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Monday, September 27, 2004

"We'd be nuts to outsource" - Linda Dillman, CIO, Walmart

Dillman oversees 2,500 business-technology projects that come with high expectations. Topping the buzz list is Wal-Mart's much-talked-about radio-frequency identification initiative, but Dillman will tell you that isn't even the most expensive IT project going on at the company, not "by a long shot." Other high-priority projects include revamping supply-chain processes, synchronizing product data with suppliers using the UCCnet standard, improving E-commerce platforms, and developing talent and fostering regulatory compliance in stores across the globe.As with 95% of Wal-Mart's IT projects, the Information Systems Division will manage the work from programming to process reengineering, relying very little on commercial software and not at all on outsourcing. Indeed, programmers are right now putting the finishing touches on intelligent RFID middleware to handle the influx of data to be generated as the first wave of 100-plus suppliers begins sending RFID-tagged cases and pallets of products through the doors of Wal-Mart's Sanger, Texas, distribution center. Yet Wal-Mart spends below the average on IT for retailers--less than 1% of worldwide revenue, which reached $256.3 billion in 2003. "The strength of this division is, we are doers and do things faster than lightning," says Dillman.. "We can implement things faster than anyone could with a third party. We run the entire world out of the facilities in this area at a cost that no one can touch," she says. "We'd be nuts to outsource."The company's IT budget has, in fact, grown at less than the rate of sales growth, says Dillman.Wal-Mart relies on information to run its business and depends on technology as the enabler to meet the customers' needs," says Walton (no relation to the retailer's founding family), who's responsible for the worldwide rollout of RFID technology. "There's confidence and credibility in the IT organization to deliver results."Wal-Mart expects its RFID project to help not only its sales but also those of its suppliers, and it may even aid competitors and other industries. How much it will benefit suppliers, however, is one of the biggest debates in the IT industry.RFID tags on cases and pallets will be read not only when inventory enters a stockroom but also when those cases or pallets go to the floor and, ultimately, when empty cases go to the compactor, she explains. Much of the data collected during RFID reads will be passed on to Retail Link, Wal-Mart's Web-based software that lets the retailer's buyers and some 30,000 suppliers check inventory, sales, and more. The company is developing software for Retail Link that will leverage that data and trigger a business process--for example, initiating a purchase order. The use of RFID "can dramatically improve suppliers' in-stock positions.Dillman expects Wal-Mart to use all the data gleaned to draw conclusions about when to bring additional stock to the floor, of course, but also to figure out if too much of a product has been ordered by a store (monitoring how long a case sits in the stockroom before its contents are emptied) or is sitting in a distribution center (if the case doesn't get shipped out for days).Critical to the RFID effort is global data synchronization to enable communications with the industry-standard EPCglobal registry so that accurately described and consistent product information is exchanged between trading partners. Wal-Mart has selected UCCnet and, so far, 650 suppliers send item information to the data pool on a machine-to-machine basis.The potential benefits across the supply chain from deploying RFID are such that Wal-Mart has taken the unprecedented step of collaborating with its competitors to make the technology easier for suppliers to adopt.Among the next set of innovations in the area is an effort dubbed Remix. The project, being tested in Florida with a dozen stores, will turn upside down distribution processes that have been in place since 1992. The aim is to revamp the distribution network to eliminate mixing different types of freight so that associates won't have to pick through trucks to find items, and to provide Wal-Mart buyers with additional visibility into inventory in the system. Wal-Mart is turning grocery-distribution centers into "high-velocity" buildings out of which will be distributed fast-selling products, such as paper, that are pallet-loaded onto trucks and can go straight to shelves, while regional distribution centers handle merchandise that gets loaded onto trucks without pallets.Wal-Mart is structured so those projects can happen fast, too. The centralized IS group doesn't have some of the budget and governance issues many companies do. It charges nothing out to the divisions--budget and project resources are allocated to what's most important in the company, not to the person with the biggest budget. No steering committees exist to slow the process, making it possible to give new projects a try on a small-scale basis, as well as to simplify projects for the critical piece that adds the most value. The Wal-Mart way, VP Walton notes, is to look for the 80% to 90% solution and deliver it with 100% accuracy.The nucleus of the IT infrastructure Dillman presides over is a single, centralized, 423-terabyte Teradata system that churns data from 1,387 discount stores, 1,615 Supercenters, 542 Sam's Clubs, and 75 Neighborhood Markets in the United States, plus 1,520 more stores worldwide.The common system, centrally managed, is our competitive advantage at Wal-Mart," enabling the same data set for both buyers and suppliers.Key to Wal-Mart's development efforts today is its build-it-once-for-all-systems mentality. That means build it for both domestic and global operations.Today, Wal-Mart captures all the day's sales and product data across its global operations on an hourly basis. Database queries can start running as soon as data is available.Wal-Mart's common IT foundation is textbook, but not often seen in the real world. Now Wal-Mart is engaged in bringing its online operations onto a common platform as well. An initiative dubbed Global.com that encompasses the retailer's online sites--www.walmart.com, www.samsclub.com, www.asda.com, and www.walmartmexico.com.mx--will move by 2005 from the disparate technology platforms on which they were developed onto a Java-based platform running on IBM's WebSphere and an Informix database. That way, "scalability is easier to maintain." What Walmart has acheived is marvellous.The Walmart IT team seems to have actualised a famous statement made by their founder - Sam Walton -" The Greatest Pleasure In Life Is Doing What Other People Say Can't Be Done." Senthil pointed out to me the oft repeated criticisms about Walmart and where its modernisation and cost cutting is taking walmart to:

Does Flagsmart Staff Need Super Walmart?- Walmart -Myth and Reality.


The Wal-Mart You Don't KnowThe giant retailer's low prices often come with a high cost. Wal-Mart's relentless pressure can crush the companies it does business with and force them to send jobs overseas. Are we shopping our way straight to the unemployment line?
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