Retail EDITOR'S NOTE
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Taking RFID's Temperature
So why the disconnect? Shouldn't the vendors be happy that some of the biggest companies among Wal-Mart's top-100 suppliers now believe RFID can deliver a return on investment? You'd think so, but that wasn't necessarily the case. Vendors are annoyed by how long it is taking most companies to figure out where the benefits are and how to change their business processes. "I never thought the year of the pilot would last three years," one vendor complained.
I understand their frustration—particularly the pure-play hardware companies. They depend on volume to make money, and people just aren't buying tens of thousands of interrogators and tens of millions of tags—even the companies that see value in RFID. I'll explain why.
During the question-and-answer session of my panel, we discussed how Wal-Mart and its suppliers will work together to reduce out-of-stocks. I asked Langford the following question: "When you are testing in five stores, the supplier can see the data showing the product is in the back of the store and not on the shelf. The supplier can call the stores and get it moved to the front of the store. But, obviously, that is not a solution that is going to scale when you have hundreds of suppliers monitoring the situation in thousands of stores. So what technology and business processes do you put in place to ensure that you can react to the data and make sure the product is there?"
He said candidly that these are issues Wal-Mart is working through, and that it's a big issue that won't be solved overnight. Wal-Mart's suppliers need to change their technology and business processes, and Wal-Mart needs to do the same. Only when Wal-Mart and its suppliers together figure out what technologies and processes will enable them to react to RFID data and move product to where it needs to be will it make sense to rapidly scale up the number of SKUs being tagged.
I don't know how long that will take. No one does. So I understand the concern among vendors and the challenge they face: They are investing in new hardware and software to meet customer needs, but they are not getting the volume purchase they need to make those investments pay off. They need to manage this period carefully so that they are engaging customers and building their brands, but they also have to make sure they have enough cash to sustain those efforts until volumes pick up. Some will get it right and reap huge rewards when adoption ramps up. Others will get it wrong and won't be around—at least in their current incarnation—when the ramp-up occurs.
Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below.
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I understand their frustration—particularly the pure-play hardware companies. They depend on volume to make money, and people just aren't buying tens of thousands of interrogators and tens of millions of tags—even the companies that see value in RFID. I'll explain why.
During the question-and-answer session of my panel, we discussed how Wal-Mart and its suppliers will work together to reduce out-of-stocks. I asked Langford the following question: "When you are testing in five stores, the supplier can see the data showing the product is in the back of the store and not on the shelf. The supplier can call the stores and get it moved to the front of the store. But, obviously, that is not a solution that is going to scale when you have hundreds of suppliers monitoring the situation in thousands of stores. So what technology and business processes do you put in place to ensure that you can react to the data and make sure the product is there?"
He said candidly that these are issues Wal-Mart is working through, and that it's a big issue that won't be solved overnight. Wal-Mart's suppliers need to change their technology and business processes, and Wal-Mart needs to do the same. Only when Wal-Mart and its suppliers together figure out what technologies and processes will enable them to react to RFID data and move product to where it needs to be will it make sense to rapidly scale up the number of SKUs being tagged.
I don't know how long that will take. No one does. So I understand the concern among vendors and the challenge they face: They are investing in new hardware and software to meet customer needs, but they are not getting the volume purchase they need to make those investments pay off. They need to manage this period carefully so that they are engaging customers and building their brands, but they also have to make sure they have enough cash to sustain those efforts until volumes pick up. Some will get it right and reap huge rewards when adoption ramps up. Others will get it wrong and won't be around—at least in their current incarnation—when the ramp-up occurs.
Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below.
