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Lesson #4: Get Hooked Up

Article Overview: “I have always been driven to buck the system, to innovate, to take things beyond where they've been,” he said.

Lesson #4: Get Hooked Up

“I have always been driven to buck the system, to innovate, to take things beyond where they've been,” he said.

Before the age of the Internet and instant e-commerce, stores across America were relatively low-tech. It wasn’t until a select few entrepreneurs, including Sam Walton, decided to push the boundaries of the retail industry that new technologies began to be embraced.

When the Wal-Mart chain started to gain momentum, Walton realized that in order to continue growing at the pace that it was, he would have to computerize and standardize his operations. In 1966, with 20 stores to his name, Walton went to an IBM school in upstate New York to find the best student in the class. He wanted to hire someone who would be able to take his company technologically to the forefront. Ahead of his time, Walton was attempting to ensure that Wal-Mart could remain on top of its competition for years to come.

In embracing new technology, Wal-Mart became one of the very first companies to establish the universal bar code, which allowed Walton to generate the kind of information he needed to help him succeed. Walton also introduced the first electronic scanners at cash registers, which were linked to a central inventory-control computer system and informed him of when items had to be re-ordered. These tools enabled Wal-Mart to be one of the first companies to master just-in-time inventory control with its superior logistics, thereby removing much of the waste in its supply chain.

This strategy was a key ingredient to Walton’s success, for it allowed him to keep costs down and profits up. By ordering the exact number of products he needed at the exact time he needed them, Walton was able to remove the unnecessary expense of being overstocked while also removing the risk of losing sales from un-stocked shelves.

More recently, Wal-Mart became the first major retailer to begin demanding that manufacturers use radio frequency identification technology (RFID). Here, radio frequencies are used to transmit data that is stored on small tags attached to the products. Similar to the bar code that Walton first implemented, RFID tags are able to hold significantly more information than their predecessors. Though introduced after the death of Walton, it was his personal philosophy of looking for new and innovative ways to do business that led to the adoption of RFID. And, the results were a success; within the first eight months it was introduced, Wal-Mart experienced a 16% drop in out-of-stock merchandise.

“Capital isn't scarce,” Walton once said. “Vision is.” Walton knew he had to think above and beyond what his competitors were doing if he was going to succeed. He was not only fearless in embracing the unknown, but he actively sought it out. He wanted to be different and he knew technology could give him that edge. Even today, Wal-Mart continues to stay ahead of the pack by innovating and looking into new technologies. The company’s computer database remains second in capacity only to the U.S. Department of Defense.

Despite the fact that Wal-Mart is known for its advanced technological capacities, Walton believed that a computer would still never be able to substitute for getting out in his stores and learning what was going on. After all, he said, “a computer can tell you down the dime what you’ve sold. But it can never tell you how much you could have sold.”

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Article Tags: cash registers, commerce stores, computer system, control computer, electronic scanners, exact number, exact time, forefront, inventory control, new technology, overstocked, radio frequency identification, radio frequency identification technology, retail industry, sam walton, time inventory, unnecessary expense, upi, upstate new york, wal mart



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