Sam's Club, P&G Discuss Sharing RFID's Value

By Mary Catherine O'Connor and Claire Swedberg

April 18, 2008—At the RFID Journal LIVE! 2008 conference, held this week in Las Vegas, Gregory L. Johnston, Sam's Club's executive VP of club operations, reaffirmed his company's belief that both the retailer and its suppliers will profit from the technology's implementation. In the retail market, Johnston told conference attendees on Wednesday, the evolutionary path of RFID technology and the Electronic Product Code (EPC) is comparable to that of the bar code and the Universal Product Code (UPC) in the 1970s. "Just like UPC," he said, "EPC can help all of us improve the services we provide."

Greg Johnston

As of Jan. 31, 2008, Sam's Club, owned and operated by Wal-Mart, began requiring all of its suppliers to apply EPC Gen 2 RFID tags to every full single-item pallet of goods destined for its distribution center in DeSoto, Texas, or directly to one of its stores served by that DC. Any supplier failing to comply will be charged a service fee, the retailer announced, starting at $2 per untagged pallet on Feb. 1, and capping at $3 per pallet on Jan. 1, 2009. The fee will cover Sam's Club's cost in having to tag the pallets itself (see Sam's Club Tells Suppliers to Tag or Pay).

Johnston told the audience that Sam's Club believes its RFID mandate plans are reasonable, but also acknowledged and thanked the retailer's many suppliers in attendance. "We ask a lot of our suppliers, and you deliver a lot," he said, adding that RFID "will bring a benefit to all of us."

By Jan. 30, 2009, Sam's Club intends to have suppliers tag full single-item pallets destined for all 22 of its distribution centers. The suppliers must also tag at the item level for shipments to all 22 DCs by Oct. 31, 2010. Because Sam's Club is a warehouse retailer, items are typically bulk goods packaged in large units. Johnston predicted tagging will lead to increased sales resulting from fewer out-of-stocks, better product placement, fewer out-of-date products, faster checkout and better-quality products (due, for instance, to fresher produce). These features, he added, would benefit the entire CPG industry.

More than 3,000 people had preregistered to attend LIVE!, with more than 175 providers of RFID hardware, software and services filling the event's 100,000-square-foot exhibit hall to capacity (see Exhibit Hall at RFID Journal LIVE! 2008 Is Sold Out). Among the other speakers at the event was Bob McDonald, chief operating officer of Procter & Gamble. Like Johnston, McDonald referenced the history and evolution of RFID technology in the supply chain during a keynote presentation on Thursday. He charted for attendees the early research into RFID that engineering teams at both P&G and Gillette—which P&G purchased in 2005—initiated, as early adopters and as members of the Auto-ID Center, which developed the Electronic Product Code (EPC) concept.

Bob McDonald

McDonald also stressed the importance of retailers and suppliers working together closely to extract what he called shared value creation from RFID. He presented a scorecard for EPC adoption in the retail industry to date, grading standards development with an A-minus, but retailer engagement and shared value creation both earned Cs. According to McDonald, only two major retailers have initiated significant pilot projects to determine the value of using RFID to track product promotions, which he said represents tremendous potential for improved sales and efficiencies.

In addition, Microsoft announced at the conference that it has entered into beta testing on a version of its BizTalk RFID middleware designed to run on mobile RFID readers. Anush Kumar, Microsoft's senior product director, joined with two Microsoft partner companies, RFID solutions providers Xterprise and S3Edge, to describe the process of testing the beta software with customers.