During the Spring 2005 semester, I took a course in Databases at the Busch Campus of Rutgers University, and on the first day, I learned in lecture about how Wal-Mart gets prepared for hurricanes. Wal-Mart, the largest retail outlet in the United States, and one of the leading influences on China's emerging market, put together an immense database system, which contains 460 Terabytes or 460,000 Gigabytes of data that cost approximately $4 billion dollars to develop, so that they could analyze what their customers prefer to buy, especially in certain situations such as when a hurricane is approaching.
As reported in the New York Times in 2004, Wal-Mart put this predictive technology to work when Florida was being blitzed by a flurry of hurricanes: Charley, Frances, Ivan, and Jeanne. Management analyzed data that is larger than the World Wide Web and contains every product sold, and all of its inventory. Managers wanted to find out what customers purchased the most when a storm was coming. One would think that the most common purchases involved important items such as batteries, bottled water, and canned food.
However, much to my surprise, Wal-Mart's analysis of their database, which also provides a retail link for its suppliers so that they can see how their own products sell, revealed that many of its customers prefer to buy beer and pop-tarts when a hurricane approaches. In the Times article, Wal-Mart was able to determine that the sales in Strawberry Pop-Tarts rose seven times more than normal when Hurricane Charley approached. Meanwhile, beer was actually the top selling item. The usual survival gear and canned goods that were mentioned at the beginning of the article still sold well, but not as well as the Pop-Tarts and Beer.
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Many stores, particularly retail and grocery chains, offer their shoppers a club card, which gives discounted savings on certain items in their store. In turn, the stores use the information from the shopper's card to track their transactions so that they can get a feel for what their customers like to buy. In other words, Wal-Mart's club card provides a window into the buying habits of its customers, and the data is then used to anticipate demand by stocking stores appropriately. Stores such as Wal-Mart analyzes the customer trends produced by reports generated by its database to decide what they want to load on a delivery truck that will be traveling to Florida.
Management is presented with a choice. For instance, they can load the truck with the goods people buy on average, or they could load it with pop-tarts and beer. In making this choice, managers at Wal-Mart know that when tropical storms or hurricanes approach, customers will be coming to their stores for one particular thing. Sending the right thing will mean that they will be able to sell everything loaded in the truck. Otherwise, they will just sell half of it.
By knowing what people are looking for ahead of time, Wal-Mart can eliminate the guesswork, and most importantly sell a lot of the right thing. Consequently, Wal-Mart could better anticipate what their customers would need, and as a result, make more money. It's basically a win-win situation for the customer and the stores from a business standpoint. This doesn't just apply to when hurricanes are coming, it can apply to other situations as well such as winter storms, holidays, certain times of year such as spring, summer, or back to school.
According to the Brier Patch blog, Wal-Mart uses a model called Just-In-Time for automatic inventory replenishment. Now a problem with this particular mechanism is that a company can not afford to have any down time. It must be online all the time since the inventory stock must be accurate, and must adapt in real time. In addition, Wal-Mart employs a staff of several professional Meteorologists to provide them with information on the weather so that they can plan what to ship from their warehouses to sell at their stores. This is not unusual to see weather forecasters working for private companies. Here in New Jersey, utility companies such as PSE&G employ forecasters. The utilities use the forecaster's expertise to prepare for high demand times such as during a heatwave in the summer.
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Hurricaneville has an online storm database to provide lots of different information and past storms and hurricanes. While the database is not used as a forecasting tool, it does give visitors to the site an idea of such things as past storms that have formed in a particular location that a present storm is in, or what tropical systems formed on a certain date during the year. It can also provide users with an idea of how many hurricanes have made landfall in a particular state such as Florida or North Carolina. Such information can be helpful to visitors of the site, who are looking to buy a home somewhere, or just make plans for a vacation or honeymoon.
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