September 14, 2006
For the past few years, Wal-Mart's proprietary RFID (radio frequency identification) technology set
the early pace for adoption, especially in the retail distribution industry and the trend is certainly
continuing in the same direction.
Recently, Wal-Mart announced that it was adding another 500 RFID-equipped stores and is currently working
towards compliance with its next 300 soon-to-be suppliers.
After all these efforts, Wal-Mart will have 1,000 stores, nearly 25 percent of all U.S. locations, able to
scan incoming RFID-tagged cases and pallets. For now, consumer-facing use of RFID is not yet a priority. By
2007, about 600 of its suppliers will be equipped to tag shipments with the technology.
So far, Wal-Mart has seen many benefits from the use of RFID. However, the business case for suppliers has
been a lot weaker. This is an issue that Wal-Mart addressed in only general terms this week, with CIO Rollin
Ford stating that, "We continue to work with suppliers to help them see the vast potential of RFID."
That vast potential is something that Wal-Mart is already realizing. About a year ago, a study run by the
University of Arkansas determined that the use of RFID had reduced merchandise stock-outs by an impressive 16
percent.
Also, manual orders placed by stores decreased by 10 percent. Together, these statistics point to lower
inventory, increased automation, and, most significantly for Wal-Mart, the increased availability of product
for its millions of shoppers to buy.
It is important to note that Wal-Mart has moved to EPC Generation 2 tags and technology. This is a long-planned
move, and Wal-Mart had encouraged suppliers to stay ahead of the curve on it. The retailer feels that the technology
will lower costs.
A Wal-Mart press release issued in 2005 cites "price tags are being reduced by over 70 percent in some instances"
and allow suppliers to derive ROI benefits independent of the mandate.
Source: Line 56
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