A New Kind of ‘Mandate’ For 2009

By Mark Roberti

Wal-Mart and Sam's Club are likely to push RFID adoption this year, but expect them to take a collaborative approach.

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When Wal-Mart announced plans to require its top 100 suppliers to put RFID tags based on the Electronic Product Code (EPC) standard on pallets and cases starting in January 2005, it was widely criticized for being heavy-handed. Later, the media accused Wal-Mart of “backing off” its RFID mandate. In other words, it wasn’t forcing suppliers to tag quickly enough. Wal-Mart and its Sam’s Club wholesale division are eager to move ahead with their RFID plans, but they’re reluctant to force suppliers to tag more units, particularly in the current economic climate. So you can expect the retailer and wholesaler to take a collaborative approach in 2009.

Wal-Mart has been working with some of its top suppliers on a large-scale test to determine if tagging all cases in a particular category improves perpetual inventory and, therefore, sales. An initial trial with air fresheners in eight stores indicated that when RFID was used with conventional adjustment tools, it did improve overall accuracy of perpetual inventory. The study didn’t measure improvement in sales, but the expectation would be that better inventory accuracy would lead to increased sales for all suppliers.

If the expanded study confirms improvements in inventory accuracy, Wal-Mart hopes more suppliers will agree to tag more cases because they’ll see increases in sales, which would help offset the cost of applying tags. The study should be completed in February, and the results announced soon after.

Sam’s Club is also eager to encourage—rather than force—suppliers to tag sellable units. In a teleconference with suppliers in late December, Sam’s Club said that it remains committed to deploying EPC RFID at the sellable-unit level, but, according to two suppliers on the call, it did not say definitively that it was sticking to its original timetable or extending the deadline.

One supplier told RFID Journal that he and others had proposed studying the potential benefits for suppliers and that Sam’s Club had reacted positively. “They’re eager to show their suppliers that all the benefits don’t accrue just to Sam’s Club—there are benefits for us, too,” said the supplier, who requested anonymity.

It will likely be midyear before the results of any meaningful study for Sam’s Club are completed, but if the results of both the Sam’s Club and Wal-Mart studies show significant benefits for suppliers, that could provide a dramatic lift for the use of EPC technologies and standards to track goods in the open supply chain. The volume of tagged goods would begin to increase at a more rapid pace, which would lower prices for tags and readers, and that, in turn, would further improve the cost-benefit ratio for suppliers.

RFID Journal does not expect to see a rapid change in the market. Given the slowdown in consumer spending in the United States, companies are going to weigh all new investment decisions carefully. But we do expect to see more tagging activity in Wal-Mart and Sam’s Club supply chains, and maybe the mainstream media will even praise the retailer and wholesaler for taking a collaborative approach with suppliers.