A New Supply Chain Forged

Computerworld - Being a supplier to Wal-Mart is a two-edged sword," says Joseph R. Eckroth Jr., CIO at Mattel Inc. "They're a phenomenal channel but a tough customer. They demand excellence." It's a lesson that the El Segundo, Calif.-based toy manufacturer and thousands of other suppliers learned as the world's largest retailer, Wal-Mart Stores Inc., built an inventory and supply chain management system that changed the face of business. By investing early and heavily in cutting-edge technology to identify and track sales on the individual item level, the Bentonville, Ark.-based retail giant made its IT infrastructure a key competitive advantage that has been studied and copied by companies around the world.
"We view Wal-Mart as the best supply chain operator of all time," says Pete Abell, retail research director at high-tech consultancy AMR Research Inc. in Boston.
Abell says he expects the company to remain in the vanguard. "Wal-Mart is evolving; they're not standing still," he says. The company is still pushing the limits of supply chain management, he says, searching for and supporting better technology that promises to make its IT infrastructure more efficient. Radio frequency identification (RFID) microchips, for example, may replace bar codes and security tags with a combination technology that costs less money.
Sam's Vision
Wal-Mart founder Sam Walton first explored the idea of using computers to handle inventory in each store in the mid-1960s. But databases made only the analysis part easier; counting stock, a manual chore, was still a headache.
That headache didn't ease until the early 1980s, when retailers put into general use a way to electronically identify items. That was the genesis of the stock keeping unit, or SKU, and the standardized bar code.
The original idea for a machine-readable encoded identification symbol appeared in 1949, in a patent application submitted by Bernard Silver and Norman Woodland. In 1967, a rough system went into use at a supermarket in Cincinnati, using a circular symbol. In 1974, the first modern scanning system appeared - again, at a grocery store - reading the standardized, rectangular universal product code that's ubiquitous today.
It took a while for the majority of packaged goods to be labeled with bar codes. At that point, in 1983, Wal-Mart invested in point-of-sale terminals, which simultaneously rang up sales and tracked inventory deductions. Four years later, a massive satellite system linked all of the stores to company headquarters, giving Wal-Mart's centralized IT department real-time inventory data.
Early on, Wal-Mart saw the value of sharing that data with suppliers, and it eventually moved that information