Wal-Mart works to use big data to improve checkout process, manage supply chain

Retail giant Wal-Mart Stores is a huge collector of big data from around the world and in its big data hub known as the Data Cafe where more than 2.5 petabytes of data are analyzed each hour from dozens of social media websites, weather and transaction information totaling more than 200 data streams.

For reference, 1 petabyte is the equivalent of the information that could be stored on 1.5 million CD-ROM discs. Also, 1 petabyte is equal to 1,024 terabytes, and one terabyte contains a little more than 1 trillion bytes.

This high tech center located in the retailer’s Information Systems Division in Bentonville has reduced the time it takes to analyze data from 2.5 weeks to about 30 minutes. The retailer said the time savings is beneficial to stemming lost sales.

The Data “Cafe” stands for Collaborative Analytics Facilities for Enterprise and represents one of the largest data centers in the world as the retailer tries to anticipate shoppers needs. In a recent blog post, Wal-Mart said it is using big data to get a real time view of workflow in the pharmacy, distribution centers and through its network of stores and e-commerce businesses. Following are the five areas in which Wal-Mart said it is using big data to improve operations.

PHARMACY APPLICATION
Walmart U.S. operates more than 4,000 pharmacies in its stores as well as one at the home office in Bentonville. This makes Wal-Mart the fourth largest pharmacy operator in the U.S. with estimated sales of roughly $21 billion last year. Big data is being used to gain efficiencies in the pharmacy division, according to the retailer’s blog.

The retailer uses simulations at the pharmacy to find out how many prescriptions are filled in a day so Wal-Mart can determine the busiest times of the day and month and then staff that department accordingly. Wal-Mart said better scheduling saves money and reduces the time for prescriptions to be filled.

Earlier this year, Wal-Mart tweaked its Walmart Pay service to allow customers to reorder the scripts through the app and then skip to the front of the line when coming into the store to pick them up. This function was designed to make the pickup experience more convenient and drive customer loyalty in the process.

IMPROVED CHECKOUT
A focus by Wal-Mart in the past 2.5 years has been to improve the checkout process for 140 million customers each week. The Walmart Pay app rolled out nationwide last year allowed the consumer to scan their phone at checkout instead of having to pull out cash or credit cards. Scan and Go allows consumers to skip the checkout lane and is being tested in Wal-Mart’s U.S. stores, and is completely rolled out at Sam’s Club.

“By using predictive analytics, stores can anticipate demand at certain hours and determine how many associates are needed at the counters. By analyzing the data, Walmart can determine the best forms of checkout for each store: self-checkout and facilitated checkout,” Wal-Mart noted in the post.

In Northwest Arkansas, some stores such as the Neighborhood Market on Don Tyson Parkway in Springdale recently had its front configured to include a large self-checkout corral like the ones found in most supercenters. This store is also testing Scan & Go. Talk Business & Politics was in the store Wednesday, (Aug. 9) at 5:30 p.m. and virtually all of the five remaining checkouts were self-service with the exception of one manned checkout lane open.

Talk Business & Politics recently asked Walmart U.S. CEO Greg Foran about the use of more self-checkouts. He said the retailer was using more technology at the front-end and tweaking labor counts in stores. He said in most cases employee store counts remain steady, with the only difference being they are out in the store as opposed to being in the backroom or standing behind a register.

PERSONALIZE SHOPPING EXPERIENCE
The retailer said it’s also using big data to identify shopper preferences, which it intends to use as it engages with customers through more personalized marketing.

“If a user is shopping for baby products, Walmart can use data analysis to personalize mobile rollback deals for parents and help them live better by anticipating their needs.” Wal-Mart noted in the blog.

This use of big data is the most controversial of the three customer-oriented applications. There are some consumers who appreciate retailers sending them special deals based on previous shopping habits or perhaps online searches. But there are other consumers who find this type of marketing intrusive. Wal-Mart appears to be taking a conservative approach with use of big data, but as more consumers become comfortable with marketing based on their past habits, the retailer will be ready, according to Jarrod Ramsey, president of the Northwest Arkansas Tech Council.

He said iBeacon technology has been around for several years and allows retailers to track shopper behavior while they are in the stores and push out personalized marketing offers according to their store location. He said Macy’s has tested personalized marketing, but most U.S. consumers are not yet comfortable with being followed by the retailer. Conversely, he said consumers in Europe and Asia have come to expect it.

MANAGE SUPPLY CHAIN
Wal-Mart is also using big data to help it better manage the supply chain. The retailer said it is using simulations to track the number of steps from the dock to the store. This allows Wal-Mart to optimize routes to the shipping dock and track the number of times a product gets touched along the way to the end customer. The fewer steps the better.

Every time a product is touched, there is a higher risk of damage. Wal-Mart workflow calls for employees to touch freight only one time once it gets to the store and that is moving it from the truck to the shelf display. But freight coming through a consolidation center and handled by less-than-truckload (LTL) carriers will often make several stops and be handled more often from the dock to store, according to Colby Beland, vice president of marketing at CaseStack.

Wal-Mart said it also uses big data to analyze transportation lane and routes for its fleet of trucks. This data crunching helps the retailer reduce transportation costs and improve driver schedules.

OPTIMIZE ASSORTMENT
Another back-office application of big data analysis is occurring in the retailer’s merchandising teams. Through the analysis of customer preference and shopping patterns Wal-Mart said it can accelerate decision-making on how to stock store shelves and display merchandise. A prime example is seeing umbrellas out front in a makeshift display on a rainy day, or making sure an item that has gone viral on social media is prominently displayed in stores such as the green light bulbs used in porch lights to welcome home U.S. veterans last fall.

Wal-Mart also said big data is providing insights on new items, discontinued products and which private brands to carry. These insights are reviewed by the buying teams and play a role in which products are renewed each year.

Wal-Mart has said it uses big data to help problem solve in various areas of its business. One example shared was a grocery team trying to understand sales declines in a certain product category. After drilling into the data provided by Wal-Mart’s Data Cafe, the team was able to see pricing miscalculations which led to products being priced too high in some regions. The error could then be corrected to fend off more lost sales.