Walmart’s strong IT will be key in strategic shift

US retail giant Walmart plans to use its IT expertise to procure products directly from a larger number of suppliers.

Walmart, which owns Asda, buys...

US retail giant Walmart plans to use its IT expertise to procure products directly from a larger number of suppliers.

Walmart, which owns Asda, buys most of its stock via third-party intermediaries but predicts it can save billions of pounds by buying directly.

The retailer predicts between 5% and 15% savings within five years, equivalent to $4bn-$12bn if it makes about 80% of purchases directly as planned.

The change will mean integrating systems with more suppliers, in many cases small companies.

The retailer is no stranger to IT projects to improve the supply chain. Walmart runs some of the most advanced systems of any company in the world, according to Christine Bardwell, retail technology analyst at Ovum.

She said, "Walmart has invested heavily in state-of-the-art technology over the years, particularly supply chain technology.

"Although an initial investment in technology may be required to handle these changes, it will not be huge as Walmart already has the technology capacity. The change will be more around business process and supplier relationship management. Any costs will be recouped very quickly from the savings made by having a more efficient supply chain."

But Walmart could face challenge getting the suppliers to integrate to its supply chain technology. When Walmart made RFID compulsory for suppliers in 2005 it expected suppliers to meet the costs and many did not get there money back, added Bardwell.

"Radio frequency tagging [RFID] for real-time inventory tracking was made compulsory for key Walmart suppliers in 2005. The suppliers were expected to also handle the costs of the technology though many did not realize a return on investment from this implementation."

Read more on IT supplier relationship management

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