Kmart's failure: technology adoption and supply chain mismanagement

KMART's problems were numerous. But beginning with technological adoption, the problems multiplied. When Wal-Mart successfully used technology to cut down cost and thus started a serious price war, Kmart realized it was quite a few steps behind the leader on which product. The second crucial thing was adoption of technology fairly early by the competitors. While Kmart was still thinking about including IT in its sales and supply chain, Wal-Mart had already made major technological changes by early 1970s and 80s. WM had barcodes with scanners installed which were connected with back-store computers so everyone could know which items were selling fast and needed to replenished.

On the other hand, Kmart was suffering badly. It had a poor system and its shelves mostly had lots of those products that no one needed while important items were always out of supply. The cutting edge technology was not only used by WM, it was also used very effectively which made all the difference and by 1983, it was clear that WM was the leader. This is because by this time, the IT strategy at WM had such a huge difference that while WM was spending only two cents getting the products to the store, Kmart was spending five cents. This difference alone allowed WM to start and win the price war.

The major problem with Kmart was lack of focus and ineffective adoption of IT. The firm never realized that instead of promoting millions of products, it was supposed to focus on few items that were selling well. This promotions-based model did not an provide effective competition strategy. The company continued expanding by buying various businesses while other competitors like Wal-Mart and Target focused on products that were selling fast and tried to expand internally. While Kmart has the technology but it was used to collect data which was never used properly. The data could be to forecast demand but unfortunately that was never done. The company was losing money very rapidly and by 2000, it was in deep trouble.

Supply chain management was the main area of trouble for Kmart. The firm never seemed to know which products did it actually require and supply of required products was almost always late. There was serious lack of coordination between inventory and suppliers and while the firm always had truckloads of unneeded items in inventory, it never seemed to have the needed items. That was because of poor connection with suppliers. With the adoption of i2 technologies, it was hoped that things would improve. But while the project was huge, it failed to bring about the desired change and its failure was blamed on Kmart's operational problems. And operational problems were certainly there since Kmart was encountering serious supply management issues.