Wal-Mart asks top vendors to tag cases, pallets with RFID - Business news: business trends people - radio frequency identification

Food & Drug Packaging, August, 2003 by Lisa McTigue Pierce

Wal-Mart Stores Inc. is investing in radio frequency identification (RFID) and electronic product code (EPC) technology to improve efficiencies in its supply chain.

Wal-Mart's plan includes urging its top 100 vendors--leading consumer product goods (CPG) companies such as Procter & Gamble, Kraft, Johnson & Johnson and Unilever--to label pallet loads and individual cases with EPC-compliant RFID tags by January 2005. Information encoded into these tags will enable Wal-Mart to automatically track and quickly process products through its 108 U.S. distribution centers (DCs).

Wal-Mart spokesperson Tom Williams explains how the company will benefit from RFID. "Last year from January to June we moved more than 2 billion boxes. Much of our product is in and out the door on the same day. We do track via bar code and scanner now, but RFID takes tracking to a much higher level. It's a tool that adds a great deal to inventory control, but it will take us beyond that, with more data to help us further define trends, and seasonal issues, for example. We really can't have enough data at Wal-Mart. RFID will give us that."

Wal-Mart's RFID implementation schedule is:

* Second quarter 2003: Announce and define the scope of the pallet-case level implementation.

* Third quarter 2003: Test interoperability of EPC-compliant readers and tags.

* Third to fourth quarter 2003: Officially brief suppliers on EPC.

* 2004: Test implementation strategy.

* Jan. 2005: Go live with targeted vendors.

* 2005/2006: Roll out case/pallet level RFID strategy with all vendors.

Some say this timetable is too aggressive, that available RFID products currently fall short of needed volume, and that the cost and effort is more than most CPG companies can bear. Creating an entire infrastructure around EPC-compliant RFID technology will be expensive and time-consuming, but supporters point out that the long-term benefits may surpass the impact of the bar code.

Wal-Mart's payoff could be substantial. It's estimated that the retailer's supply chain costs are about 10% of overall sales. Analyst Pete Abell from AMR Research says RFID could save as much as 7% of those costs annually. Based on 2002 sales figures, that's at least $1.3 billion.

Before Wal-Mart can realize these savings, it must first invest in RFID readers and the middleware (software support) to handle the collected data. How much it will cost Wal-Mart to implement its RFID strategy? "This would be proprietary," says Williams. "We would not share that."

Initially, Wal-Mart's RFID plan even included a test with Gillette of EPC-labeled products at the shelf level in a store in Brockton, Mass., a Boston suburb. But Wal-Mart cancelled its trial of a "smart shelf" to focus instead on installing RFID systems in warehouses and distribution centers.

Tag--you're it ...

A number of suppliers of RFID technology and products say they're ready to help Wal-Mart's vendors comply. Tom Coyle, vice president of supply chain solutions at Matrics Inc., says, "I love [Wal-Mart's] ambitious schedule. Let's get into the action phase. We can improve a lot of things that need improving." Coyle explains that Wal-Mart has built its reputation on supply chain efficiencies. It's those savings that help the company deliver on its promise of "Always Low Prices."

The retail giant's latest move reaffirms its leadership position. According to Dr. Clive Hohberger, vice president of technology development at Zebra Technologies, "Wal-Mart's backing of this program will be the catalyst that drives consumer goods manufacturers, logistics providers and other retailers to establish RFID programs and begin developing the new processes that deliver on the value of this technology."