SUBMITTED TO: PROF MANPREET

KAUR

SUBMITTED BY: SAGAR ARORA

STUDENT ID : A00118051

ASSIGNMENT 1
SCM 115 Purchasing
e-procurement and usage of RFID technology by Walmart

Introduction

When it comes to retail success, Walmart is nothing short of extraordinary. Despite the pressure
to catch up with Amazon and other behemoths, they maintain their position. With over 11,500
retail locations worldwide and e-commerce sales, they offer “Every Day Low Prices”. The
corporation employs millions of people, including more than a million in the United States on a
global scale. In the United States alone, there are over a million people. When you consider the
company's $485 million in revenue, it's easy to see why. Billion in the fiscal year ended in
January 2017, and 2% of the US economy at the end of the year. It is unquestionably a company
worth studying.

The success of Walmart can be due to three factors: scale, volume, and low operating expenses.
Since its founding in 1950 by Sam Walton, the company has risen to the top by utilizing a
business model targeted at keeping margins more down than the competition and depending on
sales volume to make up the difference and keeping operating costs as low as possible. They're
able to maintain their low prices for various reasons. Still, the ones that truly matter are a robust
supply chain management system, the ability to leverage supplier bargaining strength, and
reducing overhead and operational costs. The process of requisitioning, ordering, and acquiring
products and services online is known as electronic procurement, sometimes known as e-
procurement or supplier exchange. It is a business-to-business process. Unlike e-commerce, e-
procurement relies on a closed system maintained by a supplier and is only accessible to
registered users. Through bids, purchase orders, and invoicing, e-procurement improves
interactions between chosen suppliers and clients.

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e-procurement and usage of RFID technology by Walmart

Following the introduction of Electronic Data Interchange (EDI) in the 1980s, e-procurement
was born. Improvements in EDI allowed firms to create online catalogs for vendors a decade
later. Everything from supplier evaluation and selection to contract management, electronic
orders, and payments is now part of e-procurement

What Can You Learn from Walmart’s Procurement Team?

Dealing with Manufacturers Directly

Walmart engages directly with manufacturers and eliminates the need for third parties by
employing direct sourcing. Suppliers are now in charge of inventory management in their
warehouses, which means Walmart is no longer controlling inventory management. The vendor-
managed inventory system improved inventory flow and ensured that customers' favorite
products were always available on store shelves. Walmart's costs have decreased due to this
procedure, which translates to more savings for customers because they can afford to drop
pricing.

Make the Most of Your Purchasing Power

Many well-known enterprises rely on Walmart for more than one-fifth of their revenue because it
is the number one supplier-retailer of most available products. Walmart employs this kind of
leverage to keep its prices lower than the competition.

For example, Lakewood Engineering & Manufacturing, a Chicago-based fan maker, has seen
significant adjustments due to Walmart's influence and pressure. A 20-inch fan cost $20 in the
early 1990s, and Walmart wanted it to be less. As a result of this drive, Lakewood switched to an
automated manufacturing process and laid off employees. The price of a 20-inch fan in Walmart
shops plummeted to $10 in 2003 due to this, as well as pressure on their suppliers to lower part
prices and the hiring of a crew in China to labor for 25 cents an hour. Suppliers are motivated to
make adjustments to keep them as customers because of their big volume orders. The good news
is that you don't need Walmart's clout to make the most of what you already have. You can
change your sourcing strategy to a category management plan, in which you buy in bulk from

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e-procurement and usage of RFID technology by Walmart

fewer vendors. Because goods are grouped, this strengthens supplier connections and helps you
negotiate better terms for fewer contracts.

Keep Overhead and Operational Costs 

With roughly 160 distribution centers positioned within 130 miles of the stores they serve;
Walmart has built a cost-effective distribution network. Regional distribution centers are located
in areas where labor and transportation expenses are lower. Cross-docking is made more
accessible due to this process, allowing you to save even more money on transportation and
inventory storage. When a truck arrives at the warehouse, cross-docking takes the products from
that truck and places them in another outbound vehicle headed to a store, ensuring that the
products do not spend time in the warehouse. Walmart also saves money by owning and
operating its fleet of vehicles and employing its drivers. According to Arkansas Business,
Walmart's distribution costs were 1.7 percent of sales in 1989.

Software for e-procurement

The e-procurement process is more accessible using e-procurement software. Procurement

personnel can also automate various tasks, processes, and procedures, such as policies, contracts,
and vendor relationships. The software's primary advantage is that it speeds the procurement
process and removes manual or paper-based operations, even though offered functions and
capabilities differ by vendor. Many e-procurement systems include capabilities that enable
procurement managers to tailor the procurement process.

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e-procurement and usage of RFID technology by Walmart

Wal-Mart Business Strategy and Supply Chain Strategy Linkage

To make things as efficient as possible, Walmart stores use a highly technologically advanced
and efficient supply chain management system. They've been able to get vast amounts of precise
product information attached to every product in their stores by using barcodes and radio
frequency identification (RFID) technology. This data is delivered to their database subsequently
passed along to their inventory management system. This guarantees that Walmart is aware of
what it requires, how much it needs when it requires it, and which location. Walmart reported a
16 percent decrease in out-of-stock products at RFID-equipped shops during the first eight
months of 2005, proving that the system works. Walmart’s continued investment in IT is seen
through its RFID initiatives. Wal-Mart is currently driving the adoption of RFID technology
through supplier mandates. RFID promises the next generation of barcode technology to provide
automated data capture to further streamline Wal-Mart’s processes and vendor compliance
initiatives. In addition to technology, trust and cooperation are essential for Walmart to develop
collaborative relationships with vendors, such as vendor managed inventory (VMI) and co-
managed inventory (CMI). Walmart would face a slew of problems if it didn't have a robust
supply chain, all of which would hurt customer happiness and profit margins. Customers will

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most likely go to the competition to get what they need if they can't locate it in the store

This Photo by Unknown Author is licensed under CC BY-SA-NC

Benefits of RFID for Walmart

Walmart stores use RFID to quickly and accurately identify and track their assets. RFID tags are
powerful and quick at transmitting data from items to scanners. The RFID tags' capacity to send
fast and real-time information outperforms barcode scanners, previously used to identify
products.

By leveraging RFID technology, Walmart's supply chain decreases the Bull-whip effect and
limits excess inventory across the distribution center. The supply chain's bull-whip effect causes
changes in the company due to client requests, and it moves up the supply chain business. As a
result, Walmart planned to store RFID-tagged clothing in 2010.

The major benefits are:

 Reduce labor costs for warehousing processes

 Increase in warehouse processing accuracy and throughput
 Increase in inventory accuracy
 Speed up physical inventory process
 Automated data capture and compare

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e-procurement and usage of RFID technology by Walmart

 Reduce thefts, misplacement, and misrouting

 Optimize work processes to increase productivity
 Tracking goods handled
 Increase on-time deliveries
 Reduce inventory levels and safety stocks
 Reduce inventory of obsolete products
 Enhanced real-time visibility in the supply chain
 Increase assets utilization

Conclusion

This survey looked into the possible benefits of RFID technologies in supply chains, such as cost
savings and value creation, especially concerning inventory inaccuracy and the bullwhip effect.
Through increased traceability and visibility of items and processes throughout the supply chain,
RFID technologies can provide various benefits in supply chain management. Increasing process
efficiency and speed, improving information quality, and reducing inventory losses are just a few
of the benefits. However, because the costs of RFID are typically substantially higher than the
costs of current identifying methods, real-world uses of RFID technologies are still limited.

References

Biedron, R. (n.d.). Planergy. Retrieved from

https://planergy.com/blog/walmart-procurement-strategy/#:~:text=By%20using%20direct
%20sourcing%2C%20Walmart,was%20no%20longer%20Walmart's%20responsibility.

De Graves. (2004). Retrieved from Framework for the Study of Governance in the Supply NetworksWal-
Mart: the “Enlightened Despot”: Massachusetts Institute of Technology – Master Thesis .

Pratt, R. A. (n.d.). Retrieved from https://searchcio.techtarget.com/definition/e-procurement

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