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Putting Wal-Mart's Apparel Tagging in Context

Here's what the news that the retailer is tracking inventory of men's jeans and basics means for EPC RFID adoption.
By Mark Roberti
Aug 02, 2010In 2003, when Wal-Mart Stores announced plans to have its top 100 consumer packaged goods (CPG) suppliers tag pallets and cases starting in January 2005, it seemed to signal the widespread adoption of radio frequency identification technology in the global supply chain—but it didn't happen. Now, Wal-Mart has announced that it is tracking inventory of men's jeans and basics with RFID based on EPCglobal's second-generation ultrahigh-frequency (UHF) standard (see Wal-Mart Relaunches EPC RFID Effort, Starting With Men's Jeans and Basics). Does this herald widespread adoption?

Before I answer that question, let's examine why Wal-Mart's 2003 announcement didn't lead to widespread use of EPC RFID in the global supply chain. I believe Wal-Mart expected more retailers to see the benefits of tracking goods with RFID, and that there would be a momentum that would lead to widespread use of the technology. That wasn't the case. Target and a few others jumped on board, but it seemed they were more interested in keeping abreast of what Wal-Mart was doing than in driving adoption.

As a result, Wal-Mart was forced to go it alone. And as such, suppliers pushed back. EPC RFID was seen as an additional cost, and suppliers would have to manage separate tagged inventory for Wal-Mart. So the retailer had two choices: Force suppliers to tag only for Wal-Mart, regardless of the complaints, pushback and negative press, or take a step back and rethink how it could use RFID internally, and in areas where the benefits were so significant that suppliers would be willing to work with Wal-Mart to tag at the point of manufacture.

Sam's Club began tagging pallets and charging suppliers a nominal fee (see Sam's Club Tells Suppliers to Tag or Pay) and using the tags internally (I don't know if they still are). Wal-Mart continued to track the products that CPG companies tagged, but it also began looking at using EPC RFID on some of its private-label products, such as Faded Glory jeans.

Wal-Mart realized there were significant benefits to using EPC RFID technology on products with many variations, which makes inventory management a challenge. Jeans was one example, as companies need to manage, size, style, color and fit. In my interview with Myron Burke, who heads Wal-Mart's domestic EPC RFID efforts, he also mentioned tires and some electronics products in addition to apparel items. Think about laptops, for instance—there could be a number of variations, including models with different processors, hard drives, graphics cards and so forth.

Wal-Mart decided to start with men's jeans and basics, and to add new categories if and when it makes business sense to do so. Then, it will work with its suppliers to tag at the point of manufacture, so that both Wal-Mart and the suppliers will benefit. Just the two current categories will account for 250 million tags annually. That will make it one of the biggest—if not the largest—EPC RFID projects to date. And that's important news.

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