Wal-Mart and Inventory

After I finished reading all the modules and my peers comments I realized why many of us argue that holding inventory is not a good idea based on financial implications; due it represent investment by the organization (an asset on the balance sheet) that they wish to keep as low as possible. We learnt already that inventory also causes expenses on the firm's income statement.

Generally accepted there are four types of inventory: raw materials, work-in-process, finished goods and maintenance repair and operating supplies (MRO). Some of this inventory may be in transit or as a buffer inventory in a warehouse.

As we know Walmart has been an example of effectiveness in a synchronized supply chain, among many other good characteristics they keep lower inventory and some amount of buffer inventory also called "safety stock" in order to fulfill uncertainty/variability in supply and demand. To achieve this process they handled concept like fill rate, inventory turnover, just in time, lead time and reduced out of stock products.

However this great company gave one step ahead implementing more technology in order to track finished good materials sell by the store and also reduced the buffer/safety inventory. This fascinating technology is called RFID Radio Frequency Identification tags, but is far to be new, have been in the market for year and have had cause some serious disruptions and legal question to the big retailer.

They first used the RFID in 2003 over scans in order to monitored and track pallets, reduced labor scanning codes and improve visibility to know what produces are in their own distribution centers or suppliers, the plan was well developed and Walmart insisted that all his suppliers must have the RFID technology in the pallets. Therefore many suppliers like HP, Procter and Gamble P&G started pilot program, that were successful and other just did some part of the investment necessary to comply with the new rules set by Walmart.

However according to Supply Chain Digest digital "Many years later, it is inconceivable Wal-Mart could have achieved any return from its investment in time and equipment for RFID to this point" article published in 2009, to my understanding Supplier like HP and P &G abandoned the program because they feel like Walmart never used the data to close the inventory gap. After all supplier and partners also wants to increase sales and save money in their own supply chain and any efforts must be in conjunction.

Now Walmart wants to use the same technology RFID, in the clothes wear by their employees to track them and on individual clothing sell by the store. As the tag can be read from some distance in a single wave by a wand-like device, they expect to reduce some theft problems in some store, improve track sale and determine exactly the amount of product on shelves reducing buffer inventory.

The problem is that many already raise the question that if the clothes can be trac-kable out of the store for period of time, what happens if the readable devices goes to the wrong hand or if Walmart start tracking what customer wear, when and where. What about our private rights? The question is more for lawyers but I would answer that if we don't like it we can always go to Target.