Walmart Tries RFID Again

By Mark Roberti

A decade after pulling the plug on the technology due to a lawsuit, the retailer is implementing radio frequency identification technology once again.

Walmart first looked into radio frequency identification in the mid-1990s. I was told by sources at the company (who are no longer there) that an outside consulting firm—I believe it was  McKinsey—had studied Walmart's operations and had informed senior management that it could save millions of dollars annually with better supply chain tracking and visibility, and that RFID might be the right technology for that task. When the  MIT Auto-ID Center proposed a low-cost passive UHF RFID tracking system in 1999 and early 2000, Walmart jumped on board.

Pilots conducted at Walmart's distribution centers and stores throughout 2002 and 2003 confirmed that the technology could indeed provide accurate, real-time data about where pallets and cases were in the supply chain, and that this could reduce costs while simultaneously decreasing out-of-stocks and boosting sales. Walmart then announced, in June 2003, that its top 100 suppliers would be required to start tagging pallets and cases starting in early 2004 (see  Walmart Draws Line in the Sand, Walmart Spells Out RFID Vision, Walmart Expands RFID Mandate, Walmart Details RFID Requirement and  Does Walmart Use RFID?).

There was a lot of hype around RFID at that time. Articles were written predicting the technology would transform the supply chain. A few other retailers, including Albertson's and Target, joined the Auto-ID Center, but none issued mandates. From 2005 to 2007, Walmart was mostly alone in requiring suppliers to tag shipments. This created extra costs for suppliers, which had to maintain separate tagged inventory for Walmart. Some complained that Walmart was not acting on the RFID data (Walmart shared the data with the top suppliers). Pallets would remain in the warehouse and cases in the back of the store, while shelves remained low on inventory.

The financial crisis exploded in late 2008, and shortly thereafter Procter & Gamble announced it would stop tagging for Walmart because the retailer was not using the RFID data to make sure point-of-sales displays were put out on time. Walmart soon backed off its requirements and began looking at internal uses for the technology. It started to tag jeans and men's basics, which shifted the focus of retailers from tagging pallets and cases to tagging items (see  Walmart Relaunches EPC RFID Effort Starting With Men's Jeans and Basics).

In 2013, a patent company called Roundrock Research sued Walmart and other users of passive UHF RFID for patent infringement. Roundrock asked for a share of the financial benefits from technology's use. Most of the people I talked to thought it was not a big deal (see  Patent Lawsuit Not a Major Issue for RFID). They said the providers of the technology would eventually reach deals to license the patents and protect their customers, which they did.

However, an outside lawyer hired by Walmart recommended the company stop using RFID technology to protect itself from being sued. I'm told those within the company vociferously disagreed with this decision, but that management nonetheless played it safe and stopped using RFID. This was interpreted by other retailers as a sign the technology didn't work, which was a huge setback for the industry.

Walmart is now circling back to the technology (see  Walmart Re-Commits to RFID with Supplier Mandates). This is no surprise to those who once worked on Walmart's RFID efforts. They always knew the technology worked and could deliver profound benefits. Whether or not Walmart will remain committed to what needs to be a sustained, focused, long-term effort is the question.

In chatting with RFID solution providers throughout the past week, I've noticed a common view of this new development. Many see Walmart coming back to RFID as a possible positive. It could create huge demand for tags and readers, as suppliers ramp up to meet the tagging requirements. But they are fearful that Walmart could make another U-turn and do further damage to the industry.

My hope, of course, is that the retailer has learned from both its past successes and its missteps, and that it will deploy the technology successfully—first in home goods, and then throughout its stores.

Mark Roberti is the founder and editor of RFID Journal.