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Wal-Mart Stores, Inc is an American public corporation that runs a large chain of department stores and a chain of warehouses that are used as discount stores.
History. Sam Walton with the opening of the first 'Walmart' discount store in Rogers, Ark, founded 'Walmart' in 1962. The company was incorporated as Wal-Mart Stores, Inc., on Oct. 31, 1969. The company's shares began trading on OTC markets in 1970 and two years hence were listed on the New York Stock Exchange. The company grew to 276 stores in 11 states by the end of the decade. In 1983, the company opened its first Sam's Club membership warehouse and in 1988 opened the first supercenter, now the company's principal format, featuring a complete grocery selection in addition to common merchandise. Wal-Mart became a global company in 1991 when it opened its first Sam's Club near Mexico City.
Present. Wal-Mart, headquartered in Bentonville, Arkansas, is the largest majority private employer and the largest grocery retailer in the United States of America. According to the Forbes Global 2000 for 2010, Wal-Mart was rated the world's largest public corporation by revenue. Wal-Mart has its stores in many parts of the world outside the U.S and operates them under different banners such as Wal-Mex in Mexico, Asda in United Kingdom, Seiyu in Japan to name a few. Wal-Mart has wholly-owned operations in Canada, Brazil, Puerto Rico and Argentina. With more than 8,792 retail units under 55 different banners in 15 countries, Wal-Mart serves customers and members more than 200 million times per week. With fiscal year 2010 sales of $405 billion, Wal-Mart employs 2.1 million associates worldwide.
Wal-Mart and IT. Wal-Mart's goal is to give their customers the finest value they can find anywhere. Its emphasis on quality products at "everyday low prices," coupled along with friendly service, propelled Wal-Mart to its present position as the world's leading retailer. It has been Wal-Mart's primary objective and all strategies are based on reducing costs in either a salient way or outright reduction from the root. Costumers trust Wal-Mart is to not only have the lowest prices, but also the best selection of quality items that are appropriate to their needs and the easiest, most handy shopping experience. With the matchless prices and exciting surprises that Wal-Mart offers to customers, they know that they won't be saddened by the value they find at Wal-Mart. In order to keep up this image and consistently deliver good at prices lower than they were yesterday, Wal-Mart needs to be able to monitor and analyze all the processes and the information that can be generated from them in order to attain this competitive price advantage and lure customers. Wal-Mart recognizes the importance of information technology and its returns, and invests heavily in information systems that are utilized in every process that the retail business encompasses.
In this document, there shall be emphasis on the Sales and Marketing Information Systems that Wal-Mart has in practice currently and the utility of those systems.
Information Systems: SALES & MARKETING
For Sam Walton, low prices and satisfied customers were the guiding principles to retailing success. In order to generate sales, it is absolutely necessary to sell the same item with same value at a price lower than anyone else. The customer must have a pleasant experience of the buying process that will lead to tremendous goodwill and result in more future sales by repeat buyers known as loyal customers or through referrals. In order for Wal-Mart to attain its goals and serve customers efficiently, Wal-Mart relies on certain information systems that aid in the key processes of the retail industry- Sales and Marketing.
Today, the company uses those same principles to test the value of each innovation it considers. Systems implemented must help them lower costs and improve customer experience. "At Wal-Mart, we don't implement technology for its own sake," says David Flanagin, Director of Network Engineering. "It has to have a payback that helps the customer." The Wal-Mart network, linking more than 8000 stores and 300 distribution centers worldwide, helps Wal-Mart maintain low prices and inventory on the shelves. Just as vital, the network helps over 2 million Wal-Mart associates work more resourcefully to keep their customers contented.
Point of Service/Sale System used by Wal-Mart
Wal-Mart uses SUSE® Linux Enterprise Point of Service/Sale system that is supplied by vendor Novell.
SUSE Linux Enterprise Point of Service includes three primary components: Administration Server, Branch Server, and Point of Service Client Images.
(Refer to Fig. 1 in the Appendix.)
The Administration Server
The SUSE Linux Enterprise Point of Service Administration Server runs at the main office. The main office of Wal-Mart is located at Bentonville, Arkansas. The administration server manages all Point of Service devices. It keeps the master operating system images for the Point of Service devices indirectly and is used to create POS Linux client images that are based on SUSE Linux Enterprise 11, using the image-building tool KIWI. The Administration Server serves as the central repository for configuration information and stores the configuration of each POS client in an LDAP directory. Finally, the Administration Server replicates the POS Linux client images to the branch servers.
POS operating system images are built from templates, using SUSE Linux Enterprise. Images are built on a separate dedicated Image Building Server which is also located at the headquarters in Arkansas.
Apart from sales from the stores, the Administrative Server also contains a database which records the goods sold through other sales outlets like the online shop of Wal-Mart. The data stored also comprises of information like the number of items bought by a user and similar products purchased along with other online statistics.
The Branch Server
The Branch Server is used to deploy the SUSE Linux Enterprise Point of Service client images. In a nutshell, the Branch Server provides the server infrastructure for:
Booting the Point of Service clients from the local network
Registering new client devices at the site
Distributing operating system image updates to the client devices
The Branch Servers store the sales information in real time as inputted from the POS Clients as a data backup. At the very same instant, the Administration Server is updated with the data.
The Point of Service Client
The POS Client is what the consumers interact with indirectly daily when they make any purchases at Wal-Mart. Not only do these devices accelerate and improve the shopping experience for the consumer, but they serve an important business-management role as well. They process and record purchase transactions and enable real-time reporting of sales and inventory data for all sales. The SUSE Linux Enterprise Point of Service/Sale client images are built on the dedicated Image Building Server that is linked to the Administrative Server. These POS Linux client images are based on the SUSE Linux Enterprise 11 code base and are built with the smallest possible size and footprint in order to run well on terminals with older or weaker hardware parameters (processor type, amount of memory and hard drive space). All details of the items sold and time along with the person operating the counter is updated to the Branch Server database once the cashier has clicked check-out and the bill is printed.
One server with an x86 or x86-64 processor.
The HD space required space depends on the size of your images.
A minimum of 512 MB RAM; recommended 512 MB - 3 GB (at least 512 MB per CPU)
One network card
One server with an x86 or x86-64 processor
The HD required space is dependent on the size of the images you distribute to your Point of Service terminals.
A minimum of 512 MB RAM; recommended 512 MB - 3 GB (at least 512 MB per CPU)
Two network cards:
One network card for the Administration Server's public network
One network card for the Branch Server's private network
Today, all the Wal-Mart outlets have this POS connected with Wal-Mart data center and incorporated with the data warehousing system.
Uses and Integration of POS System with other Information Systems
Wal-Mart recognizes that if it can manage the sources of information and shrewdly analyze and process data, it can influence those particular entities that need these types of information for decision making process. Wal-Mart, through its compilation and examination of POS data, has tried to create information asymmetry over its competitors and vendors. This information asymmetry enables Wal-Mart to broaden its business areas over production processes, allocate its resources for product improvement, and create a series of own-label goods.
At Wal-Mart, POS data consists of: store no., item no., department no., activity sequence no., unit quantity selling, selling amount, selling cost, Day unit Quantity. Data is saved with product bar codes, through which product and supplier data is coded and is interpreted and tracked. POS data is studied for customer demand changes, processed to exhibit instantaneous inventory movement down, and mined to know consumer consumption patterns and preferred patterns of product presentation.
The control and scrutiny of POS information give Wal-Mart powerful sources to better know its customers, enable more frail decision-making processes, and stimulate Wal-Mart to incorporate some risks and activities that are formerly undertaken by manufacturers and vendors. Wal-Mart's own product development team, with the POS data from customers, is motivating significant enhancement in important merchandise categories such as domestic products, apparels and electronics. Wal-Mart currently owns a rich chain of private label goods, and formulates decisions on how its home brand products are presented and displayed. Today Wal-Mart Stores' own brand label goods include: Sam's American Choice, OI' Roy, Great Value, Equate, EverActive, Member's Mark, Spring Valley, White Cloud, Glory, Special Kitty, Neighborhood Market. Wal-Mart is intensely involved with private label goods design, manufacture, packaging, etc. Home label goods are more profitable than national brand goods since home brand products do not need to be advertised in a large manner.
In order to actually make benefit of the POS system in a more effective manner, there must be collaboration of retail units with the suppliers to lower prices and increase sales. Robust inventory management, a vital part of maintaining low prices at Wal-Mart, requires up-to-date information about sales as well as good communication with suppliers. This scenario is critical when there are thousands of stores, tens of thousands of suppliers, and hundreds of thousands of products. Wal-Mart turned to technology in the early 1980s, first for collecting and analyzing sales data and then for transmitting orders to suppliers with electronic data interchange (EDI). By the 1990s, Wal-Mart was collaborating electronically with thousands of its suppliers, using EDI initially and then developing its own applications, collectively known as Retail Link. Retail Link has been developed by Wal-Mart's own IT Department and is very cautious about distribution of information about the software. Suppliers used modems to dial into the Wal-Mart database for up-to-date, store-bystore information on sales and inventory for their products. This information, and the various applications of Retail Link, allowed Wal-Mart suppliers to work with the company's buyers to manage inventory in the stores forecasting, planning, producing, and shipping products as needed. Depending upon the information from the POS, the Retail Link software application is able to display to the vendor various key information like the repurchase cycle time of the product, percentage of Wal-Mart customers buying the product, purchase quantity per basket. Retail Link can also provide information such as sales history and sales performance. The result was faster replenishment, a product mix tuned to the needs of local customers, and lower inventory costs for Wal-Mart. With the Cisco network and Internet, Wal-Mart has elevated Retail Link to a new level of competence and usefulness. It has been transformed from a traditional dial-up to an Internet application making it easier for Wal-Mart's vendors to use, who now just need a Web browser and a working Internet connection. All of Wal-Mart's international suppliers can get access, due to the global nature of the Internet. And it's easier and less costly for Wal-Mart to maintain thereby further reducing costs. In the earlier period, it seemed as if Wal-Mart was in the software business, sending Retail Link software to its vendors, making sure that they had the correct versions, and maintaining its stock of modems in working order. Now that Retail Link is an Internet application and completely coupled with the POS System, Wal-Mart can update the software on the Web, doesn't need modems, and suppliers are able to use their own browsers and computer machines. Another plus point is that data transmission is no longer restricted to the speed of dialup modems. Vendors will get Wal-Mart's data at the speed supported by their internet connection. Since vendors are all accessing a common database, Wal-Mart uses accounts with passwords to allocate what they can see. In fact, users in different locations within a vendor corporation get different accounts, depending on what they need to know. This integration with POS and Retail Link, results in lower prices. With Retail Link, vendors monitor their products sale, use it to simulate what-if situations, and then work with Wal-Mart on pricing and sell-through.. Retail Link is now a very functional and powerful tool that is always up-to-date. (Refer Fig 2 on Features of Retail Link to suppliers.)
Smooth functioning and automated replacement of the Wal-Mart supply chain depend on consistent connectivity between the outlets, the central database (LDAP Database in Admin Server), and the distribution centers. Optimum functioning of network architecture, as well as speed is important. The network is set-up and managed by Cisco. The performance and consistency of the Cisco network, as well as its support for Web-based applications, add to the smooth running of the Wal-Mart product supply chain and to the continued effectiveness of Wal-Mart associates.
From the marketing perspective of Wal-Mart, marketing initiatives mostly rely on discounts and item bundles. Giving away profit is necessary at times to move on sluggish stock or possibly to generate more footfalls, but it is also very pricey. A product marked up by 1.6, then put in the sale at 20% discount, needs atleast twice as many products to maintain the same amount of profitability. So, it is important to follow which marketing initiatives work. Repeating ineffective promotions results in the wastage of money. Using their database present in the administrative server that stores information from the POS system, Wal-Mart marketing executives closely track the performance of their marketing pursuit using a custom built software by their very own IT Department by looking at-
The rate of take up for sale items
Changes in the number of customer purchases
Average customer spend during the promotion
With an effective POS System and Retail Link in place for specific stores, the independent outlets do the same by using the customized software to report on these key areas. The result is more successful marketing campaigns and a smaller amount of wasted money on fruitless discounts.
The basis of the Sales and Marketing Information Systems is the Point of Service/Sale System where the customer actually interacts with the store in the form of a purchase or enquiry. Marketing managers at Wal-Mart use data from the POS System that is in place to decide on marketing strategies to employ. Vendors of products to Wal-Mart use Retail Link software whose backbone is the POS data, to decide on the supply schedule and kind of products to offer at Wal-Mart stores in order to optimize purchases and reduce costs for Wal-Mart, themselves and thus the customers.
The whole set-up of these information systems helps Wal-Mart meet their objectives of growth, cost saving and reliability. Wal-Mart is using these Sales and Marketing Information Systems in order to provide customer satisfaction, everyday low pricing and an enhanced shopping experience that are critical factors to gain an edge in today's highly competitive retail market.
Fig. 1: Architecture of POS System
Fig.2 : Vendors make use of Retail Link software in the following manner