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The Effectiveness of ERP Systems in Supply Chain Management of Walmart Inc: A Systematic Literature Review

Aashna Arya (2023589) Bironika Singh Kanwal (2022957) Emily Maceda (2022140) Mark Alexis Joco (2021197) Vilma Villacampa (2025084) University Canada West OPMT 620 Operations Management Professor Ajay Garg July 24, 2021

Table of Content Introduction......................................................................................................................................... 2 Literature Review................................................................................................................................ 3 Research Gap................................................................................................................................... 5 Conceptual Framework...................................................................................................................6 2.1 Objective.....................................................................................................................................7 2.2 Hypothesis..................................................................................................................................7 2.3 Research Methodology..............................................................................................................9 2.3.1 Data Collection, Presentation & Analysis.........................................................................9 Results & Discussion.........................................................................................................................10 Recommendations..............................................................................................................................13 Conclusion and Future Perspective..................................................................................................14 Implications of the Study on Walmart & the Industry...................................................................14 References..........................................................................................................................................15

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Introduction Enterprise Resource Planning (ERP) solutions and their development in crossorganizational enterprises are becoming a critical success factor for building operational efficiency in building business strategies for networked companies (Elder, 2019). This research aims to understand the ERP system used by Walmart Inc. it looks at how the system provides operational efficiency and cost optimization in building its successful supply chain. According to recent study by Elder in 2019, Walmart has a competitive global presence in more than 11,700 stores in 28 countries worldwide. Walmart manages on an average CAD 32 billion in inventory. It is imperative for Walmart to have an adequate supply chain strategy with these massive numbers (Muñoz et al., 2018). Walmart's Everyday Low Prices (EDLP) pricing strategy requires a cost-effective ERP system for generating revenue. Walmart's manufacturers are responsible for managing their products in its warehouses – as under its supply chain initiative called Vendor Managed Inventory (VMI) (Michelson et al., 2018). Historically, Walmart has been superior to its competitors in managing distribution costs, and in 1989 was named Retailer of the Decade. Walmart's distribution costs were estimated at 1.7 percent of its total cost of sales; where its competitors like Kmart and Sears have estimated distribution cost of 3.5 percent and 5 percent respectively (Pandey et al., 2021). This research is a systematic review on the study of ERP effectiveness in Walmart Inc – studying and analyze the outcomes of the coordination theory perspective on the ERP misalignment problem. The researchers attempt to present a conceptual framework (Figure 3) for analyzing Walmart's dependencies on its ERP implementations. This study attempts to

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show the effect of coordination mechanisms in the ERP system and its role in balancing flexibility required by the ERP system against the rigidity imposed by Walmart. Literature Review A retail business requires a consistent flow of information, flexible operations flow, process efficiency, and responsiveness; Walmart, a significant retail company, uses Enterprise Resource Planning (ERP) system to manage and maintain its supply chain management (Lacity & Van Hoek, 2021). ERP packages are built to handle the elimination of Information Technology (IT) complications while considering the execution difficulties to the line of IT management staff and the overall business (Lacity & Van Hoek, 2021). Teradata is Walmart's most prominent technology vendor. Walmart is also a customer of SAP ERP, Business Intelligence, MCCM, Oracle Financials, and Aprimo Marketing MRM. With the effective implementation of the ERP package, Walmart uses a single stage to plan and manage resources across its departments (Lacity & Van Hoek, 2021). With everything being centralized and no error of data duplication: sales forecasting, order tracking, and inventory processes are made simple by the ERP system. This research builds on three types of sources for its systematic literature review:  Historical study on ERP systems  Frameworks established by previous research in analyzing the costeffectiveness of adopting an ERP system  The existing knowledge available on Walmart Inc supply chain management and planning practices Daneva and Wieringa, in their 2006 research on ERP system implementation, identified the importance of cross-organizational resource planning that requires the analysis of desired coordination mechanisms in implanting the ERP package, as shown in Figure 1.

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The coordination mechanisms preferences set by an organization are implicitly linked with the ERP packages and thus can lead to the undesirable outcome if not made explicit.

Figure 1: Business Process Alignment Business

Utility

Process/Operations Semantics

Channels/ Communicatio n

ERP Systems, data warehousing, CPFR) Software Infrastructure (Operating systems, etc.)

This research focuses on the top two layers of the framework (Figure 1), as in networked organizations like Walmart, the system and process alignment occur. Reviewing previous research on ERP implementation and Walmart's supply chain management, the researchers found that there is a small number of coordination technologies that Walmart uses as part of its enterprise systems layer (Ireland & Bruce, 2000): 

ERP functional modules

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Workflow process management

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Data Warehousing System

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Collaborative Database

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Electronic marketplace, and

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Knowledge Management Software

Figure 2: Interconnection Transaction Foundation

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Source: Adopted from Harsono, Alexander. "How walmart enhances supply chain management with CPFR initiatives." (2013).

In 2000, Walmart adopted the Collaborative, Planning, Forecasting, and Replenishment (CPFR) approach; the aim of CPFR is value chain collaboration among the trading partners who affect the product's value to the end-consumer (Ireland & Bruce, 2000). As Walmart migrates towards creating a dynamic and collaborative vendor relationship, the value creation also increases (Figure 2). At every step of the path – integration, collaboration, optimization, and exchange – is imperative for the next step in maximizing the value chain effectiveness.

Research Gap The ERP and supply chain management literature between 2015 - 2020 considered the appropriate time for related study review (Vartanian, 2010); various pilot implementation of CPFR is available. The researchers found that there is limited information on the following information: 

Implementation of ERP system as a measure of identifying key inhibitors

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A practical guide for implementing CPFR as an ERP system

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What monetary value does the ERP system create for networked organizations like Walmart Inc?

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Discussions on the need for the ERP systems in identifying the costeffectiveness of supply chain system

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Conceptual Framework

Figure 3: Conceptual Framework - Showing the dependencies in Implementation of ERP System

The conceptual framework shown in Figure 3 exhibits the link in coordination and cooperation in bringing out the dependencies in ERP implementation. The framework indicates that as more organizational processes get integrated through the data environment and shared process, the more they adjust to the ERP structure; thus, more change is required, resulting in greater resistance. The figure maps the basic coordination problem theory of rigidity versus flexibility in implementing an ERP system. Thus, the ERP system impacts the costs and benefits related to Walmart's supply chain management.



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2.1 Objective

The research aims to study the effectiveness of ERP systems in streamlining the three critical flows: material flows, information flows, and financial flows, and factors affecting them. Identifying the gaps in the literature, the researchers seek to answer the following research questions: 1. What are the issues related to the ERP systems that have a significant impact on Walmart's operations? 2. What is the relationship between ERP solutions and Supply Chain Management? 3. What are the critical success factors in implementing cross-organizational resource planning (ERP) solutions in the supply chain for inventory management?

2.2 Hypothesis For the systematic literature review, the researchers identified the independent and dependent variables followed by the research hypothesis: 

Independent variables – Supply chain management (SCM)

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Dependent variables – IT systems, ERP systems, human interfaces, costs

Based on the variables, the research will test the following hypotheses: H1 There is a significant relationship between SCM and the effectiveness of ERP systems Due to the complexity of today's supply chain, manufacturers and distributors must seek out innovative ways to cut costs, enhance efficiency, rethink channel models, collaborative design partnerships, and cross-functional, cultural, and personal boundaries. As

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insurance against supply chain risks, the most frequent approach is to create safety stocks. High volumes of safety stock raise the cost of inventory holding. The bullwhip effect can occur when there are high inventories at many locations throughout the supply chain. When demand is strong, or delivery is sluggish, low stock levels raise the danger of stockouts or insufficient supply, as well as lost profits. In any case, the overall cost—including maintaining inventory, the cost of lost future sales, and the cost of a bad reputation—can be too expensive. While ERP solutions and supply chain management (SCM) software optimize the supply chain, CPFR aims to be a significant enabler for implementing synchronized supply chain forecasting and restocking. H2 ERP systems significantly influence Walmart's cost optimization Activity-Based Costing is the most effective accounting technique offered to incorporate software solutions (ABC). The ABC method has been used to evaluate inventory holding costs, ordering costs, and setup costs. The primary approach is to identify the cost drivers, resources, and activities and then allocate the right cost to goods and materials. According to the report, an ERP may cut total operating expenses by 23 percent and administrative expenses by 22 percent, a big-time reduction. Although operating savings may motivate adopting ERP, effective ERP software may do more than reduce cost. Approximately 95% of firms report significant operational benefits after using an ERP; lower production times, more cooperation, and data centralization are enhancements.

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2.3 Research Methodology Based on the nature of the research problem, the study is Descriptive using Qualitative analysis – Secondary Data Analysis (Lambert et al., 1998). The researchers extensively analyzed previous research findings on ERP systems and Walmart supply chain management through Walmart's website, journal articles, case studies, narratives, and grounded theory for conducting a descriptive study. 2.3.1 Data Collection, Presentation & Analysis Descriptive research was conducted to explore the ERP systems, supply chain, and CPFR technology through case studies, textbooks, and literature related to Vendor Managed Inventory (VMI), supply chain management, CPFR, and Electronic Data Interchange (EDI). The books and literature extracted for this study are based on a wide range of credited online courses, including Walmart's official websites, press releases, and whitepapers. Hardcopy documentation included research journals, academic papers, and scholarly articles. The relevant material and information were gathered and categorized into themes for analyzing how ERP systems and related technology enhance Walmart's supply chain management effectiveness. Descriptive research was conducted to describe the characteristics of ERP systems and CPFR technology implemented in Walmart's supply chain management.

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Results & Discussion According to the research conducted by Harsono in 2013 in the paper - How Walmart Enhances SCM - surveyed 4500 respondents who are employees of Walmart at a different location – USA, Canada, Mexico, and China – showed that 63 percent of the respondents believed that there are potential advantages of ERP systems in supply chains; reduced costs and productivity improvements, explicitly related to inventory inconsistency and the bullwhip effect. In another study by Barney in 2012 on Walmart's supply chain management showed that more than 70 percent of respondents (600 employees working in warehouses) believed that CPFR technologies can provide numerous advantages in inventory control through improved record keeping and enhanced clarity of production forecasts. Some of the benefits discussed in the research involve: 

higher operational speed and performance,

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better information accuracy, and

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decreased inventory losses.

Trailblazing firms such as Walmart and Procter and Gamble (P&G) have undertaken significant developments. However, actual uses of ERP technology remain limited because ERP prices are often higher than the costs of traditional identifying methods.

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Using CPFR, Walmart logistics management could quickly check detailed order patterns for each of their best-selling items, "pampers diapers," at any point on Walmart shelves, enabling real-time inventory monitoring (Elder, 2019). Pampers sales fluctuated in retail outlets, although the variation was not severe. However, when the executives analyzed distributor orders, they were amazed by the increased degree of unpredictability (Elder, 2019). When researchers examined P&G's material orders—the production level—to its suppliers. Researchers have observed that the fluctuation in order size was much more significant. Primary contributors to it as a bullwhip since even slight increases in demand may result in substantial increases in the market for parts and materials lower down the supply chain. The bullwhip has far-reaching ramifications as businesses scramble to satisfy orders while also replenishing warehouse stocks. CPFR has changed the way Walmart operates its retail stores (Ireland & Bruce, 2000). Walmart has effectively used CPFR, which is a demand management strategy. The following are examples of how Walmart has reaped the benefits of CPFR: 1. Strengthens partner connections with P&G providers, where a shared estimate of customer demands directs both partners' actions. 2. Coordination of collaboration is provided, from developing a shared prediction to sharing similar solutions to operational difficulties and analysis of sales and order projections (Ireland & Bruce, 2000). 3. Improves forecast accuracy by utilizing point-of-sale data 4. Manages the demand chain, removes issues before they occur, and allows cooperation on future needs and plans (Elder, 2019).

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5 Integrates management, predicting, and logistics operations so that P&G receives assured orders from retailers. 6. Enables efficient SCM practices and a better knowledge of consumer purchase trends. 7. Analyzes critical performance parameters (for example, forecast reliability, forecast deviations, product lead durations, stock turnover, and proportion out-of-stocks) to decrease supply chain bottlenecks, enhance customer service, and boost revenues and profitability (Elder, 2019).

Walmart has risen to become the world's largest retailer by pursuing every opportunity to simplify its supply chain and decrease costs to deliver on its guarantee of "everyday low pricing." Walmart is indeed a pioneer in developing technology to create operational efficiency, which results in savings for its consumers (Ireland & Bruce, 2000).

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Recommendations

This research focuses on secondary data analysis due to its qualitative nature and time constraint involving a gatekeeper. The study collected information based on previous research findings. A longitudinal approach to the study is recommended for Walmart to analyze the effectiveness of CPFR and ERP solutions in its supply chain management and bring out the key performance indicators in managing costs. Walmart can provide everyday low prices (EDLP) to customers year-round due to its ability to control expenses. The ERP packages that Walmart uses help the company manage its operations. However, the cost of its products is determined not just by its efficiency or lack thereof but also by the effectiveness or inefficiency of its suppliers (Elder, 2019). Due to Walmart's number of items sold, it wields significant influence on its suppliers and frequently influences them to find methods to reduce prices. Therefore, further research is required to study the effectiveness of Walmart's supply chain management as other parties involved in the supply chain process can significantly influence the cost-effectiveness of its operation.

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Conclusion and Future Perspective

Since the introduction of the ERP system, Walmart has used ERP solutions to leverage existing technology investments to deploy CPFR projects swiftly. The main barrier to the widespread adoption of ERP is that it necessitates a paradigm change in how customers interact. Companies need to ensure that their information systems, coordination mechanisms, business operations, and internal information are suitable for ERP implementation.

Implications of the Study on Walmart & the Industry Supply chain innovations like ERP systems and CPFR can improve performance by raising service levels and decreasing costs. The quality of service increases inventory levels and provides value to its customers. As a result, quality of service and effectiveness directly impact the Its value proposition and value acquisition. Vendors in a company's network can be identified through logistics services and supply chain technologies that can directly influence the company's performance.

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References

Elder, S. D. (2019). The impact of supermarket supply chain governance on smallholder farmer cooperatives: the case of Walmart in Nicaragua. Agriculture and human values, 36(2), 213-224. Harsono, Alexander. "How walmart enhances supply chain management with CPFR initiatives." (2013). Ireland, R., & Bruce, R. (2000). Cpfr. Supply chain management review, 1, 80-88. Lacity, M., & Van Hoek, R. (2021). Requiem for reconciliations: DL Freight, a blockchainenabled solution by Walmart ...