Wal-Marts RFID Deadline: A Chunky Mess

By Larry Dignan  |  Posted 2003-12-15 Print this article Print

Campbell Soup Co. is two-thirds of the way through a technology overhaul. Next up: Meeting Wal-Mart's product-tracking deadline with the unproven technology RFID.

You cant put a radio tag on a can of soup.

Thats just one technical tidbit Campbell Soup Co. is digesting as it investigates using so-called smart labels to better track its products from factory to retail outlet. It affects how Campbell will find a suitable way to put metallic tags on all its products–to satisfy its biggest customer, Wal-Mart Stores.

Wal-Mart accounts for 12 percent of Campbells annual sales of $6.7 billion. The worlds largest company has given Campbell and the rest of its 100 largest suppliers until January 2005 to track their products using tiny pieces of circuitry that contain identification codes and can be scanned by radio waves at any time.

At a meeting at its Bentonville, Ark., headquarters in November, Wal-Mart told suppliers that the requirement for using such radio-frequency identification (RFID) tags stands—and that suppliers who comply early will have a leg up on those who dont. The company also said it started RFID trials at three distribution centers in Texas, with one unnamed supplier already agreeing to participate.

The problems with putting radio tags onto Campbells soup cans are twofold: the soup and the cans. Radio waves bounce off the cans and dont move through liquid well. That means that the Camden, N.J., company has no plans to track individual cans of chunky or thin broths. "You can tag cases and pallets, but not cans, says the companys chief information officer, Doreen Wright. Nevertheless, the tags are expected to be a big step up from the bar codes used today. For example, taking inventory at a warehouse, in a truck or supermarket aisle today can mean scanning each package individually. With tags, packages dont even need to be touched when a company takes stock. In theory, a retailer will know exactly how many cans, jars and boxes are on shelves or racks at any time. Radio waves can be sent out from stationary antennae that grab individual identification codes.
In distribution, this means Wal-Mart can know the exact contents of a pallet without ever opening it, speeding up routing and loading procedures.
For Campbell, the first steps will include a hybrid approach. The tags will be on pallets and cases, for tracking products from warehouse to store. But a retailer will only know the whereabouts of an individual can when it is sold, and the bar code is scanned at check out. Industry executives say Campbell is talking to IBM about how to best implement its smart-tag system, as well as RFID consultants such as ePC Group in Boston. Campbell may brief its potential technology partners on how it would like to proceed in upcoming weeks, these executives say. For a detailed case study on Wal-Marts race to adopt RFID, click here. Even these minimal steps are proactive compared to the wait-and-see approach of other suppliers. More than half of Wal-Marts top 100 suppliers havent budgeted for the additional costs of radio tags or researched the implications of their use, says AMR analyst Kara Romanow. Tags have come down dramatically in price in recent years. But the initial tags are still likely to cost 5 cents apiece. A million tags, as a result, can increase costs $50,000. Conventional identification systems are based on Universal Product Codes (UPC ). Those are simply stripes of ink that can be printed with other product information on any package. Smart tags, by comparison, must be separately affixed, at this point, with some type of adhesive. Next Page: Campbells business case for RFID tags.

Business Editor
Larry formerly served as the East Coast news editor and Finance Editor at CNET News.com. Prior to that, he was editor of Ziff Davis Inter@ctive Investor, which was, according to Barron's, a Top-10 financial site in the late 1990s. Larry has covered the technology and financial services industry since 1995, publishing articles in WallStreetWeek.com, Inter@ctive Week, The New York Times, and Financial Planning magazine. He's a graduate of the Columbia School of Journalism.

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