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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, 2007Wal-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."


Wal-Mart's Simon Langford
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."

USER COMMENTS

Gabrielle Lopez-Robles 2007-02-22 10:48:02 AM
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.
Ken Rohleder 2007-02-22 11:01:55 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?

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