Walmart: Managing Food Safety through the Internet of Things
Walmart is combating food safety risks through the use of IoT (Internet of Things)
TOM Challenge: Digitization and Supply Chains
Walmart: Managing Food Safety through the Internet of Things (796 words)
In 2015, a food inspector in China found 100,000 tons of frozen smuggled meat, some of which was 40 years old. This follows the hospitalization of 300,000 children during a milk contamination scandal in 2008. [1]
With 439 retail stores operating in 189 cities within China, how does the world’s largest company leverage technology to improve supply chain and food safety? [2] How does Walmart stay competitive with complex global supply chains that could negatively impact efficient delivery of fresh produce and other goods to its stores in China and globally?
To answer these questions, Walmart relies on the internet of things (IoT). IoT aggregates data from sensors at each point in the supply chain: farm, transportation, warehousing, and marketplace (Exhibit 1) to inform decision-makers about a product’s attributes: harvested and transit time, temperature, expiry, and other data points to provide more visibility. [3]
Exhibit 1: IoT in the Food Supply Chain
Why does Walmart care? IoT initiatives mitigate food safety issues by tracking inventory throughout the supply chain, providing customers a safe and consistent shopping experience. These are critical business priorities, as food safety issues are disruptive and lead to lost customer confidence that adversely affects brand and financial performance. [4] Accordingly, Walmart has increased technology investments in response to these risks: a review of Walmart’s job postings on LinkedIn confirms that the IoT division’s hiring has increased, as Walmart seeks over 20 positions in San Bruno and Sunnyvale, California. [5]
In the short term, Walmart has invested in IoT to improve food safety and traceability. In 2016, Walmart started collaborating with IBM and Tsinghua University to “improve the way food is tracked, transported, and sold” in China as an alternative to paper and manual processes. Walmart installed IoT sensors with near field communication technology (NFC) allowing the company to track product and production attributes throughout the supply chain. [6] Replicating this success, Walmart launched a similar 2017 initiative to track mangoes in the US. [7]
In the medium term, Walmart plans to leverage IoT data to own the “last mile” of delivery: getting groceries directly into a customer’s refrigerator. Through communication with other home sensors, Walmart can grant delivery drivers access to fill your refrigerator. [8] Walmart has already identified key hurdles of grocery delivery including perishability, demand planning, expiry, product recalls, and automatic re-ordering, and filed for key patents.
I believe Walmart has additional opportunities in the short term. Firstly, Walmart should acquire IoT companies focused on food supply chain. Rather than undergoing lengthy processes to build an IoT supply chain program, Walmart should leverage experience and infrastructure of existing IoT platforms to accelerate growth. Secondly, Walmart should implement its program to its entire operating footprint (instead of selected markets). From Indian sea cucumbers to American grains, Walmart should track sensor data from remote parts of its supply chain and integrate data with live store metrics for better decision-making. Rollout success would augment Walmart’s ability to achieve “last mile” delivery.
In the medium term, Walmart should set the standards for IoT supply chains. As Walmart develops, tests, and implements IoT, it can share best practices with the UN Food and Agriculture Organization (FAO). This would maximize corporate social responsibility marketing efforts while confirming Walmart’s status as the industry leader. The FAO initiatives would increase the Company’s profile, contributing to a heightened ability to implement IoT initiatives in countries with restrictive telecommunications and telematics policies.
Walmart needs to address several questions for the project to succeed. Despite relative market power, how receptive will suppliers and customers be to IoT rollout? Without buy-in from both, the project will likely fail. How will Walmart navigate regulations, given each country’s different telecommunications and telematics policies? For instance, some countries require a costly registration process, making implementation cost-prohibitive.
This is a promising area for Walmart. If Walmart can overcome implementation hurdles, supply chain IoT creates opportunities to improve the customer experience at every Walmart store worldwide while maintaining “everyday low prices.”
[1] China Seizes Rotting 40-Year-Old Meat Destined for Dinner Tables. (n.d.). Retrieved November 12, 2017, from http://time.com/3933411/china-meat-40-years-food-safety-smuggled/
[2] Wang, S. (n.d.). Walmart China Overview. Retrieved November 15, 2017, from http://www.wal-martchina.com/english/walmart/
[3] Pigini, D., & Conti, M. (2017). NFC-Based Traceability in the Food Chain. Sustainability, 9(10), 4.
[4] Walmart. (2017). 2016 Annual Report of Walmart, pages 6, 17, 19. 6, 17, 19. Retried from: http://d18rn0p25nwr6d.cloudfront.net/CIK-0000104169/c3013d40-212d-409e-bf30-5e5fd482fc2f.pdf
[5] LinkedIn Search for Walmart IoT Jobs. Retrieved from: https://www.linkedin.com/jobs/search/?keywords=walmart%20iot&locationId=us%3A0
[6] Pigini, D., & Conti, M. (2017). NFC-Based Traceability in the Food Chain. Sustainability, 9(10), 4.
[7] Marr, B. (2017, August 31). How Walmart Is Using Machine Learning AI, IoT And Big Data To Boost Retail Performance. Retrieved November 11, 2017, from https://www.forbes.com/sites/bernardmarr/2017/08/29/how-walmart-is-using-machine-learning-ai-iot-and-big-data-to-boost-retail-performance/#c5f1e7d6cb10
[8] Walmart Wants to Send People Into Your House To Unpack Your Groceries Even When You’re Not Home. Retrieved from https://www.washingtonpost.com/news/business/wp/2017/09/22/walmart-wants-to-send-people-into-your-house-to-unpack-your-groceries-even-when-youre-not-home/?utm_term=.2ee7f3b3b882
Calvin,
This is a really interesting piece! It seems to me that Walmart is moving in the right direction in using digitization to improve its supply chain operations. At the same time, it sounds like the company has a long way to go in order to scale these practices across its markets and grocery segments. I agree that acquisition sounds like the right move. Recently we’ve seen Walmart acquire Parcel in New York City to improve same day delivery in the market. I hope to see more of these delivery and supply chain digitization acquisitions moving forward.
Walmart’s investment in IoT is critical to compete with Amazon after its acquisition of Whole Foods, but I’d encourage them to focus IoT efforts on their supply chain more than final delivery to customer’s homes.
If Walmart pursues the home delivery route, they may benefit from partnering with an established smart device player (e.g., Google Home) rather than patenting their own devices, given that Amazon’s Alexa is already in users homes. This will enable customers to place orders for delivery more easily at a lower R&D cost for Walmart. But even though Walmart’s retail footprint is several times larger than Amazon’s, I worry that they’re in the wrong place for home delivery economics to work: Whole Foods tend to be in more urban environments and cater to less prices sensitive customers who would value the convenience of delivery, whereas Walmart customers may be less willing to pay more for convenience given their preference for “everyday low prices”
I see IoT being more effective in de-risking and removing costs from Walmart’s supply chain, so that they can manage inventory more effectively, improve food safety, reduce supply chain waste, and pass those savings onto the end consumer. To me, this foots better with their “customer promise” than delivering directly to end user’s refrigerators.
Interesting topic! The battle into the consumer’s household is going to be the one of the next big frontiers for technology.For the long-term, I don’t believe there would be too much issues on getting buy-in from consumers or suppliers. You can offer suppliers increased customer loyalty and steady demand by hooking up consumer fridge’s to replenish themselves, and consumers are always looking for ways to spend less time on tasks they find tedious and further make their homes smarter.
I would question how feasible it is for Walmart to establish an IoT standard on this front; other companies such as Google, Amazon, or Apple will bitterly fight on that front which will further complicate the interoperability issues as the number of smart IoT devices proliferate throughout the market. Personally, I believe that a non-profit independent standards committee would be the best idea for this type of work, but understandably the companies will still try to force down their individual ecosystem to the end-user in the hopes of becoming the next big platform.
Calvin, thanks for a great article. Walmart is best position to lead the way given its deep pockets and immediate incentive to do so.
Walmart can establish a standard – whether suppliers like it or not – due to their massive purchasing power. Many question Walmart’s bullying business tactics, but here it becomes an agent for good. If an “Indian sea cucumber” provider cannot or will not get on board with the IoT strategy, Walmart will go down the road to the next competitor. Further, there are obvious benefits to becoming the “standard setter.” Eventually, governments will require this technology which objectively makes food safer.
Knowing where our food comes from has additional benefits other than safety. By highlighting the components of say, a McDonald’s hamburger, we can “brand” the cheese, the meat, the lettuce as being unique to a specific grower or farmer. These growers and farmers can then build a business, through innovation, that leads to better tasting and healthier outcomes. Today, the incentive for making the “best, sustainable cheese” doesn’t exist because it’s buried in the broader picture. It’s just “cheese,” but eventually consumers will demand “Blueberry Farms cheese.” Right now this info is only accessible / relevant to the high end of the market, but IoT has the potential to push it down the chain.
IoT means exciting times for food producers, chefs and consumers (all of us).