Commentary | Viewpoint

Innovation in Business Processes from Northwest Arkansas

Tags: Trucking, Retail, Transportation

Dr. Matthew Waller is Chair, Department of Supply Chain Management, Sam M. Walton College of Business,
 University of Arkansas, 479-575-8741

Northwest Arkansas is a hotbed for innovations in supply chain management, the effects of which span the globe. Although some argue that various aspects of these innovations started elsewhere, they have, at the very least, been perfected and rolled out broadly in Northwest Arkansas.

Though these innovations have been in areas of data science and transportation technology, at the heart of these advancements are business process innovations, and these are where Northwest Arkansas businesses have made the greatest strides. Here’s a look at how two leading companies – transportation provider JB Hunt and global retailer Walmart – are leading the way.

JB Hunt: Intermodal Innovator

Intermodal transportation, including rail and trucking, was perfected and broadly rolled out based on transportation provider JB Hunt’s strategy. The idea of putting a truck trailer on a flatbed railcar existed long before JB Hunt; indeed, intermodal marketing companies existed before JB Hunt entered the intermodal market. But JB Hunt has advanced to the point of putting 53-foot containers on rail well cars, behind which are infrastructural and equipment technologies, information systems, and communications innovations.

Trucking in the United States has traditionally been carried out through private fleets. JB Hunt takes over managing shippers’ private fleets, and has created a number of business process innovations to make this business work well. JB Hunt has also innovated brokerage. In the past, most trucking companies would not entertain this kind of non-asset based trucking, because it competes directly with their own trucking business. But JB Hunt did just that. While these different businesses compete with each other, they also leverage and reciprocally strengthen JB Hunt’s expertise, knowledge, and core competence in transportation.

Additionally, JB Hunt has made innovations in consumer’s homes while building leaner distribution systems for retailers. Consumers are challenged with receiving products to their homes and then getting these products installed. JB Hunt has created a physical distribution network and human resource strategy to do this for the consumer.

The physical distribution network attracts retailers because they don’t have to hold the entire inventory in their stores, which may number up to 20 in one city. Instead of holding three units in all 20 stores, retailers can hold just one in each store while JB Hunt holds the additional product inventory in a distribution center that serves shoppers of all 20 stores, reducing total inventory needed and, transportation and inventory holding costs while making retailers more profitable and their services more attractive to consumers.

Walmart: Harnessing the Power of Data

Walmart has profited at the vanguard of big data, dating back to before big data as we know it existed, when Walmart began sharing its point-of-sale data with its suppliers to improve forecasting and inventory management. More accurate forecasts result in lower inventory, lower transportation costs and fewer out-of-stock events, leading to lower costs for suppliers, Walmart, and, ultimately, shoppers.

More importantly, this data-sharing environment created a new and healthy dimension of competition between suppliers within Walmart’s supply chain. For example, Supplier X might argue that Walmart should introduce a new SKU because of its high sales volume and profit margin. Supplier Y, a direct competitor of Supplier X, would then conduct an analysis and suggest that adding their SKU is better because shoppers of their product also often bought additional products that carried high margins for Walmart. Suppliers X and Y might compete to provide greater analytics-based insight, and this competition has led to innovative analytics with impacts throughout the retail world.

Although data sharing required advances in data communication technology and was followed by innovations in analytics, the basic innovation was a new way of doing business between retailers and suppliers, through which the retailer creates an open space for competition between suppliers, which in turn creates greater knowledge and insights about consumer behavior.

Although there have been technological advances made by Northwest Arkansas companies, the major contributions have come in the form of strategic business process innovation.