Keith Power talks to the former CIOs of US retail giants Wal-Mart and Lowe's about the benefits their IT strategies delivered.
Wal-Mart at a Glance - Wal-Mart Stores, Incorporated is the world's largest retailer, with $US191 billion in sales in the fiscal year ending January 31, 2001. The company employs more than 1 million associates worldwide through nearly 3500 facilities in the US and more than 1000 units in Mexico, Puerto Rico, Canada, Argentina, Brazil, China, Korea, Germany and the UK. More than 100 million customers per week visit Wal-Mart stores.
Lowe's at a Glance - With 2000 sales of $US18.8 billion, Lowe's Companies, Incorporated is the world's second largest home improvement retailer. Headquartered in Wilkesboro, North Carolina, Lowe's is the 13th largest retailer in the US as well as the 34th largest retailer worldwide. Lowe's and its 100,000 employees serve nearly five million do-it-yourself retail and commercial business customers each week at more than 720 stores in 40 states.
Dell Computer at a Glance - Dell Computer Corporation is the world's number one computer systems company and provides products and services required for customers to build their information-technology and Internet infrastructures. The company's revenue for the past four quarters totalled $US32.6 billion. Dell, through its direct business model, designs, manufactures and customises products and services to customer requirements.
With only a handful of major retailers in Australia, all enjoying reasonable market share and relatively comfortable margins, competition in the industry is less intense than it is for many of their overseas counterparts. They have thus been slower to embrace initiatives such as collaborative planning, forecasting and replenishment (CPFR), and to some degree, even customer relationship management (CRM).
Wal-Mart in the US, for example, was an enthusiastic pioneer of supply chain management and its more sophisticated evolution, CPFR. Wal-Mart's RetailLink system provides weekly forecasting data to the company's suppliers, which has resulted in significant reductions in its inventory and product cycle times. In the drive to improve efficiency and reduce costs between manufacturers and retailers, Wal-Mart is, in fact, often hailed as a shining example of collaboration in action.
RetailLink was the brainchild of Randall Mott, Wal-Mart's former CIO and senior vice-president. Mott held a variety of technical and management positions during his 22 years at Wal-Mart, and was appointed CIO in 1994. He left the company in February 2000 to join Dell, also as senior vice president and CIO (see "From Retail to E-Tail ", page 50).
Mott's IT organisation at Wal-Mart consisted of some 1900 people. He joined the company as a programmer right out of university and, even in those early days, he says technology was seen as a key part of how the company could continue to expand and become more efficient. More importantly, senior management understood IT's business value. Consequently, the company was an early investor in technology compared to other retailers. In fact, 90-95 per cent of its systems were developed in-house, given that there were far fewer off-the-shelf products available at the time.
"If you look at the amount of automation in the stores, Wal-Mart clearly has the fastest checkouts in the world, " Mott says. "There are also a lot of the handhelds in the stores that the associates use to get information that enables decision-making inside the store. "According to Mott, Wal-Mart was also a trailblazer in sharing information externally with its suppliers and giving them details that most retailers weren't willing to share, such as what price items sold for in the stores and what kind of mark-downs products had. "One of the key strategies Wal-Mart adopted fairly early on was what we termed Â'store unique', " says Mott. "Each store needed to be unique in its assortment [of products]. In order to be unique, we basically allowed our suppliers to become an extension of the buying office so they were all motivated to drive the right assortment in the stores. "RetailLink first launched in 1991 as a PC version and later evolved into a browser-based and password-protected system, accessible by any of Wal-Mart's suppliers. Mott says that one of the project's key challenges was dealing with the volumes of data and making it intuitive and easy to use. To this end, Wal-Mart hosted a number of free-of-charge training sessions for its suppliers throughout different US cities, which covered both the tools and aspects of retail. As Mott points out, the suppliers themselves weren't retailers and a lot of the terminology and what they needed to think about were new to them.
For Me to Know . . .
Two years ago, CPFR had the consulting community very excited. However many companies still jealously guard their information from outsiders, and while much of the hype surrounding CPFR has since died down, Mott still considers CPFR to be a huge concept in retail. He concedes that nobody is yet practising it on a large scale, but that the likes of Wal-Mart, Kmart and Target in the US, as well as players on the supplier side, have seen the opportunity it presents and are working towards it. Progress has been steady, he says, and industry standards are evolving. He is also emphatic that there is more to be gained than lost by sharing information between different business partners.
"A lot of companies become concerned about others getting to know their information, but understanding common goals is a very powerful thing, " says Mott. "You run some risk that information will be shared inappropriately, but you can usually protect yourself from that just in terms of the agreements you have with the other company.
"In Wal-Mart's case it's very one way, as it is in our current Dell model - us sharing information with suppliers. The real value of CPFR comes in replenishment of course, whereby suppliers also let us know as soon as they know something. For example, if an order's going to be short, the sooner you know the better. You can plan for it and therefore the better the customer experience. Just how much value there is in that is still not fully recognised. Achieving true implementations of CPFR does involve significant change because all of a sudden you are working across boundaries that have never been worked across before, " Mott says.
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