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Wal-Mart Lays Out RFID Roadmap

The world’s largest retailer gave suppliers details on its RFID requirements, including the type of tags, accuracy rates, labeling, data formats and other critical issues. RFID Journal provides the complete picture.
By Bob Violino
Tags: Retail
Nov 10, 2003—Ever since Wal-Mart first began telling its suppliers that it would require them to put RFID tags carrying Electronic Product Codes (EPCs) on products beginning in January 2005, suppliers, other retailers, industry observers and journalists have been speculating about what exactly that would mean. Last week, Wal-Mart spelled it out in great detail for a group of its top suppliers gathered outside the retailer’s Bentonville, Ark., headquarters.
Reducing out of stocks could boost sales by as much as $1 billion

The meeting was by invitation only, and the companies that attended had to commit to meeting Wal-Mart’s January 2005 deadline to begin tagging pallets and cases. The 400-odd attendees included representatives from Wal-Mart’s top 100 suppliers, plus another 26 companies that voluntarily agreed to meet the January 2005 deadline.

The group gathered at a hotel in Springdale, Ark., on Nov. 4. Starting at 8:30 a.m., Wal-Mart brought out senior executives to explain why the retailer was pursuing RFID tagging. Vice Chairman Tom Coughlin said: “Yes, we’re pushing. We’re not apologizing for that. The reason we are pushing is [RFID] is the future and it’s here. There is always someone knocking at our doors, trying to take away our customers. We have to do this.”

Mike Duke, president and CEO of Wal-Mart Stores, said: “What we see with RFID is an infrastructure breakthrough. We are very committed to it.” Several executives stressed that RFID is only going to work if it benefits suppliers as well as Wal-Mart. They said Wal-Mart doesn’t advocate a “slap and ship” approach to compliance, meaning suppliers shouldn’t just slap a label on to meet Wal-Mart’s needs. They should look for a return on investment within their own operation. One supplier present says this was not just Wal-Mart making nice. “They realize that higher costs anywhere in the supply chain doesn’t help them,” he says.

Wal-Mart executives said that the retailer would assign a “sponsor” to each of the 126 companies represented. These sponsors will answer questions and work with the suppliers to help them meet the RFID tagging requirement. The executives also explained what Wal-Mart sees as the key benefits for both Wal-Mart and its suppliers. The two major benefits are visibility and reducing the number of times product is not on the shelf when the customer wants it.

Executives explained that Wal-Mart truly believes that RFID technology will help improve its ability to keep products in stock. They said that Wal-Mart’s products are currently in stock better than 99 percent of the time (an extraordinarily high number considering that the company sold $245 billion worth of goods during fiscal year 2003). But they said if the company could get to 100 percent product availability, that would be more than $1 billion in additional sales. The additional sales would also mean more revenue for suppliers.

Wal-Mart wants to move from being “reactive to pro-active on out-of-stocks.” They also believe that RFID technology will enable it to use fewer workers to manage inventory and out-of-stocks, because readers in the back room would indicate where needed product is stored.

After the highest-level executives explained Wal-Mart’s goals, Linda Dillman, CIO, and Rollin Ford, executive VP of logistics, spoke to suppliers. Simon Langford, head of Wal-Mart’s RFID efforts, and his team, which oversees hardware, software and other aspects of the project, gave the suppliers some basic information about RFID and then spelled out the details of what Wal-Mart expects in terms of RFID compliance.
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