In a recent web conference, Simon Langford, Wal-Marts manager of RFID strategies, discussed where his company was in its efforts to live up to its own mandates. Langford believes that RFID will have unimaginable benefits in due time, though he admits that Wal-Mart is a long way from realizing them. RFID is a journey, he said, and we are just beginning.So where is Wal-Mart with RFID? According to Langford, as of January 1, some 104 Wal-Mart stores were RFID-ready. More than 14,000 pieces of equipment had been installed, and 230 miles of cable laid. In just a few short weeks of the new year, 4.6 million EPC tags were read at various points in the supply chain. This included more than a half million cases shipped, and 19,000 pallets.The company has started noticing changes in those stores using RFID, Langford says. There have been fewer inventory buildups on the sales floor. Also, stores know exactly what they have in on-site storage. For the first time, were able to know how many cases of products we have in the back room, he says.Nevertheless, its apparent that Wal-Mart is a little behind its intended implementation schedule, and that its mandate is softer than previously expected. Below, ARC Advisory Groups Steve Banker assesses whats really going on at the retail giant.
|What Is the Status of Wal-Marts 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-Marts 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 retailers 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-Marts 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-Marts 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-Marts 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-Marts suppliers. Those questions are, "How successful were you in your negotiations with Wal-Mart? What does it take to do well in those negotiations?"