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Déjà Vu All Over Again

As they did with Wal-Mart, many suppliers are assuming Sam's Club will back off its EPC tagging requirements.
By Mark Roberti
I believe Sam's Club will adjust its rollout plan based on feedback from suppliers, as well as its own experience in deploying the technology. The company might initially focus on a smaller set of suppliers, or on a smaller set of sellable units (a category-by-category rollout would make sense to me). So some suppliers might have additional time to get up to speed, but I would be shocked if Sam's Club dramatically scales back or abandons the rollout entirely.

There are a couple of reasons I say this. First, Sam's Club did not go into this blindly. When Wal-Mart launched its EPC efforts in 2003, no one yet had real experience with ultrahigh-frequency UHF RFID or open supply chain applications. Five years later, however, Sam's Club has a wealth of learnings from which to draw upon—from the Wal-Mart team, and from the suppliers that have worked with Wal-Mart.

Second, although Sam's Club's plan is more ambitious than Wal-Mart's in that it focuses on sellable units (individual items in multiple cases) rather than on cases, there are factors that make the Sam's rollout easier. Sam's Club has fewer suppliers than Wal-Mart, and it carries fewer stock-keeping units (SKUs). That means there are fewer suppliers to bring on board, and far fewer products to figure out how to tag—and how to gain benefits from tagging them.

In many instances, suppliers have created special SKUs—a 12-pack of razor blades, for instance, or a 42-ounce bottle of ketchup—that they sell only to Sam's, or to a couple of other stores (BJ's and Costco). Managing tagged inventory of a special SKU for one of three retailers is easier than for an SKU sold to dozens, or even hundreds, of retail partners.

Some companies that sell low volumes to Sam's could possibly get away with a slap-and-ship approach, but for those selling high volumes, the labor costs will be too high. Having special SKUs makes it easier to adopt an automated approach to tagging, because you don't have to worry that a tiny percentage of your output needs to be tagged. All of it, or at least a good portion of it, can be tagged.

USER COMMENTS

William James 2008-09-12 10:47:41 AM
Sam's Club Initiative Mark, Very good analysis of the Sam's Club initiative. I'd on suggest that one of the incentives to help the suppliers really push hard to item level tagging is the payback they will get by gaining visibility to their product moving through the Sam's Club supply chain. By actually seeing what products are coming out of the store or off the shelf and displays they will have a much more accurate count on their inventory positions they need to maintain upstream. The problem they are all chasing is the out of stocks which they solve by moving product into the DC's so it's readily available for shipment into Sam's. This stuffing of the supply chain is costing them millions in inventory capital. Additionally, having visibility to the item level data helps them to better fine tune their promotions and category management. This is especially important when a supplier runs a promotion with Sam's, the execution is critical to the success of the promotion and today they have no real "in-store" data to tell them if they met their marks. By having access to the item level data that hopefully will be shared back with them they can better tune their supply chains which will save millions on fuel and transportation, packaging, shipping, and other sustainability goals they are trying to meet. Sam's should help the suppliers by giving them access to the data at the item level so they can feed it back into their production planning systems. At that point they will start to realize the ROI's they so rightly long for. Bill James VP Business Development Seeonic Inc. www.seeonic.com

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