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Sam's Club Wants Item-Level RFID Tagging by 2010

More details have emerged about the RFID requirements letter Sam's Club sent to its suppliers on January 7, 2008. The warehouse-format retail chain wants all merchandise to carry RFID tags at the sellable unit (item) level by the end of October 2010 and on all cases a year earlier.
Jan 14, 2008This article was originally published by RFID Update.

January 14, 2008—Sam's Club has told its suppliers to apply RFID tags to individual products by October 31, 2010. That is one of several new RFID requirements that Sam's Club communicated to suppliers in a letter dated January 7, 2008. Other requirements include case-level tagging by October 31, 2009, pallet-level tagging by the end of next January, and service fees ranging from $2 to $3 per pallet that will be charged to suppliers who do not include RFID tags as instructed. The requirements are believed to apply to most if not all of Sam's Club's suppliers, with no allowances made for low-cost or low-margin products.

Sam's Club has more than 580 stores and 47 million members in the US alone. Its item-level tagging program will likely impact more locations, consumers, and products than any other currently announced initiative. Other retailers have focused their item-level tagging programs only on limited product categories or locations. The US Department of Defense requires RFID pallet tagging, but is not expanding its requirements as quickly as Sam's Club, particularly for lower packaging levels.

RFID Update first reported the new pallet tagging requirements last week (see Sam's Club Suppliers May Face RFID Fines from Wal-Mart). Additional Sam's Club providers then came forward and provided details about the case- and unit-tagging requirements. Sam's Club declined to comment on the specifics of its RFID program or requirements when contacted by RFID Update last week. Suppliers provided information on the condition of anonymity.

Pallet, case, and item (aka, "sellable unit") tagging requirements will each take effect in three phases. The first phase applies to products shipped to the Sam's Club distribution center in DeSoto, Texas. The next phase adds four additional DCs, and the final phase expands the requirements to 17 more.

By the end of next year, all shipments to Sam's Club DCs should be tagged at the pallet and case levels, and by late 2010 all merchandise should be tagged at the sellable-unit level as well. Many products sold at Sam's Club are only available in multi-packs or bulk, so tagging at the sellable-unit level does not necessarily require tagging each item within the package.

Sam's Club intends to track all goods in its DCs with RFID, and will apply RFID tags itself if suppliers do not provide them. Suppliers who do not apply tags by their deadline will be assessed a $2 service charge per pallet, which escalates to $2.50 and then to $3, based on how long the supplier is out of compliance with requirements.

"They are very clearly incenting people to get on with tagging themselves," said Dean Frew, CEO of Xterprise, the Carrollton, Texas-based solutions provider familiar with the Sam's Club requirements and which has provided tagging solutions to numerous suppliers. Frew said it will be much more cost effective for suppliers to tag their own products rather than paying $2 to $3 to Sam's Club. "The service charge makes it attractive for suppliers to find a solution provider and get an RFID system in place. Companies can do tagging a lot cheaper themselves than by paying the service charge."

The fact that Sam's Club, which is a Wal-Mart company, intends to pursue full item-level tagging by 2010 is a major industry development, and a decidedly positive one from the vendors' perspective (though not necessarily from the suppliers'). It also comes as somewhat of a surprise. Recall that last year Wal-Mart seemed to pare down its historically broad RFID ambitions by announcing a new "focus" on a select few opportunities (see Wal-Mart's RFID Refresh). That the company now plans to go item-level in its Sam's Club chain is an indication of the giant retailer's commitment to the technology.
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