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What the Sam's Club Announcement Means

Sam's Club's letter confirms the company's commitment to EPC RFID technology, gives suppliers additional time to meet the tagging requirements wisely, and should also serve as a wakeup call to all other retailers.
By Mark Roberti
Jan 19, 2009One year ago, Sam's Club, the wholesale division of Wal-Mart, announced plans to track sellable units—50-pound bags of kitty litter, oil drums and everything else in its wholesale clubs—with RFID tags based on Electronic Product Code (EPC) standards, starting in October 2009 (see Sam's Club Tells Suppliers to Tag or Pay).

As I wrote back then, it was a very aggressive timetable (see Sam's Club Letter Shakes Things Up). Now, Sam's Club has sent a letter to its suppliers indicating they will have additional time to comply (see Sam's Club Provides Clarity on EPC RFID Plans). What does this mean for the adoption of EPC RFID technology?

No doubt, many will read about the announcement and conclude that Sam's is backing off from EPC RFID adoption. We saw this same phenomenon when Wal-Mart refocused its EPC RFID efforts. Even though Wal-Mart continues to work with suppliers to quantify the technology's benefits, the press has presented this as "backing off" from its plans to employ EPC RFID to improve its supply chain operations. Those who jump to the erroneous conclusion that EPC RFID does not deliver value in the retail supply chain should examine the issue more carefully.

I think the letter is good news, for several reasons. First, it states that Sam's Club has installed EPC RFID interrogators at the receiving doors, sales floor transition areas and box crusher areas of all 599 of its clubs. It's highly unlikely Sam's would invest in that much hardware if senior management wasn't convinced the technology would deliver benefits.

Second, Sam's Club has stated that it's working on EPC RFID-enabled checkout registers, which explains its focus on sellable units. If everything in the club is tagged, Sam's members will be able to zip through checkout lanes. As someone who detests standing in line at a store, I can tell you this is one application that will have a huge impact on EPC RFID adoption in retail stores. When customers flock to Sam's Club for the ease of checking out, all other retailers will examine whether they can provide the same benefit to their patrons as well.

Third, and most importantly, the letter states Sam's Club wants to quantify the benefits of pallet and sellable-unit tagging, both to itself and to its suppliers. In my opinion, this more collaborative approach is the right way forward. Suppliers will always push back if they believe they must bear all of the costs while the retailer receives all of the benefits. If Sam's can show suppliers they, too, will benefit, then those suppliers will be more likely to go along with the plan.

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