Knowledge Management – Wal-Mart
Wal-Mart is one of the best known companies in the United States. The name of Wal-Mart is being heard even in many corners of the world. Despite the fact that the company doesn’t tend to expand its business abroad, it always considers the importance of knowledge management when developing business strategies. The article “No Stopping Wal-Mart In Its Quest for Uber-Efficiency” by W. P. Carey discusses the reasons of Wal-Mart’s success specifying development of information technologies and importance of innovations. The article is retrieved from online database through table research. The paper is credible as the author offers in-depth analysis of the company and cites analysts and experts to defend his position.
Carey argues that nowadays Wal-Mart can be defined as a juggernaut as its net sales exceed $300 billion. In perspective the company is able to get the profit of about $649 billion. The figures are really impressive. According official statistics, the company generates 2% of country’s gross domestic product. Moreover, the company’s revenues are continuing to rise and compared with 2004 they climbed up to 11.3%. Nevertheless, the company needs innovation to maintain its current positions.
The author recommends expanding overseas and capturing new customers in domestic markets by building new stores. Wal-Mart is legendary for supply-chain genius and, therefore, it has to pay more attention to refining processes. Carey cites Mark Barratt, assistant professor of supply chain management, who argues that “Wal-Mart must gain even greater control over its supply chain; increase visibility of the movement of product through its supply chain and become more effective in terms of product availability and promotional execution”. (Carey 2006)
Wal-Mart relies on knowledge management as it realizes the need to cut costs, to improve purchasing decisions and to increase efficiency. Nowadays the company is successful in negotiating bargain prices from suppliers and n moving products to the right places at the right time. Again, knowledge management is referred to as experts need to have knowledge of markets and products, suppliers and customers, how to sell products and at what prices. Therefore, knowledge is power that drives Wal-Mart to success.
The company incorporates information technologies to improve performance and to increase efficiency. For example, the company has the best information system within the industry – Retail Link – which allows sharing data and information on a nearly real-time basis. In 2005 Wal-Mart’s data warehouse was “larger than all of the fixed pages on the Internet”. (Carey 2006) Data and information are used to analyze supply and demand, as well as to set inventory targets for particular products. The company is argued to correlate purchasing power with “factors that contribute to increasing demand for a particular good”. (Carey 2006)
One more winning supply tactics of the company is customized pallets which are effective in work with vendors as they assist in achieving the right product mix on the pallets. The author cites Rabinovich, assistant professor of supply chain management, who argues that “instead of having Kellogg’s deliver a pallet of cornflakes, they put together different types of cereals, different SKUs, allowing Wal-Mart to move the pallet through the distribution centre directly to a particular store”. (Carey 2006)
Wal-Mart tends to present supply chain as its winning strategy. However, Carey says that food distribution centers are mechanized and they are generally smaller. Wal-Mart’s experts explain that merchandisers don’t need automation as they have simply to perform conveyor-belt actions to move full pallets around. Thus, the company prefers transferring quick-selling merchandise to food DC’s. In such a way, the company will make the high-volume performing more economically. Wal-Mart is, therefore, able to put better use mechanization.
Inventory tracking is also on mechanization and the company is known to test radio frequency identification technology (RFID). It gives Wal-Mart an excellent opportunity to increase effectiveness and at the same time to cut overstock expense and out-of-stock sales losses. Nevertheless, the primary challenge of the company is that it doesn’t know “whether products sold through the checkouts have come from shelves, end-of-aisle displays or the front of store displays”. (Carey 2006)
Thus, RDI may be effective in providing knowledge where the necessary items come from. Wal-Mart would definitely increase overall effectiveness of in-store promotions as promotional effectiveness plays crucial role for overall performance of every company. According to study performed by the University of Arkansas researchers, the company’s stores supplied with RFID “show 26 percent fewer stock-outs on the 4,554 RFID-tagged products that were tested”. (Carey 2006)
In conclusion it is necessary to underline that Wal-Mart is nowadays running more than $300 billion per every fiscal year and company’s improvements result in gain’s growth of $3 billion. Such news is definitely a challenge for smaller suppliers as the company expects them to tag products with RFDI. In food industry the products are low-priced and tags may result in significant increase in cost.
Every company depends on knowledge and innovations, and Wal-Mart is no exception. We see that the company considers the importance of innovations and the power of knowledge to remain successful and competitive in tough business environment. Therefore, the article is directly related with knowledge management field as it discusses Wal-Mart’s policies in the contexts of information technology (RFDI) which is known to be practice which affects development of knowledge management and innovation which is known to be the key component of knowledge. No successful company may operate without knowledge management.