Sam’s Club Reduces Tagging Fee

By Mark Roberti

Wal-Mart Stores' warehouse retail chain will charge suppliers 12 cents, instead of $2.50, for each pallet of goods it receives without an EPC RFID tag.

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Sam’s Club, the warehouse retail division of Wal-Mart Stores, has informed suppliers, in a letter sent last week, that it has reduced the fee for each pallet it receives without a radio frequency identification tag. The retailer will now charge 12 cents, instead of the previously announced $2.50, to place an RFID tag based on Electronic Product Code (EPC) standards on any pallet shipped to its distribution center in DeSoto, Texas.

The reason for the service fee reduction, according to Simon Langford, Wal-Mart’s director for EPC and RFID technologies, is that the retailer has integrated EPC RFID tagging into its own operations, so the cost to Sam’s Club is minimal. The firm has also announced that it will give suppliers additional time to comply with the tagging requirements (see Sam’s Club Provides Clarity on EPC RFID Plans).

In a previous letter sent in January 2008, Sam’s Club had told suppliers they would be required to tag pallets shipped to its DeSoto DC starting at the end of that month, and that they would initially be charged a service fee of $2 per untagged pallet, with that fee rising to $3 by the beginning of this year. The charge was intended to cover Sam’s Club’s labor and tag costs (see Sam’s Club Tells Suppliers to Tag or Pay). But during 2008, Sam’s integrated EPC RFID tagging with its existing process, thereby greatly reducing the costs involved.

When pallets arrive at any of its 22 DCs, Sam’s Club places a label with a bar code and human-readable information on each one (in addition to the shipping label applied by the supplier) so it can track the pallets as they are shipped to and moved within the clubs. When it first began tracking pallets with EPC RFID, both a bar-code label and an EPC RFID tag were affixed to the pallets.

Now, when a pallet arrives at the DeSoto DC, if it already has an EPC RFID tag applied by the supplier, RFID interrogators at the receiving door read that tag, and software instructs the inventory management system to generate a tracking label without an EPC RFID transponder encoded. If the pallet is not tagged, the system scans its bar-coded shipping label, generates an EPC RFID label and associates that label’s EPC number with the bar code. The RFID label is then applied to the pallet just as the bar-code label is applied in other DCs, so there is no additional labor cost.

When a DC ships a pallet to a club, or when the latter receives a pallet or brings it out to the sales floor, the EPC RFID tag is read. Its data is then captured and made available to the supplier via Wal-Mart’s Retail Link extranet.

“Twelve cents is our net cost,” Langford states. “That’s a powerful message for anyone out there starting to look at EPC technology. You can tag cheaply if you integrate into your existing processes.”

Although it would be cheaper for most suppliers to pay the 12 cents than to tag for themselves, Langford believes some suppliers will want to continue tagging their products so they can track the pallets in their own operations and realize internal benefits, thus adding to their own overall benefits.

This year, Sam’s Club will test additional applications that take advantage of pallet tags, with the aim of rolling them out chain-wide in 2010. But before that rollout begins, the company noted in last week’s letter to suppliers, the warehouse retail chain plans to reexamine the charge for tagging pallets, “based on the value the applications deliver to [suppliers].”