Walmart’s Use of Databases

Introduction

Walmart takes their data collection very seriously. They realize how useful data can be to them in a number of fashions. But what kind of data does Walmart collect, and how do they use this data? Does Walmart’s data collection expose their paying customers to risks? Walmart uses statistics of flow of customers, purchase records, personal contact information, and internal and external market research (among others) to comprise their data to help them make better business decisions. Walmart uses data in a five-pronged plan to help increase their productivity, efficiency, and predictability.

Walmart has a massive data collection and processing center that helps them build internal models their management uses as a guide to run their stores. In this paper I will highlight their collection process plus their interpretation of data, and Walmart’s five ways to utilize the data to make their business better.

What Comprises a Database

To start, in order to discuss how Walmart uses data, I must explain what a database is and the elements that comprise them. A database is defined as “a usually large collection of data organized especially for rapid search and retrieval (as by a computer) (Merriam-Webster). Using detailed plans called schema, databases are structured before being physically designed and programed (Stephens & Plew). Continuing, databases contain indexes, tables, fields and columns, records and rows, primary keys, relationships, and different data types. Some types of data stored in a database could be credit card information, images, street address, phone numbers, purchase records, numbers, and many others. The goal of a data base is to secure the electronic storage of large amounts of data that maintains the ability to be manipulated and sectioned off at will (Stephens & Plew). For example, in class we learned about Microsoft Access. Access has a cell-like section that contains all the raw data in the database. We learned that you can create queries, forms, and reports from the raw data in the spreadsheet. What sets Access apart is its ability to create relationships between data to section it off in a way that does not crash a network and is easy for any user to utilize. Databases can be stored on site or by using a cloud storage system. Without backups of these records, an operator may be at risk of losing this precious information. Because of this, many security measures are taken. Large amounts of investment are required to maintain databases when they become comprehensive (Stephens & Plew). Throughout the rest of the paper I will discuss Walmart’s use of databases and their plans to benefit from them.

The Data Collected by Walmart & its Application

The focus and investments Walmart have made into interpreting and using data includes their construction of a data hub. Their hub is cutting edge for data collection, and is located in Bentonville, Arkansas (Marr). In addition, they are in the process of building the largest private cloud in the world. Their goal is to process 2.5 petabytes of data every hour. They plan to process this information collected through their cloud in their hub (Marr). Visualization of trends will be used by experts employed by Walmart and by other service providers to help them become more efficient, more reliable, and better for their stakeholders.

Highlighting the importance of the data is their ability to solve complex problems in a much shorter timeframe (produce results for these problems much faster). What historically took months to analyze has now become days or in some cases hours. According to their senior statistician Naveen Peddamail, “If you can’t get insights until you’ve analyzed your sales for a week or a month, then you’ve lost sales within that time. If you can cut down that time from two or three weeks to 20 or 30 minutes, then that saves a lot of money for Walmart and stopped us losing sales. That’s the real value of what we have built with the data cafe (Marr).

By having better machines to interpret the data, human error is reduced to either minimal or non-existent (Marr). Miscalculations are now based on programming errors which can be easier to solve than actual accounting issues in collecting usable information to be modeled. A very real event that can use data are price discrepancies between Walmart and their competitors. Walmart advertises that one cannot beat their prices, in order to make the most profit given their competitors pricing, Walmart need to analyze what they charge and charge less (2018 Form 10k). Multiplied by the thousands of products sold in any given Walmart, and you are talking too much for humans to do. Computers and machines that can analyze the data offer a far better and efficient way to account of this (Stephens & Plew).

The Plan

Walmart has a five-pronged plan to use the data they collect (Walmart.com). First, their goal is to staff pharmacies correctly depending on the flow of customers coming to fill scripts. Pharmacists are a skilled position making on average $131,085 (Glassdoor). In order for Walmart to reduce their overhead expenses to stay price competitive, they need to maintain as few pharmacists as possible to serve their demand (2018 Form 10k). Although Walmart’s focus is to reduce costs, they still want to be able to provide the best possible service to their customers. Interpreting times of a higher customer flow can help Walmart’s management predict when the pharmacy will be understaffed or overstaffed. With accurate models, Walmart can schedule more effectively reducing costs and customer aggravations. Ultimately these goals can be met by older methods of good management, but by having access to good data modeling, Walmart can greatly reduce the time it takes to produce a better staffing plan.

Their second point is their want to improve the regular store checkout. As with the pharmacy, Walmart’s management realize certain times throughout the day the store becomes busier. They again will use models gathered by statistics of foot traffic to try to maintain the correct staffing in this area. Since the workers in this discipline are low-skilled, Walmart pays them significantly less while taking full advantage to the versatility of these workers. Crossover exists in these jobs, so low-wage employees can perform various other tasks than checking out customers (Walmart.com). So, Walmart can afford to staff a higher amount of these bottom-tier employees and just have them perform other duties such as inventory, stocking shelves, and cleaning. When the store checkout will reach a predicted peak, ground-level management can adjust the staffing from these other named tasks to the check-out lines. This efficiency is what sets Walmart ahead from some other retailers (2018 Form 10k).

Their third focus for using data in their business is to make their supply chain more efficient and predictable. Accurate inventory calculations are vital to economic efficiency, but also customers demand accurate tracking and predictable restocking. By being able to track instantaneously the progress in their supply chain Walmart can accurately forecast times for their online orders (Walmart.com). As well, supply chain management is key for keeping the right amount of stock for each item in the correct stores. Customers go to Walmart to buy exactly what they need at affordable prices, and if they cannot do so, other business will have an opportunity to acquire their market share (2018 Form 10k).

Their fourth use of big data is the bettering of the customer preferences. Walmart is a huge company that may be out of touch with certain demands in particular markets. For example, Hawaiians consume a larger amount of Spam than that of other states (Fulton). Walmart can see that their sales reflect this, and they can increase their stock of Spam in Hawaiian Walmart’s. Also, if a certain type of product is bought in conjunction with another, Walmart management can move the products closer together to increase sales of both (Walmart.com). For example, if a disproportional number of customers purchase soda and disposable cups, there is probably a trend. Walmart can see this and move a set-up of disposable cup products next to the soda isle. Therefore, Walmart can act in the customers interests, while attempting to increase sales.

Their final use for data is the personalization of the shopper’s experience. Big data gives Walmart the ability to market directly to customers relevant products they may want to purchase (Walmart.com). Walmart can send customers relevant coupons, sales tips, and catalogues to encourage people who are probably going to buy the predicted items from Walmart at a decent price (2018 Form 10k). Their marketing can reach a more targeted audience, and customers can see alternatives Walmart can offer them. Analytics is a critical part of data and can really help build predictions from purchase histories (Walmart.com).

Responsibilities of Data Collection

Walmart acknowledges in their 2018 annual report that they have a responsibility to protect customer’s information and sensitive data associated with customer and vendor transactions such as payment information, purchased items, and other relevant valuable information. According to Walmart, “Any breach of [their] security measures or any breach, error or malfeasance of those of [their] third-party service providers and loss of [their] confidential information, or any failure by [them] to comply with applicable privacy and information security laws and regulations, could cause [them] to incur significant costs to protect any customers, members, associates and vendors whose personal data was compromised and to restore their confidence in [Walmart] and to make changes to [Walmart’s] information systems and administrative processes to address security issues and compliance with applicable laws and regulations (2018 Form 10k). But the ethics and Walmart’s Corporate Social Responsibility (CSR) extend further than this. Also outlined in their annual report, Walmart’s management acknowledged specifically the threat Cyber-attacks pose them. They acknowledge they have been previously attacked and are doing everything in their power to employ staff to thwart such efforts. Walmart takes these threats very seriously realizing the potential loss of reputation they could suffer if an attack was successful in stealing or exposing stakeholder’s data. Confidence in Walmart’s mission to sell good products at affordable prices is paramount of Walmart’s CSR, and if they cannot maintain the integrity of their company, the market will surely lose faith.

Conclusion

Walmart has seen the value Big Data can bring to their company. By collecting internal data, purchasing external data, and processing such data, Walmart is looking to make more money and provide an overall better experience to their customers. A better customer experience contributes highly to increasing profit, and if Walmart focuses on becoming better at filling customer demands, customers will walk away feeling satisfied. Focusing on increases in efficiency in their supply chain produce higher predictability and efficiency. Thus, margins on product overhead will decrease as a result of using big data. However, with such value being created by data collection, Walmart’s social responsibility is drastically increased. Focusing on preserving customer privacy, acting ethically when marketing, and security of records is now of paramount importance in this industry. Walmart looks to solve these problems but will keep moving full steam ahead using data to better their company.

References

1. Fulton, A. (2015, April 13). How Spam Helped Shape Hawaii. National Geographic. Retrieved November 18, 2018, from https://www.nationalgeographic.com/people-and-culture/food/the-plate/2015/04/13/how-spam-helped-shape-hawaii/
2. Marr, B. (2017, January 23). Really Big Data At Walmart: Real-Time Insights From Their 40 Petabyte Data Cloud. Forbes.com. Retrieved November 16, 2018, from https://www.forbes.com/sites/bernardmarr/2017/01/23/really-big-data-at-walmart-real-time-insights-from-their-40-petabyte-data-cloud/#16865206c105
3. Stephens, R., & Plew, R. (2003, March 02). The Elements of a Database. Retrieved November 18, 2018, from https://www.developer.com/db/article.php/719041/The-Elements-of-a-Database.html
4. (n.d.). Retrieved November 18, 2018, from https://www.merriam-webster.com/dictionary/database
5. Walmart Pharmacist Salaries. (2018, November 8). Retrieved November 18, 2018, from https://www.glassdoor.com/Salary/Walmart-Pharmacist-Salaries-E715_D_KO8,18.htm (2018 Walmart Annual Report). (2018).
6. 5 Ways Walmart Uses Big Data to Help Customers. (n.d.). Retrieved November 16, 2018, from https://blog.walmart.com/innovation/20170807/5-ways-walmart-uses-big-data-to-help-customers
7. What is a Database (DB)? – Definition from Techopedia. (n.d.). Retrieved November 18, 2018, from https://www.techopedia.com/definition/1185/database-db

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