IT firms evaluate Wal-Mart approach to supply chain

In the near future, the world’s largest retail store could be an inspiration for some of the high-tech sector’s major services, an Ottawa gathering heard this week.

Wal-Mart’s approach to supply-chain management could theoretically be applied to the delivery of services

such as Internet access, wireless, software and service, cable and long distance, said Steven Shepard, president of Shepard Communications Group, LLC, a Vermont-based consultancy.

“The intelligence that Wal-Mart has could very easily be applied to the technology world,” he said following a speaking engagement entitled Outlook for the Telecommunications Industry. “You could say ‘Well, they do a good job with household products and home electronics, but how well could they adapt to the delivery of telecom services?’ My answer is ‘Probably pretty well, because the function is the same.’”

The idea is “certainly novel,” but “why not?” said Simon Gwatkin, vice-president of strategic marketing at Mitel. “(Wal-Mart’s) supply-management is second to none, and they’re incredibly good at negotiating a good deal.”

Wal-Mart wrote and developed one of the world’s first supply-chain management software solutions, making it an expert in identifying customer needs and responding to them efficiently, added Shepard.

While “customers have been fooled for a very long time into believing that the technology itself is a service, it isn’t,” he said. “It’s valuable, it’s important, but it underlies the service layer, and it’s really the service layer that makes the money.”

It doesn’t really matter what lies under that service layer, the concept of service delivery is the same across all sectors, added Shepard. Therefore, companies such as Wal-Mart could easily respond to the oncoming move by technology-oriented corporations to outsource major facets of IT service-delivery, he said.

Historically, technologists haven’t been that great at recognizing customer needs, so it is better left up to contractors who are more plugged in to the customer service end of things, Shepard suggested.

“This isn’t this week’s passing fad, this is unquestionably a long-term trend,” he said.

A move to outsourcing is one thing, but whether Wal-Mart will realistically fit into the contractor role in the IT world is another.

“Of course, we’re trying to do an apple and tractor comparison because that’s retail versus a very different selling model,” said Shepard. “But the rules apply and they apply very, very well. Do I think Wal-Mart will move into a (service-delivery role in the IT world)? Probably not. But the companies that do end up doing it would be real smart to take a lesson from Wal-Mart.”

Gwatkin observed there are large retail chains such as CompUSA that already perform a service-delivery function.

“If you have the footprint, why not use your logistics and supply chain to do it. You can go to Wal-Mart and buy a PC, so why not have it installed and set up along with your network?”

Realistically, though, such companies that are suited to undertake such a contracting role are Lucent Technologies, IBM, Ericsson and EDS, said Shepard.

Shepard’s address was organized by Orbit IQ and the National Capital Institute of Telecommunications (NCIT), and sponsored by Neutronics. The Ottawa Centre for Research and Innovation hosted the event at SmartCentral.

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