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Wal-Mart, Suppliers Affirm RFID Benefits
The retailer and several of its leading suppliers say they see benefits in using EPC RFID today, which they expect to increase over time.
By Mark Roberti
Feb. 22, 2007—Wal-Mart Stores remains fully committed to its use of radio frequency identification in its supply chain, and is already seeing quantifiable benefits, says Simon Langford, Wal-Mart's director of transportation and RFID. Several of the retailer's leading suppliers also say they are achieving benefits from tagging pallets, cases and promotional displays shipped to Wal-Mart.
"If you look at the activity within Wal-Mart, we're foot down and full speed ahead," says Langford. "If nothing else, we're starting to accelerate our rollout."
A recent report in the Wall Street Journal characterized Wal-Mart's EPC RFID initiative as "fizzling." The article pointed out that Wal-Mart had planned to install RFID systems in 12 distribution centers by the end of January, but has, in fact, RFID-enabled only five so far. However, Langford explains that the goal of being in 12 distribution centers was part of Wal-Mart's initial RFID announcements, just as the first RFID installations went live in April 2004. After the pilot and early rollout stages, Wal-Mart refined its focus to deploy RFID at stores instead, where a more immediate ROI can be achieved and where the technology helps improve the on-shelf availability of products. This benefits Wal-Mart, its customers and its suppliers.
Wal-Mart had initially planned to be in 1,000 stores by the end of January, but now says it won't achieve that target until April. Langford attributed the slight slippage to the fact that Wal-Mart's policy is to avoid rolling out new technology during the October-to-December holiday season, when customer traffic and sales peak and installations could be disruptive to store operations.
According to Langford, Wal-Mart expects to continue RFID-enabling roughly 400 to 500 stores a year, its typical pace for the past two years. He adds that the number of suppliers tagging merchandise, and the number of stock-keeping units they tag, would likely continue to rise at the current pace or faster.
Some RFID tag vendors have complained that most suppliers are doing the minimum to comply with the retailer's tagging requirement, preventing the volume of tags sold from greatly increasing and making it difficult to make money in the market. Langford, however, says the number of tagged cases continues to rise. World Kitchen, for instance, will increase the number of tagged cases it ships this year to 2 million, up from 100,000 in 2006.
Langford says the pace and direction of the rollout will be driven by the businesspeople in charge of operations, not by the IT RFID team. Wal-Mart handed the RFID initiative off to the operational side of the business in 2006. Rather than have the IT RFID team work with suppliers on what to tag and when, the retailer is having its merchandise-buying teams talk to suppliers about this question, making sure fast-moving goods and promotional items are in stock. "They are reviewing the items that we need tagged," says Langford, "to drive sales through better on-shelf availability."
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Feb. 22, 2007—Wal-Mart Stores remains fully committed to its use of radio frequency identification in its supply chain, and is already seeing quantifiable benefits, says Simon Langford, Wal-Mart's director of transportation and RFID. Several of the retailer's leading suppliers also say they are achieving benefits from tagging pallets, cases and promotional displays shipped to Wal-Mart.
"If you look at the activity within Wal-Mart, we're foot down and full speed ahead," says Langford. "If nothing else, we're starting to accelerate our rollout."
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| Wal-Mart's Simon Langford |
Wal-Mart had initially planned to be in 1,000 stores by the end of January, but now says it won't achieve that target until April. Langford attributed the slight slippage to the fact that Wal-Mart's policy is to avoid rolling out new technology during the October-to-December holiday season, when customer traffic and sales peak and installations could be disruptive to store operations.
According to Langford, Wal-Mart expects to continue RFID-enabling roughly 400 to 500 stores a year, its typical pace for the past two years. He adds that the number of suppliers tagging merchandise, and the number of stock-keeping units they tag, would likely continue to rise at the current pace or faster.
Some RFID tag vendors have complained that most suppliers are doing the minimum to comply with the retailer's tagging requirement, preventing the volume of tags sold from greatly increasing and making it difficult to make money in the market. Langford, however, says the number of tagged cases continues to rise. World Kitchen, for instance, will increase the number of tagged cases it ships this year to 2 million, up from 100,000 in 2006.
Langford says the pace and direction of the rollout will be driven by the businesspeople in charge of operations, not by the IT RFID team. Wal-Mart handed the RFID initiative off to the operational side of the business in 2006. Rather than have the IT RFID team work with suppliers on what to tag and when, the retailer is having its merchandise-buying teams talk to suppliers about this question, making sure fast-moving goods and promotional items are in stock. "They are reviewing the items that we need tagged," says Langford, "to drive sales through better on-shelf availability."
READERS' COMMENTS
Wal-Mart WSJ report
I think that the WSJ report should be interpreted by Wal-mart as how it can improve on communication to it's vendors specifically. Wal-mart's RFID message changes, RFID communication is not clear and RFID for most of it's vendors is misunderstood; I've attended too many Wal-Mart RFID supplier meetings only to hear vendors and Wal-Mart top guys fail to communicate. It is good to hear for the first time that RFID has been handed off to operations within Wal-Mart. As an IT person implementing RFID, it is impossible to get traction from my sales folks when Wal-Mart Sales and RFID/IT aren't on the same page as far as communication.
Posted By: G. Lopez-Robles 2/22/2007 at 9:48:02 AM
Wal-Mart RFID fizzle?
This article denies the Wall Street Journal's claims while simultaneously confirming them. The fact is, Wal-Mart under Linda Dillman was clearly mandating case-level RFID across the board. She told MSN Money Magazine that "they would not invest more time in suppliers that are reluctant..." The major CPG's co-opted the initiative to meet their ends -- namely to insure store-level compliance with promotional product in which they give Wal-Mart significant funds for executing. No compliance -- no funds. The use of RFID for promotions does benefit suppliers, consumers, and Wal-mart; but it is not the vision Dillman had for the technology. It also confirms that the ROI at the DC's isn't there -- which again was a major thrust of the initiative early on. Finally, it confirms that using RFID to locate general merchandise among a sea of boxes in the back room doesn't work either. For example, cases in the box bailer waiting to be recycled continue to transmit data when the stock room is interrogated. A bit of a problem with no obvious solution. RFID does make sense for tracking P-O-P compliance, but that will fail to generate the kind of impact that Wal-Mart originally suggested by many orders of magnitude. RFID will be useful in retail and Wal-Mart blazed the trail, but their initiative as originally conceived has in fact fizzled. Why not redefine the initiative honestly and move on?
Posted By: K. Rohleder 2/22/2007 at 10:01:55 AM
"ROI at the DC's isn't there..."
Ken, I ask this question for a greater understanding on my part. What information did you base your statement that no DC ROI exists? Thanks in advance for your reply. > This article denies the Wall Street Journal's claims while > simultaneously confirming them. > > The fact is, Wal-Mart under Linda Dillman was clearly > mandating case-level RFID across the board. She told MSN > Money Magazine that "they would not invest more time in > suppliers that are reluctant..." > > The major CPG's co-opted the initiative to meet their ends > -- namely to insure store-level compliance with promotional > product in which they give Wal-Mart significant funds for > executing. No compliance -- no funds. The use of RFID for > promotions does benefit suppliers, consumers, and Wal-mart; > but it is not the vision Dillman had for the technology. > > It also confirms that the ROI at the DC's isn't there -- > which again was a major thrust of the initiative early on. > > > Finally, it confirms that using RFID to locate general > merchandise among a sea of boxes in the back room doesn't > work either. For example, cases in the box bailer waiting > to be recycled continue to transmit data when the stock > room is interrogated. A bit of a problem with no obvious > solution. > > RFID does make sense for tracking P-O-P compliance, but > that will fail to generate the kind of impact that Wal-Mart > originally suggested by many orders of magnitude. > > RFID will be useful in retail and Wal-Mart blazed the > trail, but their initiative as originally conceived has in > fact fizzled. Why not redefine the initiative honestly and > move on? > >
Posted By: G. Lopez-Robles 2/22/2007 at 10:45:30 AM
DC ROI
> > Ken, > I ask this question for a greater understanding on my part. > What information did you base your statement that no DC ROI > exists? > > Thanks in advance for your reply. > > > > > This article denies the Wall Street Journal's claims > while > > simultaneously confirming them. > > > > The fact is, Wal-Mart under Linda Dillman was clearly > > mandating case-level RFID across the board. She told MSN > > Money Magazine that "they would not invest more time in > > suppliers that are reluctant..." > > > > The major CPG's co-opted the initiative to meet their > ends > > -- namely to insure store-level compliance with > promotional > > product in which they give Wal-Mart significant funds > for > > executing. No compliance -- no funds. The use of RFID > for > > promotions does benefit suppliers, consumers, and > Wal-mart; > > but it is not the vision Dillman had for the technology. > > > > It also confirms that the ROI at the DC's isn't there -- > > which again was a major thrust of the initiative early > on. > > > > > > Finally, it confirms that using RFID to locate general > > merchandise among a sea of boxes in the back room > doesn't > > work either. For example, cases in the box bailer > waiting > > to be recycled continue to transmit data when the stock > > room is interrogated. A bit of a problem with no obvious > > solution. > > > > RFID does make sense for tracking P-O-P compliance, but > > that will fail to generate the kind of impact that > Wal-Mart > > originally suggested by many orders of magnitude. > > > > RFID will be useful in retail and Wal-Mart blazed the > > trail, but their initiative as originally conceived has > in > > fact fizzled. Why not redefine the initiative honestly > and > > move on? > > > >
Posted By: K. Rohleder 2/22/2007 at 11:58:07 AM
DC ROI
> Gabrielle, I based it on the paragraph in the article where Langsford says there are only 5 DC's implemented because they shifted focus to the stores where there is a more immediate ROI. I would have been more accurate to say "immediate ROI." It is hard to see where savings would come from though since barcode systems are so efficient and RFID poses some odd problems. Such as, what if a pallet of cases are checked in, and there are 3 cases wide, by 3 cases deep, by 3 cases high, but the RFID interrogator shows only 25 boxes? It would seem that 2 tags aren't transmitting; but which 2? How could you tell short of taking the pallet to the far corner of the parking lot and bringing in one case at a time until you got no reading on two of them. And how would you correct the problem so that the cases can proceed through the distribution channel? The tags are only 95% effective, so this problem would present itself constantly in a large DC. > Ken, > I ask this question for a greater understanding on my part. > What information did you base your statement that no DC ROI > exists? > > Thanks in advance for your reply. > > > > > This article denies the Wall Street Journal's claims > while > > simultaneously confirming them. > > > > The fact is, Wal-Mart under Linda Dillman was clearly > > mandating case-level RFID across the board. She told MSN > > Money Magazine that "they would not invest more time in > > suppliers that are reluctant..." > > > > The major CPG's co-opted the initiative to meet their > ends > > -- namely to insure store-level compliance with > promotional > > product in which they give Wal-Mart significant funds > for > > executing. No compliance -- no funds. The use of RFID > for > > promotions does benefit suppliers, consumers, and > Wal-mart; > > but it is not the vision Dillman had for the technology. > > > > It also confirms that the ROI at the DC's isn't there -- > > which again was a major thrust of the initiative early > on. > > > > > > Finally, it confirms that using RFID to locate general > > merchandise among a sea of boxes in the back room > doesn't > > work either. For example, cases in the box bailer > waiting > > to be recycled continue to transmit data when the stock > > room is interrogated. A bit of a problem with no obvious > > solution. > > > > RFID does make sense for tracking P-O-P compliance, but > > that will fail to generate the kind of impact that > Wal-Mart > > originally suggested by many orders of magnitude. > > > > RFID will be useful in retail and Wal-Mart blazed the > > trail, but their initiative as originally conceived has > in > > fact fizzled. Why not redefine the initiative honestly > and > > move on? > > > >
Posted By: K. Rohleder 2/22/2007 at 12:11:41 PM
Wal-Mart RFID fizzle?
The big problem with passive EPC RFID is that it failed to perform any better than barcode. Wal-Mart based its vision on the perception that group reading (Pallet with cases) will eliminate the need for reading items one at a time. This was never possible because of Physics. When it comes to reading one at a time, barcode is superior. In 2003 Wal-Mart was misled by the hype surrounding RFID in general, and failed to understand the limitations of the passive EPC RFID that was chosen for the Supply Chain. > > Gabrielle, > > I based it on the paragraph in the article where Langsford > says there are only 5 DC's implemented because they shifted > focus to the stores where there is a more immediate ROI. I > would have been more accurate to say "immediate ROI." > > It is hard to see where savings would come from though > since barcode systems are so efficient and RFID poses some > odd problems. Such as, what if a pallet of cases are > checked in, and there are 3 cases wide, by 3 cases deep, by > 3 cases high, but the RFID interrogator shows only 25 boxes? > It would seem that 2 tags aren't transmitting; but which 2? > How could you tell short of taking the pallet to the far > corner of the parking lot and bringing in one case at a > time until you got no reading on two of them. And how would > you correct the problem so that the cases can proceed > through the distribution channel? The tags are only 95% > effective, so this problem would present itself constantly > in a large DC. > > > > > Ken, > > I ask this question for a greater understanding on my > part. > > What information did you base your statement that no DC > ROI > > exists? > > > > Thanks in advance for your reply. > > > > > > > > > This article denies the Wall Street Journal's claims > > while > > > simultaneously confirming them. > > > > > > The fact is, Wal-Mart under Linda Dillman was clearly > > > mandating case-level RFID across the board. She told > MSN > > > Money Magazine that "they would not invest more time > in > > > suppliers that are reluctant..." > > > > > > The major CPG's co-opted the initiative to meet their > > ends > > > -- namely to insure store-level compliance with > > promotional > > > product in which they give Wal-Mart significant funds > > for > > > executing. No compliance -- no funds. The use of RFID > > for > > > promotions does benefit suppliers, consumers, and > > Wal-mart; > > > but it is not the vision Dillman had for the > technology. > > > > > > It also confirms that the ROI at the DC's isn't there > -- > > > which again was a major thrust of the initiative early > > on. > > > > > > > > > Finally, it confirms that using RFID to locate general > > > merchandise among a sea of boxes in the back room > > doesn't > > > work either. For example, cases in the box bailer > > waiting > > > to be recycled continue to transmit data when the > stock > > > room is interrogated. A bit of a problem with no > obvious > > > solution. > > > > > > RFID does make sense for tracking P-O-P compliance, > but > > > that will fail to generate the kind of impact that > > Wal-Mart > > > originally suggested by many orders of magnitude. > > > > > > RFID will be useful in retail and Wal-Mart blazed the > > > trail, but their initiative as originally conceived > has > > in > > > fact fizzled. Why not redefine the initiative honestly > > and > > > move on? > > > > > >
Posted By: C. Kapsambelis 2/25/2007 at 4:02:17 AM