Walmart – Digital Transformation of the retail giant

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Gigantic & Agile. Walmart, which serves 270 million customers each week online and are located within 10 miles of 90% of the U.S. population, is transforming itself from a traditional retail company to a technology and an innovation company, a title that CEO Doug McMillan used to describe Walmart.

And yes indeed. Walmart is both a technology company and an innovative company.  During 2018 fiscal year, Walmart has spent a total of 11.7 billion in technology investment, making it the third largest IT spender in the entire world behind Amazon and Alphabet.  They have successfully deployed transformation strategies across all aspects in their business processes such as shelf inventory, supply chain management, delivery, online space and have optimized overall customer experience.

Walmart is going through a digital transformation and has shifted its focus from re-platforming its e-commerce business to re-platforming across the board. This can be done through business partner and rapid iterations in supply chains, store operation, in-store merchandise and customer experience.​​

Walmart

Apparently, this is just the tip of their transformation journey.  With 1,700 technology employees being hired in 2018, they are looking to hire 2,000 more by the end of 2019.

We estimated that Walmart started taking digital transformation seriously in 2015 when they bought out Yihaodian in 2015 – a B2C e-commerce company in China and following.  Right after that another 3 billion dollar acquisition of jet.com and other acquisitions are coming in at an incredible pace including shoes.com, Moosejaw, Bonobos, Eloquii, Bare Necessities(Fashion), Parcel(Delivery), Cornerstone(Deliver) and Flipkart.

Even though most of these investments at that time didn’t bring in immediate profit, Walmart is betting on the longer game.  That is the integration of these technologies, different demographics, different data & patterns, different talents, and most importantly how it all combines with the infrastructure of Walmart itself. 

“Management believes that executing well (on the fundamental) will help WMT become a world class omni-channel retailer and will turn physical stores in to a fulfillment centers.” –  Chen wrote.

So, what exactly did Walmart do to transform those aspects in the business process? ​​

To answer this.  We can take a deeper dive into what business functions they have invested in.  And to our surprise it is almost a full-scale transformation in all aspects of the product cycle and throughout the organization.  From what kinds of products to sale to where and how it is sourced, picked, and delivered, Walmart has designed a digital-factory like system to try and test new technologies and scale it if the method reaches their KPI.  We now dig deeper into how they are testing new technologies in those fields.

Shelf Inventory

Bossa Nova Robotic System

The robotic startup which were famously mentioned in an announcement from Walmart stating that they would be rolling out Bossa Nova’s shelf-scanning robots in 50 of its stores back in 2017 and recently Walmart expands use of the nova’s robot to 350 stores.

They automate the inventory scanning process on the shelf space so that when customers come in to the store they will always get what they were looking for –  see Walmart Blog    

And they don’t stop there,  They also identify which stock keeping unit is in a slot and the price associated with that slot.

The complication of this task is mesmerizing and one of the most important in the retail business.  In the US, the accuracy of shelf inventory is 88% which means there are 12% either coming to the counter with a wrongly labled price or even worse, the retailer thoughts the stock is on the shelf when it’s hidden in the dark corner of the warehouse.   The poor inventory performance not only leads to lost sales, it also decreases the accuracy rate of demand forecast. 

Electronic Shelf Labels ​​​

Walmart is also testing Electric Shelf Labels in two stores in U.S. to make price adjustment automatically as dictated by store management.  At OOSGA, we even had a long discussion over this topic on the possibility of real-time adjusting pricing strategy where the electronic shelf labels not only communicate with other technology in the store & warehouse, but even integrate it with 3rd party data. 

Future of Retail​​​

Future of retail is not just shiny object with apple style design, Walmart define the future of retail with their Walmart Neighborhood Market in Levittown, New York,  it’s Walmart’s new intelligent Retail Lab – or “IRL”.

IRL is setup to gather information about what’s happening inside the store through an impressive array of sensors, cameras  and processors. 

The first aspect they are focusing on is the product inventory and availability.  That is they use all form of detectors to get real-time information and inform associates to know more precisely when to restock products and more.

“Customers can be confident about products being there, about the freshness of produce and meat. Those are the types of things that AI can really help with,” Hanrahan said.

Supply Chain Management​​​

Supply chain management is moving the right items to the right customer at the right time by the most efficient means. No one does that better than Walmart.​​

Army Col. Vernon L. Beatty​​

Vernon made it sound simple, but reality?  The mulitnational retail giant operates almost 12,000 stores with 2.3 million employees in 28 countries while managing inventory that is worth approximately 32 billion dollars.  That means even if they just tweek the efficiency of their supply chain by as little as 5% that is billions of dollar in revenue.  

Even though Walmart had been internationally recognized as the most successful example in the supply chain management, the retail giant was experiencing an inventory growth rate exceeding its sales growth.  That was a strong indication of needing to fundamentally upgrade their supply chain management system which apparently is already top of the world.  The management recognized that challenge back in 16 and has since initiated multiple strategy to digital transform their complex supply chain and one of them is the data science research in Walmart Labs.

Data Scientist at Walmart Labs are  focused on building algorithms that power the efficiency and effectiveness of complex supply chain management processes. We are successfully solving both classic and new problems. 

So in what aspects in the supply chain management can be optimized with data science?

Solving problems in sourcing

Delivery Promising

Delivery promising is the real-time estimated delivery date shown on the item at Walmart.com when customers purchase the item at a given date.  Algorithm estimate the delivery date with factors such as 

  • The distance between the customers and fulfillment centers(FC)
  • Inventory Level of the Item
  • Available shipping method and capacity 

Order Sourcing

Whenever the order is placed the algorithm has to determine the following to better optimize the effectiveness & efficiency of supply chain

  •  Which fulfillment center is the optimum to fulfill the order or a portion of the order
  •  Which carrier is the optimum to fulfill the order at the the lowest cost yet in a timely manner

Order / Shipment Preperation​​

There are two aspects in this stage that if done well, it would hugely optimize the overall efficiency of supply chain management

Picking Optimization

When an order is to be fulfilled by a designated Fulfillment Center, the item in the order will need to be picked from the shelf in a timely manner and the algorithm to optimzie this process has to determine the following

  •  Which picker the item should be assigned to
  •  For each individual picker the optimal route and series of items to be picked
 This should look familiar to data scientist as it is one of the most difficult answered/unanswered NP-Hard Problems in the field which commonly known as the Vehicle Routing Problem with Time Window. 

Transportation​​

Walmart has successfully implemented data science methodology in the transportation process  to optimize overall Supply Chain Management.  In that, the most prominent feild is the lane planning.

After the Sourcing & Order Preperation, now the shipment is being picked, packed and ready to go.  At this stage, a shipping label will be generated for Walmart associate to sort the package and determine which dock door they should put the package at.

Then, the specific route (Lane) will be defined by the algorithm with various factors such as Source Facility, delivery date, method and destimation facility.   The most cost effective & on-time lane will be generated by the algorithm. 

With a partnership with Gurobi Optimization, Walmart is abel to solve this problem successfully.

With the combined might of people and world-class logistic technology, this facility will be the most efficient consolidation centre in Walmart’s supply chain.​​

Walmart​

A 340,000-square-foot consolidation centre was having the spotlight in January 2019 when Walmart first announced it.  This initiative will optimize the company supply chain operation by utilizing automation technology to handle increased order volume and faster delivery time. 

Investment on blockchain in the food supply chain space​

Walmart has also been exploring the space in blockchain by partnering with IBM Food Trust on a food safety blockchain solution and is now actively urging their supplier to track their produce using blockchain technology as well. – See this Article 

The IBM Food Trust will work to manage traceability in the food supply chain in two phases, allowing Walmart to track food efficiently in a large system.