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RFID's Impact at Wal-Mart Greater Than Expected
Hardgrave noted that while the faster-moving goods saw the highest increase in product availability, 90 percent of the studied products selling at a rate of 1 to 3 units a day registered a 32 percent decrease in out-of-stocks using EPC. "Imagine if the bulk of the tagging was in the 6-to-15 rate," Hardgrave commented.
The department in which goods were displayed also had an effect on the benefit of RFID tagging in OOS situations caused by in-store errors. For example, tagging cases of goods really made no difference in the electronics department, said Hardgrave.
Researchers compared out-of-stock rates in the RFID-enabled stores against the baseline data established at the start of the study. They also examined the OOS rates at the control stores and those of SKUs not tracked with RFID at the RFID-enabled stores.
The RFID-enabled stores receive SKUs tagged at the case and pallet level from either Wal-Mart's own distribution centers, or directly from suppliers. The decrease in out-of-stocks comes from using RFID to monitor how many cases have arrived at the store and how many have been brought out to the shelves, then comparing that information with the number of items from those cases that have been sold (Wal-Mart uses conventional point-of-sale data to determine sales).
By using RFID to track inventory still in its back room, Wal-Mart has been able to automate the addition of tagged products to pick lists for restocking store shelves. Without such automation, sales staff might overlook inventory in the back room, unnecessarily order more stock and leave the store shelf empty of the product while waiting for the new order to be processed and delivered.
"That can create a bullwhip effect in the supply chain. One case is no big deal. But for 10 million cases a day, that can be a big problem," said Hardgrave. "What Wal-Mart has done was simple. It used RFID data to add one key piece of information: Do we have it in the backroom? It's just a little tiny tweak—it didn't change the way it stocks shelves or the printout of the pick list—but the impact is phenomenal."
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The department in which goods were displayed also had an effect on the benefit of RFID tagging in OOS situations caused by in-store errors. For example, tagging cases of goods really made no difference in the electronics department, said Hardgrave.
Researchers compared out-of-stock rates in the RFID-enabled stores against the baseline data established at the start of the study. They also examined the OOS rates at the control stores and those of SKUs not tracked with RFID at the RFID-enabled stores.
The RFID-enabled stores receive SKUs tagged at the case and pallet level from either Wal-Mart's own distribution centers, or directly from suppliers. The decrease in out-of-stocks comes from using RFID to monitor how many cases have arrived at the store and how many have been brought out to the shelves, then comparing that information with the number of items from those cases that have been sold (Wal-Mart uses conventional point-of-sale data to determine sales).
By using RFID to track inventory still in its back room, Wal-Mart has been able to automate the addition of tagged products to pick lists for restocking store shelves. Without such automation, sales staff might overlook inventory in the back room, unnecessarily order more stock and leave the store shelf empty of the product while waiting for the new order to be processed and delivered.
"That can create a bullwhip effect in the supply chain. One case is no big deal. But for 10 million cases a day, that can be a big problem," said Hardgrave. "What Wal-Mart has done was simple. It used RFID data to add one key piece of information: Do we have it in the backroom? It's just a little tiny tweak—it didn't change the way it stocks shelves or the printout of the pick list—but the impact is phenomenal."
READERS' COMMENTS
RFID and the decrease in out-of-stocks (OOS) at Wal-Mart
What I found most surprising, after reading the study by Bill Hargrave and his associates at the University of Arkansas, was that Wal-Mart was not making use of Point of Sale (POS) transaction data for the generation of automatic pick lists to replenish stock. Ever since the adoption of the UPC code in the ‘70’s, super markets have used POS data for inventory control. One has to wonder how much of the 30% decrease in OOS is due to the use of the Automatic Pick List, and how much, if any, is due to RFID.
Posted By: C. Kapsambelis 5/05/2006 at 10:28:19 AM