There were two evident truths at the RFID World conference in Dallas: Wal-Mart Stores is the impetus behind the technologys recent popularity; and RFID for Wal-Mart is a long-term journey. One thats only just begun.
The biggest retailer in the world, Wal-Mart currently has 300 suppliers sending products to 500 RFID-enabled Wal-Mart and Sams Club stores.
It has five distribution centers that are able to take in RFID-tagged pallets and cases from suppliers.
In January 2007, Wal-Mart plans to add more suppliers and double the number of stores and clubs that are RFID-enabled, so that more than 1,000 stores can receive tagged goods.
By that time, the company will have added 600 suppliers sending tagged goods to its stores and distribution centers.
In addition to adding more suppliers and more stores with RFID capabilities, Wal-Mart is also pursuing several proof of concept areas this year around sensor technology.
The idea is to be able to put a better quality of product on the shelf for its customers—think produce on supermarket shelves—and get products to the shelf quicker.
“Sensor tags are around $20. Thats a little high cost, but we want to find a way to put bananas on shelves in our food department so theyre at the perfect ripeness,” said Carolyn Walters, vice president of Information Systems at Wal-Mart, during an RFID World panel discussion in Dallas on Feb. 28.
Walton explained that as a crate of bananas comes into Wal-Marts distribution center, it is ripened by being exposed to nitrogen.
The concept that Wal-Mart is pursuing is tagging those bananas, for example, with an RFID tag that identifies where the shipment has been and how much nitrogen it needs to be exposed to, to be perfectly ripened by the time it hits the store shelf.
Another related proof of concept is getting products from a truck to the shelf at the right time.
Walton explained that the typical Wal-Mart Super Center receives seven truck loads of freight a day.
That amounts to about 7,000 boxes that have to be organized and stacked before they can be moved to a shelf.
“What would it be like if associates had some type of wearable device that, as a box comes into their facility information is there that says, this box needs to go straight to the shelf—dont stack it so its staged for tomorrow or the next day. It needs to go now?” said Walton. “The numbers are big: 7,000 boxes a day.”
Working with Partners
Wal-Mart is also developing business scenarios with trading partners to help understand how their products can get to store shelves with “precise execution” using RFID.
The example Walton provided is time-sensitive items that come into Wal-Mart stores—a gift set for Mothers Day, a new razor for Fathers Day—that need to be on store shelves at precisely the right time to really drive sales (too soon before a holiday can kill promotional sales, as can too close to an event).
In closer analysis of its RFID data, Wal-Mart found that the reason some stores had lower sales of a promotional items was because the item was not on a store shelf when it was advertised, according to Walton.
To combat that breakdown from supplier to shelf, Walton said Wal-Mart analyzes its RFID data and sits down with suppliers to determine where there are inefficiencies.
“The value of data is huge,” said Walton. “Our mindset should be that we are willing to share this with each other. From manufacturer to consumer crosses a lot of points and has a lot of touch-points. That needs to be streamlined. For us, the margins are razor thin. Its important to squeeze that out.”
To better facilitate this back-and-forth with partners, Wal-Mart provides RFID data to its trading partners within 15 minutes of it being read by Wal-Mart systems, so that every partner knows where its data is, according to Walton.
“It requires collaboration to make sense of what is there,” she said.
On this front, the company is taking a three-pronged approach to RFID data: Its working with standards setting body EPCglobal to define and set standards that will be “good for the world,” according to Walton; it quickly provides everything it gets back to trading partners; and it plans trading partner planning sessions regularly to figure out whats next.
“We cant focus too narrowly,” said Walton. “That would be a mistake.”
Investing in RFID
This is not Wal-Marts first foray into RFID technology.
Apparently the company became interested in RFID as a potential solution “years back,” according to Walton, when officials did some work with the Auto ID Center, a group initially formed with funding from the government, industry and EPCglobal to develop a standard architecture for creating a network of physical objects. (That effort, now headed by EPCglobal, resulted in the Electronic Product Code, a numbering system used in identifying items with RFID tags).
Then, two years ago, Wal-Mart put together a formal team and started a pilot program around RFID, requiring its top 100 suppliers to tag cases and pallets of goods being sent to certain distribution centers.
By January 2005, “things were live in prime time,” said Walton. “Weve continued to ramp up ever since.”
Walton said the company has found some “good surprises” with RFID to date—particularly as it relates to process change at the store level.
There are 1.5 million associates that work in Wal-Marts stores across the nation.
Already challenged with training issues, Walton said it “just becomes overwhelming” to consider the training needed for RFID.
“But we saw return on investment in some areas without having to go through process change, and having to train thousands of associates,” said Walton.
A 29-week study done at the store level to record when items on the shelf were in stock, and when they were out of stock, found that those stores that were RFID-enabled reduced out-of-stocks by 16 percent—without having to make a process change.
The study also determined that if an item was tagged with RFID, it was put on the shelf three times faster than it normally would be.
At the same time, manual orders—which relates to safety stock in inventory—were reduced by 10 percent.
“Its pretty simple,” said Walton. “I stocked some shelves myself when I came to Wal-Mart two years ago. I found my favorite brand of shampoo was not on the shelf. I looked at my handy wireless device, it said the product is in back of the store, but I couldnt find it. I gave up and re-ordered more.”
Walton said that what Wal-Mart is able to provide with RFID is the same information—where a product is in the store—and its accurate.
“Just think what its going to be like when were able to get to the big ah-has,” she said.
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