Wal-Mart's Way

Heavyweight retailer stays innovative with help from RFID and a massive centralized data infrastructure.

Laurie Sullivan, Contributor

September 27, 2004

5 Min Read

Massive, Centralized Infrastructure
It's an intense work atmosphere--and maybe not everyone is cut out for the challenges, or for the isolation. The do-it-yourself approach means that Wal-Mart "doesn't have the peer-group support and industry best-practice knowledge from other retailers using the same application," says AMR Research retail analyst Robert Garf.

Yet the engine keeps accelerating. 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. "That's key to how we can leverage what we do into the future," says Dan Phillips. The VP of operations, data warehousing, databases, large systems, and communications led the IT effort when Wal-Mart opened its first international unit, a Sam's Club store in Polanco, a suburb of Mexico City, and was a critical player in the company's decision in 1995 to bring together all its businesses under a common IT system for distribution, replenishment, and so on. "The common system, centrally managed, is our competitive advantage at Wal-Mart," enabling the same data set for both buyers and suppliers, he says.

Wal-Mart in the 1990s tried having IT executives report to the business, a "well-intentioned" but not well-executed experiment, Phillips says. "We lost touch with what was going on in [the IT group] and with being able to leverage the synergies of being able to do everything for everyone."

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--the retailer's growing international presence encompasses operations in nine countries and Puerto Rico, including the most recent acquisitions of Brazil's Bompreco in March . "When you're writing the code, you automate, enhance, and change processes globally," says Tony Puckett, VP of international systems. As Wal-Mart learns from its experiences in new countries--about Brazil's complex tax structure, for instance--"we bring back the structure into our core system and that becomes a tool we have in the future," he says.

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. That ability comes in handy, particularly on the Friday after Thanksgiving, when Wal-Mart buyers start watching what's happening in stores at 6 a.m. on the East Coast, then use that data to make decisions in real time that can affect the big day's sales. Wal-Mart once used its data prowess on a Black Friday to query sales of a PC advertised in a circular; when execs found out it wasn't selling well, they called stores and discovered the reason was that customers thought they had to pay separately for the system and monitor. So store clerks quickly put the two boxes together and spelled out the pay-one-price deal in a sign. "We've done a lot of work for performance and availability, and making sure the data is current," Phillips says.

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," says Matt Carey, VP of technology, who started as a programmer trainee writing code in CICS Cobol for Sam's Clubs merchandising systems.

There's been a lot of talk in the past about leveraging the strengths of brick-and-mortar businesses with E-commerce operations, but Dillman says that's really happening now. Wal-Mart has made some of its own missteps, such as spinning out its Web site in a partnership with a venture-capital firm before bringing it back in-house. Also, an attempt at online grocery shopping and home delivery in the United States failed because it proved too costly. (The service is more successful in the United Kingdom and Mexico, where housing is more concentrated and people are more willing to pay delivery fees.)

Greater hopes are pinned on a test under way to let customers order specialty merchandise that's available on Walmart.com, which stocks more than 700,000 items, including textbooks, and then pick it up at several Dallas-area stores. The initiative builds on Wal-Mart's existing architecture for letting customers order prescriptions or contact lenses online and pick them up in stores.

In stores, Wal-Mart is tinkering with how to make the most of its everyday- low-prices formula. It began rolling out in January the first modules of a markdown and sales-optimization package it's creating to help predict at what point in the selling cycle a product becomes less desirable by consumers; the last modules are due next year. The goal is to provide tools to reduce an item's price at the most optimal time in the cycle to increase sales and profit.

"Most stores drop the price 50% after a holiday," says Rob Hey, Wal-Mart's VP of merchandising systems, who began as a stockman 23 years ago at Wal-Mart's Parsons, Kan., store. "But why drop 50% when you can take a reduction earlier in the season and create additional sales for the company?"

Creating value for the company and the customer is what it's all about, Dillman says. And Wal-Mart even now has a small group looking at how it can transform development to deliver business-technology solutions to Wal-Mart faster, cheaper, and better.

In this, as in every other area, the Information Systems Division is being proactive. "What makes our job fun is bringing many ideas to the table," Dillman says. "If we were always sitting on the other side waiting for someone to tell us what to do, it wouldn't be nearly as exciting."

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