach the appropriate documents to the returned items and places them in a cart for later processing.
This new process will minimize the customer wait time at the Customer Service Counter and require them to process only the more difficult returns. Since the Customer Service Counter staff is relieved of some processing they can spend that time preparing the returned items for restocking and sorting them by department including those items collected by the Greeter. During peak periods, additional staff may be required to assist the Greeter. The Customer Service return programs will use the same crediting rules as the hand held.
No new technology will be needed as the hand held POS that is used for inventory has the necessary capabilities, but 3 additional units will be required. Programming changes will be required to enable the printing of the Bar Code on the receipt and enable the hand held to access the programs needed for returned and the algorithm for how the credit is processed will need to be programmed and implemented. The WiFi needed for this process is currently available in all stores.
This process change will not provide any manpower savings but will decrease overtime, and it will support our strategic objective of improving the customer experience, but could expedite the restocking of returned items or determining their final disposition. The costs are minimal and the equipment purchased could provide back up for handhelds used for taking inventories. The cost of the programming changes would be minor as they would be done by existing programming staff.
The To Be Process is shown below:
When a new IT solution is being developed, a number of areas must be considered. Their importance determined, an explanation provided for that ranking and ultimately the design of the overall new process adjusted to mitigate the major concerns.
Area| Explanation of Area| High/Medium/Low Importance or Relevance or Not Applicable (N/A)| Explanation for Ranking| Accessibility| Varying levels that define what a user can access, view or perform when operating the system| HIGH| Access must be highly controlled because of financial impact of transaction| Availability| Timeframe when the system is operational| HIGH| Must be available during the store hours| Maintainability|
Or flexibility how quickly a system can transform to support environmental changes| LOW| Process is required and should not significantly change| Portability| Ability of a system to operate on different platforms or devices like different operating systems| N/A| Equipment and software standard| Reliability| Ensures a system is functioning correctly and providing accurate information| HIGH| Financial transactions and Customer involved | Scalability| How well the system can adapt to increased demands of growth| N/A| Transactions should not increase markedly and scalability included in the major system| Usability|
The degree to which a system is easy to learn and efficient and satisfying to use.| HIGH| Greeters should not fumble around and be fast so that the customer is not delayed.| Disaster Recovery Plan| A detailed process for recovering information or a system in the event of a disaster.| N/A| Since this is merely a part of the major store system it will be encompassed in the system wide plan as it cannot function on its own..| Authentication & Authorization| Method to confirm the user’s identity and process of providing access needed to perform tasks required.| HIGH| Financial system| Prevention & Resistance (Security)| Prevention of unauthorized use and resistance to intrusion| HIGH| Financial system| Detection & Response (Security)|
Being able to detect and respond to unauthorized use. | HIGH| Financial system| Grid Computing| Collection of computers, often geographically dispersed that are coordinated to solve a problem| N/A| Not complex computing| Cloud Computing| Use of resources and applications hosted remotely on the Internet| N/A| Is part of the larger system that does not use cloud| Virtualized Computing| Creates multiple virtual machines on a single computing device| N/A| Not required by application| Communications Architecture|
The design of the communication equipment and network protocols. | HIGH| Wireless communication within the store and hard wired communication to central system is needed to operate, but nothing unique for the application| Database Architecture| The structure of the database| N/A| Part of larger system and does not determine architecture| Decision Support| Ability to model information to assist in evaluating different courses of action.|
LOW| Supports the Greeter knowing what can be returned| Artificial Intelligence| Simulates human thinking and behavior| N/A| Real intelligence required in the Greeter| Business-to-Business eCommerce| Businesses buying and selling to one another over electronically| N/A| No requirement| Business-to-Consumer eCommerce| Busiess buying and selling from consumers.| N/A| No requirement|
The above IT considerations are evaluated above, there are only a few unique to the customer return module solution, because the considerations are determined by the large transaction processing system and inventory system. This solution is merely expanding the capability by making the return process portable and increase the number of returns that can be processed at one time with no increase in people.
Its use could be expanded further to the Customer Service counter if the lines are long by providing the hand held to a supervisor who could make the non-standard decisions. It also is important to note that some of the areas will not be solely a system (IT) issue, but could be a business process or physical issue.
Prior to beginning the project management approval must be obtained for the allocation of resources and to start the project. This is done using a Power Point Presentation.
WERP Walmart Expedited Return Process and the purpose of this presentation is to explain the project and its benefits and the required resources and seek your approval of funding so that we might proceed with the project. 1
The solution that we are proposing would eliminate the need for all customers who are returning merchandise from standing in line at the Customer Service Counter who have their purchase receipt and paid by credit card. We would modify the customer receipt adding a bar code identifying the purchase record , When the customer enters the store they are greeted by our Greeters who currently tag all returns and send the customers to the Customer Service Counter where the return would be processed.
When the Greeter met the customer who wants to make a return they will enquire if the customer has the receipt and paid by credit card. If the answer is no the customer will be sent to the Customer Service Counter and a tag attached to their return. If the answer is yes ,the Greeter will use new capabilities that have been added for the hand scanner to scan the receipt into our system and the scanner will show the items on the receipt from which the Greeter will select the items being returned and the system will credit the credit card used for the purchse and print a credit receipt for the customer and the Greeter will mark through the items that were returned.. 2
The proposed solution will support our strategic objective to improve the customer experience by decreasing the time that it takes for a customer to return goods and minimize the time that they will spend in line waiting for service. Since the solution is using data already available and controlled the credits will be accurate, which is important to our customers. Customers have seen our Greeters for years and they have a relation ship with them and this solution will increase the customer relationship with our Greeters which will decrease the tension that some experience when they make returns. 3
This new process will minimize the customer wait time at the Customer Service Counter . The Customer Service Staff will be able to concentrate on the more difficult returns and in effect not making the customer with an easy return wait while difficult returns are processed. Since the Customer Service Counter staff is relieved of some processing they can spend that time preparing the returned items for restocking and sorting them by department including those items collected by the Greeter. The decrease in Customer Service Staff workload could result in a decrease in overtime During peak periods, additional staff may be required to assist the Greeter.
The simplicity of the system will allow other employees to be trained and help during peak periods.. No new technology will be needed as the hand held POS that is used for inventory has the necessary capabilities, but 3 additional units will be required. Programming changes will be required to enable the printing of the Bar Code on the receipt and enable the hand held to access the programs needed for returned and the algorithm for how the credit is processed will need to be revised and implemented. The Wi-Fi needed for this process is currently available in all stores as it is used for inventories.
Expediting the availability of returned items could result in increased sales. The costs are minimal and the equipment purchased could provide back up for handhelds used for taking inventories. The cost of the programming changes would be minor as they would be done by existing programming staff.
There are some important considerations in our design of WERP that are created by the new application that are internal to the system, while others are external to the actual application and part of the business environment and procedures and in addition to those already addressed in the other applications that are integrated with WERP. Accessibility to the scanner and then to the system functions must be controlled because this application allows access to financial transactions.
The scanners will be kept under the control of the shift manager who will sign them out to the authorized employees who will have individual logon. And passwords. The system must be available during the store hours so that returns can accepted.
The application, being part of the larger sales system will be available during store hours and Greeters must be at their post from store opening, which is no change from current practice. Since Financial transactions are involved the application must be reliable to ensure correct transaction processing. The use of scanning and transaction data that is already in the sales system and no creation of new data the reliability is ensured. The application must be simple and easily learned so that all employees can become proficient and able to provide help when the volume is high.
Most employees are familiar with the scanners as they are used during inventories and the new steps using scanning will make training easy. The Wi-Fi communication architecture that will be needed is currently available and is robust and proven, no new capabilities will be required.
The various aspects of Security are important, since this is a financial system that affects sales revenue and inventory control, will be met using physical controls and security of hardware and password protection. Since the receipt is required for these transactions nothing new can be entered and once an item is credited it cannot be credited again without management approval. There will be checks in the software that will monitor the credit card numbers used in the returns for an imbalance between purchases and credits . Security staff will monitor the security measures based on their normal procedures used for financial applications.
Once we have the funding approved we will select a qualified Project Manager who will be responsible for developing a Project Plan that will include a preliminary schedule and identify the required resources identify the deliverables to get the project started. Begin the SDLC finalizing the schedule, resources and deliverables. Change management issues will be addressed, both those affecting the employees and ease the migration to the new application and the policy and procedures for changes to the requirements or the application. Training while addressed in the SDLC, training will be an ongoing need as new employees are hired and to ensure that current employees are updated on any system changes.
Now that you have heard the benefits of WERP and how it supports our strategy and if you have ever stood in line for an extended period to return some item, when you have all of the paperwork needed and you support our strategy to improve the customer experience, you will approve WERP this morning. I will be happy to answer any question that you may have.
Now that we have achieved Management’s approval of WERP, the project must be initiated and a Project Manager assigned and resources assigned. We have briefly indicated the Next Steps in our presentation, but now we must develop a document of the Next Steps that can be used operationally.
Next Steps for WERP I. Proposed Technology A. Utilize the Greeters to process returns from customers who have their receipts and used a credit card. B. Utilize Bar Coding technology will be used to print a transaction identification on the purchase receipt so that the receipt for the returned goods can be scanned and pull up the transaction. C. Utilize existing wireless scanning equipment to access the main transaction system and existing software to access the transactions and process credits. D. Modify existing transactional software to accept credit transactions from a wireless hand scanner. E. Implement the successful WERP solution throughout Walmart. II. Project Management
A. Project team 1. Project Manager: Store Accounting Manager 2. Executive Sponsor: Store Manager 3. Project Team Members: Greeters, Cashiers, Programmers and Customer Service Staff 4. Supplementary Staff, as and when needed. B. Schedule 1. A detailed Schedule will be established by the Project Manager for WERP based on planning that will be completed by the development team. 2. It will include all required activities that will lead to project success. 3. It will include the detailed actions required by the steps of the SDLC and identify deliverables and dates that they must be completed. C. Resources
1. Initial monetary resource has been authorized for WERP by Corporate Management that will cover the costs of the manpower resources, program changes and new equipment purchases. 2. Based on the schedule and the tasks required at various times the project team will need augmentation from the Store Staff for specific activities, for example accountants and auditors. 3. A test environment must be established for development and testing of WERP within the transaction system. 4. In store, access to the test environment must be available on identified nights to duplicate actual operation. D. Deliverables
1. Deliverables are used to ensure that the WERP Project is on time and meeting the established schedule and are substantive items that indicate a completed activity. 2. They will include but are not limited to a document that be completed at each stage of the WERP SDLC that will be required to initiate the next step. For instance, the Project Plan, Detailed Requirements, Detailed Design Document, purchase of new equipment and etc. 3. The final deliverable will be the fully tested WEP System and trained employees ready to implement the WERP. 4. Develop a plan and tools to migrate WERP throughout Walmart. III. SDLC
A. Planning 1. Develop a high-level plan of the WERP Project and its intended goals. 2. Develop a detailed plan that will be used to manage WERP. 3. Provide a completed Plan and Schedule approved by the Project Manager. B. Analysis
1. Develop detailed user requirements for WERP. 2. Refine the goals into defined functions and operations of the WERP System. 3. Provide a completed Requirements Document including explanation of functions and operational requirements approved by the Project Manager. C. Design
1. Describe the desired features and functions of WERP. 2. Develop screen layouts and receipt design. 3. Develop business rules, like WERP will only handle returns of goods that are accompanied by a receipt and where the credit goes to a credit card. 4. Develop process diagrams. 5. Design a security plan and audit plan. 6. Develop Pseudo Code and other documentation. 7. Develop a detailed Test Plan. 8. Provide a completed Detailed Design Document including all of the above, approved by the Project Manager. D. Development 1. Transform the Detailed Design Document into the WERP System. 2. Provide detailed documentation of the work performed to meet the Design Document requirements, approved by the Project Manager E. Testing
1. Collecting all aspects of the WERP System together iin the special test environment and testing for errors, bugs, interoperability and usability. 2. Verify that all of the requirements and goals stated in the Requirements Document are met. 3. Provide documentation of the completed Test Plan, approved by the Project Manager. F. Implementation
1. Implement WERP 2. Obtain User sign off that the system meets the requirements. 3. Begin realizing the benefits. G. Operations and Maintenance Maintenance 1. Provide ongoing support to allow for changes, corrections additions and upgrades to ensure that the WERP System continues to meet the business goals established. 2. Operate system effectively.
IV. Change Management A. Establish policies and procedures to request changes to requirements or business functions that allow the Project Manager to ensure that the requirements are met and the scope does not expand, beyond the plan and budget. B. Ensure that required expected and unexpected changes, by government mandates, organizational changes or resource unavailability are identified and documented and if there is a requirement for schedule changes and increased funding, management approval is obtained and the key stakeholders are made aware of the changes. C. Establish a process that will help employees understand the changes, impact on their jobs, their scope, objective and benefits to obtain their support and minimize concern and resistance to change. V. Employee Training
A. A detailed training program that can be used at our store for all employees who will be part of the WERP process will be developed. B. All personnel at our store who will be involved with WERP will be trained in their particular function as well as in the overall WERP process. C. Part of the training will be a refresher in the use of the wireless scanning equipment since all employees are familiar with its basic operation as it is used for inventory activities.
D. Ongoing monitoring of the initial implementation will allow the ability to monitor the employees in the correct WERP operation and assist them with correct usage and make adjustments to the training to emphasize areas that need reinforcement. E. Prepare the training program for use at other stores and refine a process for training trainers at other stores. F. Modify existing new employee training programs to include WERP training. VI. Leadership Expectations
A. The project will meet the stated user requirements. B. Project will be completed on time and on budget. C. A document containing equipment needs and training program that can be used at other Walmart Stores will be completed and adjusted for lessons learned. D. Customers wait time, when returning goods, will be decreased, which will improve customer satisfaction. VII. Defining Success
A. User requirements and functions perform as desired and expected. B. Project is completed on time and on budget. C. Users accept the new process and find that it improves the images of Walmart in the customers’ eyes as being concerned about customer satisfaction.