Wal-Mart Takes a New Approach to RFID

Here are five reasons the retailer's efforts will be more successful this time.
Published: July 26, 2010

Last week, Wal-Mart Stores announced that it planned to refocus its efforts to track goods with radio frequency identification technology based on EPCglobal‘s second-generation ultrahigh-frequency (UHF) standard (see Wal-Mart Relaunches EPC RFID Effort, Starting With Men’s Jeans and Basics and Privacy Nonsense Sweeps the Internet). Some skeptics, no doubt, will say, “Here we go again.” Wal-Mart (including its Sam’s Club division) has twice before announced initiatives that did not pan out. Here is why this time should be different.

1. Wal-Mart is now focused on where Electronic Product Code (EPC) technology can deliver the most value.

The initial EPC efforts didn’t distinguish between fast-moving consumer goods that are often out of stock, for instance, and slower-moving consumer goods that are rarely out of stock. All suppliers were asked to tag. That was, in part, because Wal-Mart was just launching its EPC effort, and didn’t know what it didn’t know. The new effort is based on five years of working with EPC technology in stores. Wal-Mart now understands that the greatest benefits come in using EPCs to ensure that products that come in many variations are always in stock.

2. Business managers are driving the effort.

Wal-Mart’s initial RFID effort began within its IT department, and was driven from the top of the organization. Now the effort is being driven by the business side, and rather than force all departments to use RFID, even if it provides little value today, Wal-Mart is letting business managers within departments determine when it makes sense to begin working with suppliers to tag products. This means that when an initiative is launched to tag a new product category, that project starts with buy-in from the business managers, and they, in turn, ensure the tags are used to improve the way stores operate.

3. Wal-Mart is taking a more collaborative approach with suppliers.

Wal-Mart’s initial case- and pallet-tagging efforts didn’t fly, in part, because other retailers didn’t jump on board, and because there was more pushback from suppliers than expected. Suppliers saw RFID as an additional cost. Wal-Mart believed that once suppliers understood the benefits of increased supply chain efficiencies, they would tag willingly. That never really happened, and the retailer didn’t want to force suppliers to take on an additional expense, especially after the economy went into a tailspin. Wal-Mart knew it could achieve benefits from tracking tagged goods, but they weren’t great enough to offset the cost of alienating suppliers and getting hammered by the press. This time, the retailer is working with suppliers more closely. Some might still push back, but it will be harder to do so if other suppliers agree to work with Wal-Mart to track goods across the supply chain.

4. Wal-Mart is eating its own dog food.

Wal-Mart will be buying tags and placing them on its private-label apparel items, including Faded Glory jeans. It can then share the benefits it achieves and the business process changes it makes in its supply chain with other suppliers. If the benefits are significant—and I believe they will be—that should encourage more suppliers to jump on board. At the very least, Wal-Mart will gain a deeper understanding of the issues suppliers face when tagging individual items.

5. Wal-Mart has a clearly thought-out plan and is taking steps to implement it.

When Sam’s Club, in January 2008, announced plans to require its suppliers to tag sellable units by Oct. 31, 2010, it was clear to me that this just wouldn’t be possible. Figuring out how and where to tag more than 100,000 different products was a monumental challenge. This time, Wal-Mart has begun with a smaller group of products, and put in place specific plans for how and where to tag them. I know, from speaking to label makers, that the retailer has been getting highly detailed information on the cost of tags, for example, and it is sharing information on projected volume with label makers, in order to help suppliers get the best price for their tags. I also know, from speaking with vendors, that Wal-Mart is purchasing the RFID readers needed for this project. Sam’s Club bought some interrogators, but to my knowledge, it never outfitted forklift trucks with them as planned. This time, the preparation work is clearly well underway to make the effort succeed.

Next week, I will explain what I think this news means for the adoption of RFID in the apparel sector, as well as in other industries.

Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark’s opinions, visit the RFID Journal Blog or the Editor’s Note archive.