Executive Summary
Wal-Mart is one of the epitomes of success throughout the world. It is a billion dollar franchise that has become a mainstay in the day to day activities of people throughout the United States. The success started by Sam Walton has transformed into different ways in which stores are able to provide various products under one roof at affordable prices. However, this feat would not be possible without a few management systems that are needed to help continue operations efficient. This purpose of management information systems are to help with the focus of knowledge and technology systems that are typically used in helping to analyze the problems that arise in organizations. These systems are developed and applied to the systems that contain the applications needed to help explain the organization problems such as payroll, billing, customer service and other systems. This paper will focus on the management information systems in Wal-Mart and personal interviews from employees that will help examine the MIS and how they affect the operations of Wal-Mart.
Introduction
In the business world information systems are essential to the success of the operations. The role of information systems are seen as a technique that offers much needed information in order achieve the organizations effectively. In businesses, management organization systems are providing the business managers with essential information needed in the decision making process. Before the adaptation of better technology in the corporate world, many organizations had to rely on older forms of tracking inventory, sales, billing, and obtaining payroll data. These rudimentary tasks have been replaced with newer systems such as SAP, EPM, ERP, and SCM. Management information systems are different from the usual information systems seen in organizations, they are now used in analyzing information systems that are used in pertinent operational capacity in the organizations. In order to explain this further, this paper will be looking at the management information systems of Wal-Mart and how it has used throughout its operation activities through the help of their employees.
History
Wal-Mart was founded by Sam Walton, businessmen from Arkansas that began his career working in the retail industry in 1940. He decided to open up his own store on July 2, 1962 in a discount city store located in Arkansas. Throughout his lifetime, Sam Walton served as the CEO and was seen as hardworking and driven individual that was stubborn to want to get things down in the way he wanted to without having to pay so much. Walton came from humble beginnings as he grew up on a farm during the Great Depression. Walton graduated from the University of Missouri earning a degree in Economics. He had years of experience in the retail sector with his first job working as a management trainee for Penny’s. He stayed at Penny’s until he had to go serve in World War II, and after the war ended, he purchased his first franchise in Newport. Walton would open a store named after him, Walton’s 5 and 10 along with the Ben Franklin franchise with a total of nine stores. While studying the changes in the retail industry he developed his own discount store opening his first Wal-Mart in 1962 in Rogers, Arkansas. Walton was smart and expanded into smaller markets to make Wal-Mart a success.
In 1993, Walton expanded Wal-Mart successful operations to over 2,000 stores. Walton was always an effective visionary leader and learned from the success and failures of others. Walton knew that he wanted to form a company that would redesign the way people lived. He is known as the “entrepreneur of the century” and a true American folk hero. The company has grown from 44.2 million dollars in sales in 1970 to 400 billion in sales in 2010, the organization’s mission and innovation are a reality. The mission and vision of Wal-Mart is, “We save people money so they can live better.” (Wal-Mart) The company’s vision statement is “to become the global leader in retailing. When we look at the overall success of this organization we realize that Wal-Mart is saving people money so that so they can live better lives.” (Wal-Mart) From Wal-Mart’s earliest days until the present time, Wal-Mart has continued to see success as they have pursued a low cost leadership strategy. This strategy has allowed the company to achieve the following:
- 1967 - 24 stores totaling 12.7 million in sales
- 1970 - Wal-Mart becomes a publicly traded company
- 1972 - 51 stores totaling sales of 78 million
- 1980 - Wal-Mart reaches 1billion in annual sales
- 1983 - Wal-Mart opens the first Sam’s Club
- 1988 - Wal-Mart opens the first supercenter which incorporates general merchandising and a full scale supermarket
- 1991 - Wal-Mart expands internationally
- 1993 - Wal-Mart experiences it first 1 billion in sales in 1 week
- 1996 - Wal-Mart opens in China
- 2009- Wal-Mart exceeds 400 billion in sales
- 2011- Wal-Mart reaches over 10,000 retail unit centers
- 2012-Wal-Mart celebrates 50 years with over 2 million employees. (Wal-Mart)
Wal-Mart has done an excellent job in becoming the leader in the retail industry. No other company can compare to the growth, sales and sustainability of the organization.
Wal-Mart Strategy
The company’s strategy has allowed it to establish itself so far above the competition that, “None of the world’s leading retailers could match Wal-Mart’s enthusiasm and ability in ferreting out cost savings and finding new and better ways to manage cost-efficiency” (Thompson, Gamble). Wal-Mart’s low cost strategy is extended throughout its absolute value chain, such as obtaining merchandise from suppliers, distribution related activities, construction of facilities, operating its retail stores. Wal-Mart keeps a close watch on their costs of selling, their overall costs, and administrative activities. These strategies enable Wal-Mart to sell their products at remarkably low prices. An independently certified study showed that Wal-Mart saved the average U.S. household more than 2500.00 annually. The study included the direct impact on purchases made by customers and the indirect effect stemming from lower prices from nearby retailers. Wal-Mart typically offers customers products at least 5 to 25 percent lower than traditional supermarkets. Warren Buffet has said of Wal-Mart, “You add it all up, and they have contributed to the financial wellbeing of the American customers more than any other institution I can think of.”
Wal-Mart utilizes multiple store formats; Supercenters, Wal-Mart discount centers, Neighborhood markets and Sam’s clubs. Discount stores allow consumers obviously to obtain quality name brand products at a deeper discount. Supercenters meet the demand for one stop shopping which saves consumers time and resources which helps to contribute to their overall wellbeing. Sam’s clubs allow consumers to save even more money by buying name brand and commercial products in bulk products at a deep discount. This store was specifically designed to meet the needs of religious organizations, small businesses, families, barber and beauty salons, motels and restaurants.
With Wal-Mart having over 10,000 stores worldwide, collaboration information has become a critical part of their management information system. The collaboration information system holds significance on the Wal-Mart is able to community throughout the company to their consumers, investors, manufacturers, suppliers, and warehouses. Wal-Mart has the capability of being on the most technical advanced companies within the industry that is able to be up to date with essential information on the trends within the market. Wal-Mart collects information that is critical to their operations and only possible with their integrated management system. Wal-Mart became one of the first companies in the retail sector to use management information systems. Kroenke has noted that the factors of utilizing collaboration information systems of Wal-Mart include the hardware and software which are the computer side, the data which is the bridge, and procedures, and people which are the human side.
Wal-Mart has one of the most sophisticated distribution system within the retail market called, Retail Link. Retail Link is able to connect headquarters with each store, and connect to over 2,000 suppliers so that they can have an endless supply of inventory. Wal-Mart is able to turnover large amounts of inventory, compared to any other store within the market. The problem however, that exists is that they are not able to do the same supplying power to their overseas stores, in particular when overseas stores are growing at an exponential rate. Wal-Mart must create their own Customs Brokering division in order to become more efficient overseas, and save them on brokering and fees for freight forwarding. This also gives Wal-Mart more control, and save on costs which benefits Wal-Mart’s bottom line. Wal-Mart has started to strongly request that their suppliers be located physically in the countries where Wal-Mart stores are so they can be better able to supply their stores with inventory.
Operational Activities: MIS
Operational activities in the retail industry are having following functions: Procurement of material Transportation Inventory management Reordering Procurement of material Wal-Mart is a bulk purchaser and they follow centralized purchased the system, so the company directly procure the materials from manufacturers thus eliminating all the intermediaries and middlemen. This is necessary to reduce the cost and offer better pricing. They first find out the potential supplier and then after getting prices from everyone the will decide finally according to the cost structure of the offer. For efficiently managing this information Wal-Mart uses EDI model (electronic data interchange) it is essentially a computer based method of Wal-Mart in this system the computers of suppliers and vendors are connected with Wal-Mart. EDI permits the supplier to download purchase order also with the data from store to store sales data that are in relation to their product. This information will reveal if products were sold, how many, how many are left, and other sales data. As supplier receives information about sales of various products, the supplier shipped the required goods to different Wal-Mart distribution centers. Mainly, Wal-Mart distribution centers works as a high speed integration system between Wal-Mart and the supplier. This has proven to be tremendously helpful in making the process fast and efficient.
Transportation
In other operational activities, management information systems comes into play in their transportation sectors, as Wal-Mart’s own transportation system assists in shipping goods from the stockroom to the stores in less than 48 hours. This permits Wal-Mart to restock their shelves four times fasters than any other retail store within the market. In addition, Wal-Mart also owns the most sophisticated and largest computer system in the private sector. Wal-Mart users a MPP, a Massively Parallel Processor computer system that is able to track the development and inventory in the store. This information keeps Wal-Mart ahead of the competition and abreast to any changes or trends within the market faster than any other store. The sales and inventory information in relation to Wal-Mart is categorized by visits with the advanced satellite communication system. MPP is generally used to track the progress of goods and merchandise status and information for this is transmitted through advanced satellite communication system. When the news about movement of goods is transmitted it automatically generate the information and give it on to the transportation department and from there the logistic facility is ensured.
Inventory management
Wal-Mart invested heavily in information technology and communication systems to effectively track sales and merchandise inventories in stores across all the outlets in the country. For this company needs to have excellent communication system. Wal-Mart is utilizing these technologies with the method called, Pretty Darn Quick Display (PDQ) technique, where Wal-Mart request that its suppliers ships goods in-shore ready displays. The goods that are packed in PDQ arrive at each store ready to be loaded on the racks. This technique allows Wal-Mart employees to immediately change the empty racks with inventory by placing fully packed racks, instead of having to refill each item on the racks. Wal-Mart’s distribution system, was the first system within the retail industry, the hub and spok system where goods were ordered centrally, and assembled in the warehouses or distribution centers (hubs). Employees were able to dispatched goods to individual stores known as spoke. The system has enabled Wal-Mart to achieve an essential cost advantage by the centralization of purchasing goods in a large amount of quantities. Wal-Mart then started to use Radio frequency identification, RFID technology on merchandise that allowed them to replace their bar code system. This increase the employee efficiency as employees no longer had to physically scan each bar code, and it reduced the stock outs.
Reordering
Wal-Mart also uses management information systems in their own developed automated reordering system, which links computers between Wal-Mart stores, their distribution centers, and Procter & Gamble (P&G). This system sends a signal from each store to Procter & Gamble to alert them that their products are low on stock. This allows for the system to then send a resupply order to the nearest Procter & Gamble factory via satellite, then ships the items to the nearest Wal-Mart or to the distribution center. The system interaction between Wal-Mart and Procter & Gamble provides a win-win situation between the two companies, as this type of management information system provides better coordination, a reduction in costs, and savings to Wal-Mart. Wal-Mart is able to efficiently and effectively use these management information systems in their operational activities to achieve efficiency and cost minimization.
Marketing Activities
Wal-Mart marketing activities are directed toward, planning, promotion, and the selling of goods and services to the public to meet the needs of their consumers. It also serves as a primary objective to the organization. The management information systems that needed to support Wal-Mart’s marketing activities that make decisions in regards to the marketing mix. These decisions include the four Ps, (Product, Price, Place, and Promotion). The sources of information and data for marketing, come from the transaction processing and boundary-spanning subsystems. The management information systems for marketing relies on the external information than in other information system within the organization. These systems include two subsystems that are designed for perimeter spanning that brings the company, data and information from the external marketplace. Market research objects are to gather data from actual and potential or prospective customers. This information is needed in identifying the needs of each customers, which can be used as a starting point for total quality management (TQM). The internet has made it accessible and easy to obtain electronic commerce information in order to gather statistics on the behavior of actual buyers. The software used to support market research is used to provide statistical data analysis. In addition to enabling Wal-Mart to coordinate the behavior of consumers with variables specific to the geographical location, demographics, and psychographic characteristics. This data used and collected from the management information systems is used in competitive marketing intelligence that is responsible for the interpretation and gathering of data in regards to Wal-Mart’s competition. It is also used for the dissemination of the competitive information for the right users. This information mostly comes in the forms of annual reports, purchased reports from external parties, online database services, and media-tracking services. The internet has allowed for companies such as Wal-Mart to be able to gain vital information used through their management information systems for competitive intelligence and marketing activities.
Wal-Mart used other management information systems in their marketing activities such as marketing mix subsystems used to support the decision making of pricing, promotion, product launch, direct selling, advertising, and distribution. These decisions are integrated into the marketing plans and sales forecast that are used in comparing sales results for Wal-Mart. The subsystems that are used include product subsystem that helps to organize the launch of new products in Wal-Mart. This subsystem used in management information systems continually brings new products to the market that are essential for the Wal-Mart to compete in the rapidly changing industry. Even though the decisions made in regards to the product launched are unstructured the management information systems are able to support the process in several ways that include; the support systems used in assisting the designers in DSS work that help with evaluating proposed new products for Wal-Mart. The DSS are used by marketing managers to make new products attractive, and the systems used to set up electronic meetings enable people within the different department to share and collaborate their skills in one setting. The information that is derived from this system is crucial for gathering marketing research and intelligence for launching new products. The place subsystems helps in the decision making process as it makes the produce available to the consumer at the right time and the right place. The place subsystems assists in preparing the distribution channels for the product launch and to follow up on their performance. The Information technology that is utilized in Wal-Mart makes them viable to compete within the market, allowing the increased availability of data on the product movement within the distribution channel. This is seen for instance through the use of barcoded universal product code (UPC), point-of-sale (POS) scanning, electronic data interchange (EDI), and just-in-time (JIT) product and customized delivery.
The other subsystem, promotion subsystem is used the most often as it provides the management information systems the support needed in direct selling and advertising.
Media collection packages assist in selecting a combination of avenues to convince the prospective purchaser. This includes television, electronic media, such as the internet, direct mailing, print media, and other exposure. The success of the selected media mix is monitored, and its structure is continually attuned. For Wal-Mart, the database marketing relies on the gathering and use of large databases to segment potential customers and provide Wal-Mart with personalized promotional information. In Wal-Mart, the sales department is fully supported with information technology and management information systems that help to reach customers and trend consumer behavior. The probability for customers analysis provides Wal-Mart with the help it needs in identifying the high-growth, high profit customers. The targeted marketing efforts are than needed to maintain and developed the accounts for customers. The sales force automation incorporates equipping Wal-Mart’s salespeople with portable computers that relay information between them and the corporate information systems. This provides the salespeople with immediate access to the information needed, without have to report back with tons of paperwork. The advantages of these management information systems are that if increase the selling time, and increases performance. The access to the corporate databases provides the convenient access to corporate expertise. This helps with providing the experts the accessibility to use systems that specify the products needed to meet customer’s needs.
The last system, price subsystem, helps in making the pricing decisions obtain the information needed in supporting the DSSs. It also provides access to the databases that involve prices on the amount of energy used. This decisions are deemed highly unstructured ad are made in pursuit of Wal-Mart’s pricing objectives. The general strategies range from profit maximization to forgoing a portion of profit in order to raise a market share. Management information systems provide an opportunity to finely slice customer groups, and try different prices depending on the mix of products and services provided. In addition, these systems also provided the circumstances of the sale transactions.
Wal-Mart’s Hardware System
Wal-Mart’s server hardware and software system are hardware that is used by Wal-Mart employees on a daily basis. The computers and handheld devices (both come equipped with scanners) are built directly by the information technology department, which are integrated into the management information systems. The one primary function of the computers used, along with the handheld devices are that they provide employees with better assistance in detecting where to place items within the store. The hardware serves as an improvement of employee efficiency and performance as the RFID scanners help to track inventory inside and outside of the store. This method lets managers know how much inventory is needed, when reordering or stocking. This also helps Wal-Mart in cutting costs, by over ordering inventory for its stores. Wal-Mart used SAP, a vertical market application which helps Wal-Mart grow their international business, as their main ERP software system. “SAP software helps enterprises of all sizes around the world improve customer relationships, enhance partner collaboration and make efficiencies across their supply chains and business operations.” (SAP) When Wal-Mart chose SAP AG as their ERP software system, they cut significant cost for the company. The data that are used in connecting the computer side and the human side is considered the NCR Corporation. (Wal-Mart) It controls the Wal-Mart data, and used as their main database management system. Even though NCR controls the data, Wal-Mart makes the final decisions of what information the database will embrace and how the information will be related to another (Using MIS). NCR and Wal-Mart formed a contractual agreement in 1996. The two have shared over 7.5 terabytes of data storage (Wal-Mart Selects NCR). Wal-Mart has also brought their own data warehouse, which is owned by Teradata. Wal-Mart uses their data warehouse daily, which is currently 4 petabytes, in order to gather information on the way their consumers shop and make critical decisions about their business. In analyzing the human side of the collaboration information system: procedures and people, there are different departments of Wal-Mart supercenters that will have different procedures.
Interview with Wal-Mart Associates
Wal-Mart’s employees everyday use various procedures to get their job done in an efficient and effective manner. For example, Wal-Mart employees Janice, Randall, and James 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. In interviewing the three associates who work as stockers, they were able to share information on the different management information systems used in helping with operational activities. When explaining the term strategic information system to the associates, as ways in which Wal-Mart is able to keep a competitive advantage they were able to provide many systems that are used throughout this paper. In particular, they discuss their moved to RFID, and their use of technology that allows for salespeople to immediately identify products for the customers. The associates shared that unlike other retail stores within the market, customers are constantly frustrated over the lack of customer service from salespeople when they need to find an item. Wal-Mart is able to provide employees with the little computers or handheld devices (which they showed) which not only scan items for prices, but also search if they have items available in their stock rooms or at the distribution centers. James is quoted, “You do not really know how many times I have been told by customers that they appreciate us taking the time to find out if the products are in the back, just by using this device.” (Interview) The strategic information system, or handheld computer offers the salespeople with the flexibility to send product information directly to corporate, distribution centers, or other databases in which managers are able to collect information for restocking, reordering, or customer behavior trends. When asked if this impacted an increase in customers, the trio agreed that they feel the customers feel better served than the competition. They then are able to tell others about the enjoyable experience, and keep returning. This helps Wal-Mart gain more of the market, and sustain a loyal customer base. The handheld devices are not used by other stores frequently, and they have provided the salespeople with better ways of compiling inventory and customer reports. The trio feel that the devices also improve employee performance and efficiency as they are able to scan for which department products belong to, and can they can be used as an incentive that nets them rewards. The trio knows that by implementing the planning phase they are able to efficiently stock items on the shelves through the help of the handheld devices, which also helps in providing positive feedback to the manager and from the manager. In wrapping up the interview, they acknowledge at first they did not understand what strategic information systems meant, however, when identifying it in layman’s terms they were able to more readily give examples in which Wal-Mart has been able to keep ahead of the competition, and help customers at the same time.
Using Management Information Systems as a Competitive Advantage.
Wal-Mart uses management information systems to gain the competitive advantage within the retail market. Wal-Mart’s business strategy is simple, “Save Money, Live Better”. Wal-Mart’s 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 (CNN.com). Fundamentally, Wal-Mart uses the value chain along with their business processes to obtain maximum value, which is critical to their strategy. Inbound Logistics is the first step of the value chain. 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.
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. Wal-Mart has many marketing strategies that they used for sales and marketing. 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 arrangement will persuade the customer to buy a certain product based on the consumer’s professed 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.
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 consumer wants, where they want it, when they want it, and at the price that they want.
Recent Operating Results
The recent operating results from Wal-Mart has improved over the last five years. The Annual Report in 2012 reported that the net sales have increased steadily from 2008 from $373,821,000 to $418,854,000 in 2011. The operating income has increased in 2008 from $21,916,000 to $25,542,000 in 2011. 2012 has been a profitable year with net sales increasing to almost $500 billion, which is a 5.9 percent increase from the year before. The net sales have increased due to a combination of comparable sales, benefits from currency translations, and growth in retail feet. The operating income in 2012 was $26,558,000. Although it is the highest, it only increased 4.0% from 2011 compared to the percent change of 6.4% from 2010 to 2011. The lower percentage change is due to strategic investments for products sold in retail operations.
Conclusion
Wal-Mart has developed into a multi-billion dollar business that has changed the market on how to sell multiple merchandise under one roof. Wal-Mart serves over 200 million customers each week, at over 10,000 retail locations throughout the world. Wal-Mart has developed a system in which has made them a success, employing over two million employees, they have achieved almost half a billion in sales and have been at the top of the Fortune 500 list for years. Their management information systems that include operational activities, customer service, and in their supply chains. Management information systems are integrated throughout the company as it continues to excel globally and nationally. Wal-Mart used various systems that help in every aspect of the company, through the interviews with the employees they gave more insight in their strategic information systems that help them have a competitive advantage. In marketing subsystems, to their operational activities, these management information systems have provided Wal-Mart with a sustain growth throughout the industry. It is clear from their recent operation results that the changes that have been made to their systems are benefiting the company stay on top, and continue to grow.
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