Aug 01, 2006"This is absolutely a global directive for Wal-Mart."
That sentence was spoken back in June 2003 by Linda Dillman, then CIO of Wal-Mart, when she announced that Wal-Mart would require its top 100 suppliers to begin tagging pallets and cases in January 2005. Dillman indicated that Wal-Mart would quickly move to implement Electronic Product Code technology in Europe and then in the rest of its international operations.
Wal-Mart has not moved aggressively on the international front. One reason, perhaps, is that the first-generation EPC tags and interrogators didn't perform well in Europe. But in June, Wal-Mart announced plans for its first RFID trial outside the United States-albeit closer to home, in Canada, where the RF regulations and supply chain operations are similar to those in the United States.
Wal-Mart Canada said it plans to launch an RFID pilot this fall with about 16 suppliers to track products through the supply chain. The pilot will involve Wal-Mart Canada's Mississauga distribution center and 20 of its Wal-Mart stores in southern Ontario. (Wal-Mart has 272 stores in Canada.)
The pilot is similar to the case and pallet tracking Wal-Mart is doing in the United States. Suppliers will apply EPC Gen 2 tags to cases and pallets of goods before shipping them. The tags will be read when a shipment reaches the Wal-Mart distribution center, when pallets and cases are shipped from the DC to individual Wal-Mart stores, in the hallway leading from the back-room storage area to the sales floor, and at the store's trash compactor and cardboard box bailer, the end of the supply chain.
The pilot is expected to run through 2007. Wal-Mart has not said what the next phase of the pilot will be. There are rumors in Canada that Wal-Mart will announce a mandate for its Canadian suppliers in September, but Wal-Mart denies that. "Right now, we have no plans beyond the pilot," says Christi Davis Gallagher, a spokesperson for Wal-Mart Canada. "And we have no plans to issue an RFID mandate. Tagging will be strictly voluntary."
Wal-Mart is taking a "measured approach" in Canada, Gallagher says. "We're not in a hurry to roll it out chain-wide. We're learning from what they've done in the United States. We know RFID will help us to improve on-shelf availability for our customers. But we'd rather be right than fast."
Still, it's likely that other retailers around the world will scrutinize Wal-Mart's pilot in Canada. They know that Wal-Mart has focused on international expansion in recent years. In December, Wal-Mart acquired a majority interest in Seiyu, a leading Japanese retail chain with 405 stores. The same month, Wal-Mart announced the acquisition of 140 Sonae stores in Brazil. And Wal-Mart Canada confirmed the company would build new stores next year.
Last September, Wal-Mart purchased a one-third interest in Central American Retail Holding Co. (CARHCO), with 363 supermarkets and other stores in Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua. In March, Wal-Mart increased its interest to 51 percent and changed CARHCO's name to Wal-Mart Central America. Wal-Mart also announced that it plans to open 230 new international stores by Jan. 31, 2007.
Wal-Mart International operates more than 2,650 retail stores and employs more than 500,000 associates in Argentina, Brazil, Canada, China, Costa Rica, El Salvador, Germany, Guatemala, Honduras, Japan, Mexico, Nicaragua, Puerto Rico and the United Kingdom. The retailer doesn't have a dominant position in any international retail market, the way it does in the United States. But Wal-Mart's international stores purchase goods in 70 countries, so the introduction of RFID in its international supply chain could give it a competitive advantage in overseas markets and improve the profitability of these operations.
One thing is clear: If Wal-Mart starts to roll out RFID internationally, it would spur adoption among local suppliers and encourage other retailers in those markets to begin exploring the technology. Loblaw Companies—Canada's largest food distributor and a provider of general merchandise and drugstore products—has already launched an RFID pilot.