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Wal-Mart and RFID

Wal-Mart and RFID
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    INSTITUT SINARAN MKT 233- E-COMMERCE Task : Group Assignment Student’s Name  : Amanda Lim Pui Sze (13DM244) Nabeela Binti Zainal (13DM239) Ng Jing En (13DM233) Tahnee Tsen Tze Ting (13DM256) Program : Diploma in Commerce Lecturer’s Name : Mr Sam Yet Huat Due Date : 13 October 2014   2 Q1: Why Wal-Mart is concentrating on Supply Chain Projects?   This is because Wal-Mart feels that this is an area of strength and being efficiency in this area can lead to greater profit. Wal-Mart is investing heavily to improve their supply chain management constantly as it will allow them to lower their overall costs and to increase profit margin. To illustrate this, prior to the efforts on supply chain management in 2002, they generated a return of 3% on the sales of $218B. In 2011, their revenue doubled and their profit margin increased to 6.1%. By constantly upgrading the management of product through the various distribution channels and the process in which consumers receive products, time and money can be saved by Wal-Mart which in turn benefits the consumer. In order for Wal-Mart to remain successful on a global level, being competitive is the key. In order to maintain Wal-Mart value proposition, it must always be aware of bigger and better ways to get things done. RFID technology has risen to become a revolutionary element in supply chain management. ( RFID Arena Guest, 2013) It is not just a replacement for barcodes. RFID ensures that the right goods are available in the right place with no discrepancies and zero errors. ( RFID Arena Guest, 2013) It makes the supply chain considerably more precise and improves the efficiency and reliability of the entire chain. As real-time information is made available also administration and planning processes can be significantly improved. ( RFID Arena Guest, 2013) Wal-Mart installing RFID technology in its stores because it allows the retailer to better collaborate with suppliers that need to monitor the flow of inventory and respond to problems or spikes in demand. (Songini, 2007) Store personnel can better use the technology to keep the shelves full of merchandise and reduce the number of products out of stock at each store. When we set out on this journey, we really focused on the collaborative benefits; we wanted what was going to drive sales for our suppliers and to get product on the shelf, where it needs to be for our customers to buy.‖ (Songini, 2007)   3 Next, Wal-Mart has used radio frequency identification tags (RFID), which use numerical codes because it can be scanned from a distance to track pallets of merchandise moving along the supply chain. (Blogger, 2013 ) As inventory must be handled by both Wal-Mart and its suppliers, Wal-Mart has encouraged its suppliers to use RFID technology as well. Even more recently, the company has begun using smart tags, read by a handheld scanner, that allow employees to quickly learn which items need to be replaced so that shelves are consistently stocked and inventory is closely watched. (Blogger, 2013 )  According to researchers at the University of Arkansas, there was a 16% reduction in out-of-stocks since Wal-Mart introduced RFID technology into its supply chain. (Blogger, 2013 ) The researchers also pointed out that the products using an electronic product code were replenished three times as fast as items that only used bar code technology. This is one of the reasons why Wal-Mart is concentration on its supply chain management especially in RFID. (Blogger, 2013 ) In addition, Wal-Mart can also network its suppliers through computers. It entered into collaboration with P&G for maintaining the inventory in its stores and built an automated re-ordering system, which linked all computers between P&G factory through a satellite communication system. P&G then delivered the item either to Wal-Mart distribution center or directly to the concerned stores. (Blogger, 2013 ) Furthermore, Wal- Mart’s supply chain management strategy has provided the company with several sustainable competitive advantages, including lower product costs, reduced inventory carrying costs, improved in-store variety and selection, and highly competitive pricing for the consumer. (Blogger, 2013 ) This strategy has helped Wal-Mart become a dominant force in a competitive global market. As technology evolves, Wal-Mart continues to focus on innovative processes and systems to improve its supply chain and achieve greater efficiency. (Blogger, 2013 ) By utilizing RFID tags and readers, Wal- Mart’s products can be counted in seconds. This is due to the fact that RFID tags can be automatically scanned without being in the line-of-   4 sight of an RFID scanner and multiple tags can be scanned simultaneously. (Blogger, 2013 ) For manufacturers this translates directly into cost reductions as labor intensive tasks can be carried out faster and more accurately. (Blogger, 2013 ) In addition to faster authentication of produced goods, manufacturers can also benefit from increased information gathered with the help of RFID technology. RFID tags can store far more information than conventional barcode labels. (Blogger, 2013 ) This information can be used to optimize production processes. Accurate knowledge of the real-time movements of raw materials and the time needed for specific production steps can be integrated into efficient production planning. (Blogger, 2013 ) With the help of RFID, manufacturers can also benefit from increased information in regards to repair and maintenance of their machines and equipment. (Blogger, 2013 ) This allows manufacturers to have visibility into valuable data such as: which machine has been repaired or undergone maintenance and when has this been done? This information helps to plan maintenance schedules. Hence, maintenance can become part of production planning and help to prevent costly production breaks. RFID in manufacturing processes means less manual work, less costs, improved visibility, improved planning. (Blogger, 2013 ) Implementation of RFID technology can also add advantages to distribution processes. Usage of RFID will greatly accelerate the speed of delivery management, improve efficiency, and increase accuracy in selection and distribution processes. It will also reduce distribution costs. (Blogger, 2013 ) When products embedded with RFID tags enter a distribution center, the RFID read-write equipment at the entry gate can register the RFID tags, and send the information to the distribution centers' backend system. This information can be used to put the cartons in proper places, sort them quickly and efficiently, and dispatch the cartons to the retailing centers in less time with improved accuracy. Usage of RFID also ensures accurate inventory control. (Blogger, 2013 )
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