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|What Is the Status of Wal-Mart’s RFID Efforts? |
By Steve Banker
Service Director, Supply Chain Management
ARC Advisory Group
ARC conducted research on best practices for RFID (Radio Frequency Identification) deployment in which ARC talked to 24 companies that were actively investing in EPC (Electronic Product Code) RFID. We discovered that public reporting on the status of Wal-Mart’s RFID efforts has been highly misleading. The impression conveyed to the public by many pundits is that all Wal-Mart SKUs bound for three of the retailer’s Texas Distribution Centers from the top 100 suppliers will be RFID tagged starting January 1st. This is incorrect. In fact, there were a set of negotiations between Wal-Mart’s top 100 suppliers and the retail behemoth. In these negotiations, Wal-Mart has shown more flexibility than many anticipated.
Wal-Mart mandated that by January 2005 its top 100 suppliers must apply passive RFID tags based on EPC-global standards to cases and pallets headed toward three specific Distribution Centers (DCs) in Texas. Virtually all manufacturers of consumer goods will eventually be impacted by this because Wal-Mart’s moves in RFID are being copied by other retailers.
A Soft Mandate Based on Ongoing Negotiations
Different suppliers negotiated a wide range of agreements. One large supplier will be shipping over 700 Stock Keeping Units (SKUs) starting on January 1st. Many other companies, even very large companies, will be shipping less than a dozen.
Further, January 1st was not always the deadline. There have been extenuating circumstances that have led Wal-Mart to grant a deferment in some cases. One company we talked to had a good reason for not starting on January 1st and so they will not start RFID tagging until mid-2005. The top eight began shipping a limited number umber of SKUs to Wal-Mart in 2004. Once companies have begun, they are expected to keep shipping those SKUs.
In short, public discussion of the “status” of the Wal-Mart RFID project has been misleading. The vast majority of companies believe they have met their commitments. However, the commitments suppliers are meeting are usually far less than applying RFID tags to all SKUs that these suppliers ship to Wal-Mart’s three RFID-enabled distribution centers in Texas.
These meetings between suppliers and Wal-Mart will occur on an ongoing basis. Even if a supplier in initial negotiations was able to commit to only a small number of SKUs, that supplier knows that in upcoming meetings Wal-Mart will press for an expanded list of SKUs for tagging.
The focus right now is on Wal-Mart and the question people are asking is, "What is the status of your effort?" The more interesting questions should be directed at Wal-Mart’s suppliers. Those questions are, "How successful were you in your negotiations with Wal-Mart? What does it take to do well in those negotiations?"
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