Report Shows How Wal-Mart Did It

Nov. 14, 2005—In mid-October, Wal-Mart announced that a University of Arkansas study showed the use of RFID to track cases of products in Wal-Mart stores led to a 16 percent reduction of out-of-stock products and faster shelf replenishment of those items over items tracked via bar codes at the case level (see EPC Reduces Out of Stocks at Wal-Mart).

An 18-page research paper based on the study was published, entitled "Does RFID Reduce Out-of-Stocks? A Preliminary Analysis." The paper describes the Wal-Mart-commissioned study in detail, outlining how out-of-stock levels were measured and compared between the 12 RFID-enabled stores and 12 control stores. It also explains the methodology researchers used to account for the natural fluctuations of out-of-stock levels within the test and control stores, so that a fair comparison could be made.

Prior to the study, Wal-Mart leveraged its RFID system to make an important business process change in how it monitors and manages shelf stock. Instead of manually inspecting stock levels on shelves or back-room stock to generate pick lists, Wal-Mart now combines point-of-sale data with data generated from RFID readers located at the loading dock, at the doorway between back room and sales floor, and at the box crusher (indicating empty cases). All that data is used to generate these lists automatically.

The RFID-generated lists correlated with reduced out-of-stock levels within the test stores, highlighting the significance of leveraging RFID technology to change and improve business processes—not just in Wal-Mart stores, but in any retail environment.

The report breaks out how out-of-stocks were reduced within the test stores, showing what happened when the staff used non-RFID-generated pick lists, partially RFID-generated pick lists and fully RFID-generated lists. Compared with the weekly out-of-stock levels of test stores using a non-RFID-generated pick list, the out-of-stock levels improved by 15 percent at test stores using a partially RFID-generated list, and by 26 percent at stores using a fully RFID-generated list. During the 29-week test period, however, the control stores also experienced an improvement in the average weekly out-of-stock level. Compared with the control stores, the test stores using a fully RFID-generated list improved by approximately 16 percent. This data is mapped on a graph, as is a comparison of the out-of-stock rates of tagged stock-keeping units (SKUs) versus non-tagged SKUs within the test stores.