Wal-Mart Integrate IT Helps Stay Relatively Advantage in Supply Chain Management

RESEARCH PROPOSAL
UNIVERSITY
12TH NOV 2017
CASE STUDY PROJECT
Wal-Mart’s Adoption of Universal Bar Code, RFID and Magic Wand technologies have helped the Company Stay Relatively Advantaged in Inventory and Supply Chain Management.
ABSTRACT
Information Technology (IT) plays a significant role in enhancing the effectiveness, efficiency, accuracy and timeliness of information flow within a supply chain management system. The use of Universal Bar Code, RFID and Magic Wand technologies have been instrumental in boosting Wal-Mart’s supply chain efficiency. Integration of these three technologies in in inventory and supply chain management provides not only unsurpassed opportunities for improved cost reduction and ultimately significant cost savings, but can also a competitive advantage within the industry. Adoption of Universal Bar Code, RFID and Magic Wand into the supply chain management can be the single most important strategic decision that a business can undertake. Wal-Mart’s early integration these three technologies in supply chain management turned out to be a key differentiator with the competition. RFID tags, which are nothing but microchips embedded with product information, communicate and exchange data through radio frequencies. Universal Bar Code, RFID and Magic Wand adoption involves the use of white tags to identify items from the supplier’s warehouse to help with tracking from the supplier to the retail store’s shelf and ultimately, point of sale. Application and integration of IT in supply chain management has increased Wal-Mart’s operational efficiency. RFID tags, which are small wireless devices affixed onto items, help with tracking of objects from the source to destination. The use of IT in supply chain management has proved to be an essential asset for retail companies due to its potential to drastically reduce operational costs, eliminate frequent stock outs, product theft and other supply chain malpractices.
TABLE OF CONTENTS
TOC \o "1-3" \u ABSTRACT PAGEREF _Toc500314722 \h 2
EXECUTIVE SUMMARY PAGEREF _Toc500314723 \h 4
1.1 Statement of the Problem PAGEREF _Toc500314724 \h 6
1.2 Research Objectives PAGEREF _Toc500314725 \h 6
1.3 Research Questions PAGEREF _Toc500314726 \h 7
1.4 Purpose Statement PAGEREF _Toc500314727 \h 7
1.5 Research Background PAGEREF _Toc500314728 \h 8
1.6 Overview of Universal Bar Code, RFID and Magic Wand Adoption PAGEREF _Toc500314729 \h 8
1.7 Significance of the study PAGEREF _Toc500314730 \h 10
1.8 Scope of the Study PAGEREF _Toc500314731 \h 11
2.0 RESEARCH METHODOLOGY PAGEREF _Toc500314732 \h 11
2.1 Sampling Frame PAGEREF _Toc500314733 \h 13
2.2 Data Collection Procedure PAGEREF _Toc500314734 \h 13
2.3 Data Collection PAGEREF _Toc500314735 \h 14
2.4 Data Sampling Criteria PAGEREF _Toc500314736 \h 15
2.5 Microsoft Productivity Tools PAGEREF _Toc500314737 \h 15
2.5.1 Research Design and Strategy PAGEREF _Toc500314738 \h 15
2.6 Data Collection Strategy PAGEREF _Toc500314739 \h 16
2.7Surveys and Data Analysis PAGEREF _Toc500314740 \h 18
2.7.1 Research Survey PAGEREF _Toc500314741 \h 18
2.7.2 Survey Project Design Procedure PAGEREF _Toc500314742 \h 18
2.7.3 Questionnaire Design PAGEREF _Toc500314743 \h 20
2.7.4 Correlation Analysis PAGEREF _Toc500314744 \h 21
2.7.4Financial Performance Comparison PAGEREF _Toc500314745 \h 21
2.7.5Strong Financial Performance PAGEREF _Toc500314746 \h 21
2.7.3 Effect of Universal Bar Code, RFID and Magic Wand Adoption on Costs and Profitability PAGEREF _Toc500314747 \h 22
2.7.4Effect of Universal Bar Code, RFID and Magic Wand adoption on Competitive Advantage PAGEREF _Toc500314748 \h 22
3.0LITERATURE REVIEW PAGEREF _Toc500314749 \h 22
3.1THEORETICAL LITERATURE PAGEREF _Toc500314750 \h 22
EXECUTIVE SUMMARY
In the recent past, business organizations have integrated enterprise wide technology platforms in their supply chain management systems. More importantly, manufacturing and retail businesses have Information Technology (IT) for purposes of synchronizing data interchange, information flow and collaboration. As a result, businesses have ascertained valuable inputs and benefits such as planning and resource optimization. Wal-Mart, a global retail giant has been in the forefront in the adoption and integration of Information Technology in its supply chain operations. This integration has helped Wal-Mart achieve optimized and synchronized information flow between its suppliers and manufactures thus achieving increased efficiency and visibility, and subsequently, a drastic decline in operational costs. Wal-Mart’s early adoption of Universal Bar Code, RFID and Magic Wand technologies has emerged as the single most important strategic decision that has given the company an edge in supply chain management due to increased data visibility and real-time synchronization with trading partners. Despite the high pace of technological advancement, data acquisition, automation and real-time exchange between different business stakeholders has and still remains a challenge for most organizations, and specifically in supply chain management. The use of Universal Bar Code, RFID and Magic Wand promises to address some of the challenges inherent in the traditional inventory and supply chain management systems as it has the potential to augment organizational capability in the optimization of supply chain management investment. Through these technologies, Wal-Mart Inc. continues to provide market leadership in supply chain management (SCM), making it the company’s single most critical success factor. Universal Bar Code, RFID and Magic Wand technologies have helped the retail giant attain improved efficiency and real-time collaboration with trading partners. The primary aim of the research is to establish how integration of Information Technology (IT) has helped Wal-Mart gain relative superiority in inventory and supply chain management. The study objective is to determine the effect of Universal Bar Code, RFID and Magic Wand supply chain technologies on Wal-Mart’s performance, ascertain how the use of these technologies in supply chain management affects financial performance. The study will explore and compare Wal-Mart’s supply chain technology with other US based retail companies. Quantitative research methods will be used for data collection and analysis.
CHAPTER 1: INTRODUCTION
Wal-Mart remains the world’s largest retail company having posted revenues in excess of $482.13 Billion in 2014/15 financial year. The history of the company dates back to 1962 when Sam Walton opened the first retail store. Wal-Mart now boasts an extensive network of retail outlets that currently exceeds 10,000 spread across 27 nations. The success of Wal-Mart is due to multiple factors even though the efficiency and effectiveness of its supply chain management system is one of the key success drivers. The company holds a dominant market leadership position due to its real-time, cost effective and integrated supply chain management system that has significantly kept operational costs low. Information Technology (IT) plays a significant role in enhancing the effectiveness, efficiency, accuracy and timeliness of information flow within a supply chain management system. The use of Universal Bar Code, RFID and Magic Wand plays an instrumental role in the identification and tracking of products throughout the supply chain. Therefore, integration of IT within an organization’s supply chain provides not only unsurpassed opportunities for improved cost reduction and ultimately significant cost savings, but a competitive advantage as well. Adoption of these three technologies into the supply chain management can be the single most important strategic decision that a business can undertake. Wal-Mart’s early adoption of Universal Bar Code, RFID and Magic Wand in supply chain management has emerged as a key differentiator with the competition. RFID tags, which are nothing but microchips embedded with product information, communicate and exchange data through radio frequencies. The technology uses of white electronic tags to identify items from the supplier’s warehouse to help with tracking from the supplier’s warehouse to the retail store shelf and ultimately, point of sale. Application and integration of IT in supply chain management has increased Wal-Mart’s operational efficiency. These small wireless devices affixed onto items, help with tracking of objects from the source to destination. The use of IT in supply chain management has proved to be an essential asset due to its potential to drastically reduce operational costs, eliminate frequent stock outs, product theft and other supply chain malpractices.
1.1 Statement of the Problem
Wal-Mart’s early adoption and integration of Information Technology (IT), and particularly Universal Bar Code, RFID and Magic Wand technologies into its Supply Chain Management (SCM) system has helped the global retail giant stay relatively advantaged in supply chain management.
1.2 Research Objectives
The general research objective is:
1 To determine if Wal-Mart’s integration of Universal Bar Code, RFID and Magic Wand adoption in inventory and supply chain operations has provided the global retail giant a competitive advantage over the competitors.
The research shall be informed by the following specific research objectives:
1 To determine if Wal-Mart exhibits better financial performance after Universal Bar Code, RFID and Magic Wand adoption in supply chain and inventory management as compared to other US retail companies.
2 To ascertain whether there exists a linear relationship between strong financial performance and the use of Universal Bar Code, RFID and Magic Wand systems in supply chain management.
3 To establish the effect of Universal Bar Code, RFID and Magic Wand use on supply chain efficiencies, operational costs and profitability at Wal-Mart Inc.
4 To determine the effect of Universal Bar Code, RFID and Magic Wand systems use in supply chain and inventory management on Wal-Mart’s competitive advantage.
1.3 Research Questions
The research will be guided by the following research questions:
1 Does Wal-Mart depict better financial performance as compared to other retail companies that are yet to adopt Universal Bar Code, RFID and Magic Wand systems in their supply chain and inventory management based on financial ratios?
2 Does Wal-Mart depict better financial performance after Universal Bar Code, RFID and Magic Wand adoption as compared to the period before based on financial ratios?
3 What is the effect of Universal Bar Code, RFID and Magic Wand use in supply chain management on operational costs and profitability of Wal-Mart Inc.?
4 What is the effect of Universal Bar Code, RFID and Magic Wand adoption in inventory and supply chain management on Wal-Mart’s competitive advantage?
1.4 Purpose Statement
The purpose of this study is to investigate if Wal-Mart’s early adoption of Universal Bar Code, RFID and Magic Wand in supply chain management acted as an enabler in propelling the retail giant into a market leadership position.
1.5 Research Background
This section will provide an overview of past and present technologies employed by manufacturers and retailers in supply chain management. The study background section will review Auto-ID technologies such as Barcode and its application in supply chain management. These technologies have been traditionally used by both suppliers and retailers in tracking and control of products within the supply chain. This section will also review more current technologies such as the Radio Frequency Identification (RFID) Technology and its application in supply chain management. The section will further provide a comparative review of the modern technologies such as RFID, and past technologies such as Auto-ID that encompass Bar-coding. However, emphasis will be placed on the three technologies namely Universal Bar Code, RFID and Magic Wand that Wal-Mart uses in its supply chain management. A description of the architecture and operation of the technology will wrap up the background section.
1.6 Overview of Universal Bar Code, RFID and Magic Wand Adoption
Universal Bar Code, RFID and Magic Wand systems adoption in supply chain management has the potential of improving operational effectiveness, efficiency and responsiveness through real-time data synchronization between organizations and their trading partners (Danese, 2013). Moreover, enhanced efficiency along the supply chain can result into significant cost savings. The technology is based on modern technological advancements that have necessitated tracking of inventory from the supplier’s warehouse to the retailer’s Point of Sale (PoS). A review of literature suggests that Universal Bar Code and RFID systems can help improve product visibility and hence significant reduction in unanticipated stock-outs (Nguyen, 2017). Besides, integration of magic wand in supply chain management has been instrumental in the reduction of stock miscalculations and theft at the point of sale. Moreover, the technology has been a key driver in the timely update of logistics and inventory management systems. Research suggests that Universal Bar Code, RFID and Magic Wand adoption has immense cost management and reduction opportunities besides its compatibility and integration with pre-existing core Enterprise Resource Planning (ERP) systems (Huo, Han, & Prajogo, 2016). Although several studies have cautioned rapid adoption of this technology, studies from early implementers such as Wal-Mart Inc., suggests that if properly leveraged, Universal Bar Code, RFID and Magic Wand adoption in supply chain can bring about immense cost and efficiency benefits. Since inception of Universal Bar Code, RFID and Magic Wand adoption, Wal-Mart Inc. remains the single largest company ever to have successfully integrated the technology in inventory and supply chain operations. Wal-Mart has successfully employed this technology to link its internal supply chain system with that of major suppliers. The use of these technologies has helped Wal-Mart attain high visibility in supply chain management thus resulting to more accurate and efficient real time synchronization of information. It’s this adoption that has led to improved inventory turnover, a reduction in labor costs and enhancement in stock flow based on distribution center model (Shin, S., & Eksioglu, 2015). Universal Bar Code, RFID and Magic Wand have led to timely recognition of products, eliminating the need for itemization, thus resulting into significant reductions in cycle counting usually related to inventory management. More importantly, RFID tagging employs novel wireless gadgets in the identification of inventory items. Due to technological advancement and research, widespread adoption may soon become a reality driven by progressive reduction in the cost of Universal Bar Code, RFID and Magic Wand acquisition and implementation (Wu, 2012). Wal-Mart has been using RFID tags to identify and subsequently track stock items within its supply chain system since 2003. It’s the company’s leadership position in supply chain management technology that continues to set pace in the global retail industry (Nguyen, 2017).
1.7 Significance of the study
The study is important as it will highlight the significance Information Technology (IT) adoption in inventory and supply chain management. The research takes an exploratory case study approach as it focuses on Wal-Mart and the US retail industry. A review of current literature suggests that most related studies have tended to narrowly focus on RFID adoption in a single company. Although several studies have focused on Wal-Mart, no attempt has been made to draw a comparison with other retail companies. Specifically, Wal-Mart was the first retail company globally to ever adopt Universal Bar Code, RFID and Magic Wand technologies in supply chain. The adoption of these technologies did not necessitate a complete overhaul of the company’s supply chain system. However, through an integrated systems approach, these systems were implemented within the company’s Enterprise Resource Planning (ERP) environment. This study takes a departure from the narrow focus of previous studies. Moreover, most of the studies are either qualitative or employed a small sample size. Although numerous other studies have focused on Wal-Mart Inc., few of these studies have made an attempt to justifiably link the company’s competitive advantage to the integration of Information Technology in supply chain management. Nevertheless, the researcher acknowledges the critical role of RFID as the single most important technology component that has largely contributed to the modern day paradigm shift in inventory and supply chain operations. Therefore, the study is significant as it will delve deeper into determining if Universal Bar Code, RFID and Magic Wand adoption in supply chain management can provide a competitive advantage to organizations. Although the research will focus on Wal-Mart Inc., a broader perspective will be achieved through comparative analysis. The study will help bridge the existing gap in the research literature, particularly pertaining to the role of IT in the enhancement of inventory and supply chain management processes. Therefore, the research findings will augment the existing research literature, while providing new insights and perspectives into the role of IT integration in supply chain management.
1.8 Scope of the Study
The research will focus on answering the four research questions. Although the study will attempt to draw a comparison between Wal-Mart and other sampled US retail companies, emphasis will be placed on the determination of a relationship between Wal-Mart’s market leadership to its inventory and supply chain management advantage. Thus the study focus will be limited to determining how technological advantage in supply chain management has contributed to Wal-Mart’s market leadership position.
2.0 RESEARCH METHODOLOGY
The study will employ a quantitative, exploratory approach where Information Technology (IT), and specifically the use Universal Bar Code, RFID and Magic Wand in Supply Chain Management (SCM) related research studies will be reviewed. The study will also utilize a case study method where different case studies relating to the effect of IT/Universal Bar Code, RFID and Magic Wand adoption in SCM on the firm’s cost and profitability will be explored. The study relies on secondary sources namely books, peer reviewed journals, newspaper articles and other authoritative and credible internet sources. Most sources have been obtained from Friend’s University Online Research database, particularly peer reviewed journals and Newspaper Articles. The research literature were first reviewed for relevance to the research subject and later categorized based on the source type. Other secondary sources of data will include financial statements from the sampled retail company websites. Wal-Mart Inc.’s financial statements will be used as the study benchmark while other retail companies’ financial statements will be essential in conducting a comparative analysis that is necessary to enable effective answering of the four research questions. Financial data will be extracted from the company’s annual financial statements. The obtained data will cover the period before and after the adoption of Universal Bar Code, RFID and Magic Wand and will be limited to 10 years before and after implementation of these three technologies. The literature review section will be largely informed by the secondary sources obtained from Friends University research database. Where necessary, other relevant online sources and academic papers may be used to complement the books, journals and newspaper articles obtained from the University research portal. Relevant sources will be gathered, arranged and sorted according to the research subject. This is an important step in framing the research focus as it makes the data extraction and analysis process easier and manageable. The study will then employ descriptive statistics to analyze financial data extracted from Wal-Mart’s financial statements and other sampled retail companies. Given that the primary objective of the study is to determine whether or not IT adoption in SCM at Wal-Mart has given the company a supply chain management advantage over the competition; the literature review section will provide global view of the US retail industry. The research will employ a case study approach as the primary data collection technique. Data will be collected from the aforementioned secondary data sources that will be deemed relevant to answering research questions. A quantitative research design will be used in data analysis.
Data extracted will be analyses using SPSS v24 as the preferred descriptive statistical tool over MS excel due to its comprehensiveness in conducting data analysis, as well as data presentation. Research data will be analyzed and presented in form of tables, graphs and charts.
2.1 Sampling Frame
According to Cooper and Schindler (2014), a sample represents the correct number of items that are derived from a specific target population. Based on a predetermined sample size, a researcher collects data using a particular research design and sampling technique. This is normally done with the view of reducing the possibility of incurring a sampling error while studying the targeted population. It’s thus the reduction in sampling error that significantly increases the precision of the selected measurement method. Cooper and Schindler (2014) have suggested that a sample size of about 30% is necessary so as to generalize the study findings on the target population. Moreover, deriving a larger sample size is particularly important as it minimizes possible errors. Similarly, Fowler (2013) argues that if well chosen, a sample size of about 10% of a target population can often give good reliability. Given that the scope and purpose of the study, the researcher will ensure that the selected US retail companies represent at least 10-30% of the listed retail companies. A sample size of 100 listed retail companies will be used which represents slightly over 10% of the listed retail companies. This sampling frame will ensure high data reliability.
2.2 Data Collection Procedure
Compustat database will be used to access and download financial documents for listed US retail companies. For unlisted companies, documents will be extracted from the official company websites. The second step will be sorting the documents. The documents will be broadly sorted into two categories namely the companies that have and those that have not adopted Universal Bar Code, RFID and Magic Wand in supply chain. The third step will involve data extraction. In this step, relevant financial data will be extracted from the Balance sheet and income statement of each company. These data will be tabulated and key financial ratios derived. Data pertaining to key financial ratios will be analyzed in SPSS v24 using descriptive statistics.
2.3 Data Collection
The study will use different data collection sources. Besides extracting annual financial statements and other documents from online portals, data will also be obtained from Compustat database. Compustat database offers access to multifaceted data from a centralized location thereby eliminating the hustle of moving from one website to the next in search of relevant research data. The database provides financial statements for all major retail companies in the United States. These financial statements include balance sheets and profit and loss statements. Reliance on Compustat for data extraction is significant as it presents data according to a predetermined criteria and classification, which will make the process of access and extraction hustle-free. Compustat is an enormous database; therefore the researcher will rely on the research questions to guide the categorization and sorting process. Retail industry codes for the sampled retail companies will be used to ease the search process. Data will be sampled from 1000 retail companies, with a definite sample size of 100, representing 10% of the sampled population. The sample will comprise of 50 retail companies that have integrated Universal Bar Code, RFID and Magic Wand adoption while the remaining 50 will be companies that haven’t embraced the technology. Predefined sampling criteria will be used where data from the US retail industry will be specifically targeted and extracted. Financial Data for private retail companies will be obtained from the target company’s websites.
2.4 Data Sampling Criteria
The researcher will use the following sampling criteria:
1 Twenty years of financial data will be derived for each company. The financial data will cover 1997-2016 period. This timeframe was selected to capture data for the pre-Universal Bar Code, RFID and Magic Wand adoption period.
2 Fifty of the retail companies must have adopted Universal Bar Code, RFID and Magic Wand while the other 50 should not have adopted the technologies to date. This criterion will help capture comprehensive data prior and after adoption of the systems.
3 The 50 companies that will have implemented Universal Bar Code, RFID and Magic Wand should be listed. The reason is that most listed companies have integrated IT in their supply chain and inventory management systems while most unlisted companies are still reluctant.
2.5 Microsoft Productivity Tools
2.5.1 Research Design and Strategy
The MS office productivity tools helped the researcher effectively and efficiently prepare the research proposal. The researcher utilized functions such as formatting, editing, storage, spell checker, grammar checker, thesaurus, retrieval features among others. The researcher used MS productivity tools such as MS Word editor and researcher tools that are available in MS Office 2016. These tools were useful in complementing the common MS Word processing functionalities such as spelling and grammar checking. The researcher tool provided the researcher with an opportunity to review online sources from within MS Word document editing environment. The editor function has powerful grammar and spell checking tools. These tools will be essential in processing, editing and formatting the final research document. The researcher tool in MS Word 2016 helped eliminate the hustle of multitasking between MS word processor and the internet browser. The researcher tool proved helpful in planning and managing in text citations particularly in the literature review section. Using this tool, the researcher found it easy to identify credible relevant sources and incorporating them into the research paper. The new researcher function utilizes MS Bing Knowledge Graph to identify and extract relevant and trustworthy information from online sources. The tool helped in planning and structuring sources. Using the researcher tool, the researcher was able to automatically create citations thus eliminating the hustle of locating, incorporating and citing sources. As a result, the researcher had more time to review and refine the research. The researcher tool is available on the references tab located in the top menu bar. After accessing the tool, search terms were used to locate relevant research data. The rich features of the MS editor tool helped the researcher in the proofreading and editing of the final document. The writing style tool helped improve the researchers writing style, hence clarity and effectiveness. The tool’s word suggestions helped the researcher eliminate complex words and instead replacing them with more relevant and appropriate alternative words. The powerful spell checking and grammar option helped in the identification of incorrect style and grammar mistakes. Although MS excel provides powerful productivity functionalities, the researcher intends to use SPSS v24 as it offers more data analysis and manipulation options.
2.6 Data Collection Strategy
The researcher utilized the Friends University website to gain access to different research databases that were essential for the co...