Wal-Mart empowers its SCM with Cisco technology

By : |December 19, 2000 0

What happens when the world’s largest retailer and a Networking
colossus team together? A brilliant supply chain management solution emerges. This
is exactly what this case study is all about. Wal-Mart believes in cost-effective pricing
and immense customer satisfaction for its customers. As their website says, Wal-Mart
tests the value of each innovation it considers by asking, "Will it help us lower
prices?" and "How will it improve the customers’ experience?"

The hurdles

Although its low pricing and increase in customer satisfaction made
Wal-Mart the largest retailer, the magnum size of the company presented problems in
employee productivity and collaboration among suppliers. The factors crucial for effective
Wal-Mart functioning are up-to-date sales information and good communication with its
suppliers. Excellent inventory management is equally important for Wal-Mart, which has a
chain of thousands of stores and ten thousands of suppliers. Though Wal-Mart ventured into
using technology applications right from the eighties they needed a little sprucing up.
The application they were currently running was the Retail Link, which could collaborate
with the entire chain of Wal-Mart suppliers electronically. Retail link undoubtedly
elevated Wal-Mart to a new height of efficiency, but the task of sending the requisite
software to vendors, ensuring that they had the latest or at least the right versions and
maintaining a bank of dial-up modems still remained unsolved.

Another hurdle Wal-Mart faced was effective interaction among the
employees. One of the firm principles of Wal-Mart is good communications among the
employees, but the employee strength was almost a million and the company found it
increasingly difficult to keep the staff informed and connected to one another.

The challenge

To maintain its stand on affordable pricing, Wal-Mart needed to build
on the success of the Retail Link application, while making the inventory management
system easier for the vendors to use and easy for the company to administer. Productivity
also needed a boost in figures and that was possible by better communication among
employees. Crossing these hurdles was not very simple considering the staggering employee
strength at Wal-Mart; tens of thousands of suppliers with their own systems and
technologies, 4000 stores and a million employees spread all around the country.

The solution

Wal-Mart seeking a solution to their hurdles approached Cisco for a
technology solution. They basically intended to transform their Retail Link application,
traditionally a dial-in network into an Internet application. The aim was to develop a
company wide Intranet called Pipeline to improve communications with its million and more
employees. The shortcomings of Retail Link was that, though the application elevated
Wal-Mart to a much higher level of efficiency, the company still needed an application
which could send necessary software to its vendors, update the software when necessary and
bank dial up modems. The solution Cisco designed, keeping in mind the requirements of
Wal-Mart and the mentioned inadequacies of Retail Link, was the Pipeline application. Some
of the functions of Pipeline are,

  • It delivers company news, policies, procedures and relevant
    information to all Wal-Mart employees.

  • Pipeline provides a complete up-to-date telephone directory of the
    entire company organized by name, location and function.

  • Pipeline employs a very efficient method to locate phone numbers both
    within and outside the company. It eliminates the cost of directory-assistance calls as
    well as the need to distribute telephone books to all Wal-Mart locations.

  • Pipeline can be used by the employees at Wal-Mart to sign up for
    insurance, review company policies and check out benefits information, all online.

The benefits of Pipeline were tremendous and catered to all the
problems Wal-Mart earlier face:

  • The system is easier for vendors to use because they need only a Web
    Browser, instead of complicated specialized software to access the network.

  • The system is simple to use and there are no maintenance problems.

  • Since the solution is Internet based, more of Wal-Mart’s
    international suppliers can use it.

  • Information delivery is fast as data transmission is no longer
    limited to the speed of dial-up modems

  • Updating software on the Web is instant and easy.

  • The connectivity between the stores, the centralized database and the
    distribution centers is more reliable.

The solution proves really beneficial to Wal-Mart and as David
Flanagin, Director of Network Engineering, Wal-Mart said, "Having a network that is
designed to meet our business requirements-growth, future functions, cost savings, and
reliability-gives us a competitive advantage. By supplying the products we need and acting
as our trusted adviser, Cisco plays a primary role in helping us achieve our

The result

The Internet applications for supply chain management and a
company-wide Intranet helped Wal-Mart in more than one way –

  • Satisfy customers better by offering them lower prices
  • Lower its inventory costs
  • Communicate better with its vendors and suppliers
  • Improve internal inefficiencies and employee self-service functions; and
  • Work with the company’s buyers to manage store inventory, forecasting, planning,
    producing and shipping.

As Wal-Mart continues in its endeavor to provide the best to their
customers, they are delighted by the SCM solution designed by Cisco. Their satisfaction
with the solution is summed up when David Flanagin says, "With the Cisco network, we
have dramatically increased speed and substantially cut outages. Every time we do that, it
makes the supply chain more efficient.

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