Wal-Mart readies for RFID tags

Technology Is In Place

Last updated Tuesday, April 12, 2005 10:43 PM CDT in Business

By Anita French

Wal-Mart spokeswoman Christi Gallagher said the 100 suppliers included some of the company's top vendors and 37 volunteers.

"For business reasons unrelated to RFID, we had a few top 100 suppliers who chose to delay their RFID implementation until later this year," Gallagher said.

RFID uses a decoder, a radio frequency tag and an antenna that emits radio signals to activate the tag and read and write data to it. The technology is expected to eventually replace the universal bar code.

Wal-Mart has led the way in using RFID at the retail level. The company, along with eight of its top suppliers, began testing RFID in April 2004 at select stores and a distribution center in Dallas.

Wal-Mart set a January target for 100 suppliers to place RFID tags on cases and pallets destined for Wal-Mart stores and Sam's Club locations in the Dallas-Fort Worth area.

Among the 37 volunteers was Beaver Street Fisheries of Jacksonville, Fla. It was one of the first perishables company to step up as a "guinea pig" for RFID, a spokesman said.

"We were in doubt on how it would work when the tag went into freezers," he said.

The tags worked well in cold conditions, and Beaver Street Fisheries now has a three-phase plan for using RFID, said Chief Information Officer Howard Stockdale.

"The first phase was to make sure we could be compliant and ship the product out the door. The next phases are to focus on efficiency ... and integration. RFID is an enabling technology. It helps you become more efficient and more automated, if done properly," Stockdale said in a telephone call Monday from Chicago where he was, fittingly enough, attending an RFID conference.

Beaver Street is shipping about 10,000 RFID-tagged pallets and cases a month to Wal-Mart distribution centers, Stockdale said. His company is aiming for more than 500,000 RFID-tagged cases and pallets a month by January.

Both Wal-Mart and others using RFID have said the tags' cost will have to come down eventually for the technology to be profitable. Right now, RFID tags can run from 45 cents to $1 apiece, Stockdale said. They need to get into the single digits in terms of cents before users see a profit, he said.

"It is costing our company more money than we were spending before, but we look at it as a learning process. We're challenging ourselves on how we can make our business better. We believe in the technology. We believe it will make us a better company in the end," Stockdale said.

Management consulting firm A.T. Kearney released a study last year saying large regional and national retailers will have to spend an estimated $400,000 per distribution center and $100,000 per store on RFID, and that tens of millions of dollars will have to be spent on organizational systems integration.

The market for RFID is expected to grow to $2.7 billion by 2007, according to the American Business Journal.

Dillman said Wal-Mart wants to have RFID in use at up to 600 stores and 12 distribution centers by October. The next 200 suppliers are to come on board by January.

Hewlett-Packard is one of the largest of the top 100 suppliers participating in Wal-Mart's RFID program. Hewlett-Packard in January announced plans to open an RFID Noisy Lab -- so called because it simulates a live or "noisy" manufacturing environment and distribution center -- in Omaha, Neb. Hewlett-Packard plans to use the lab to further the development of RFID technology, it said.

"Our new Noisy Lab facility offers an invaluable resource to HP, its customers and partners as they develop innovative RFID solutions and services to help simplify change and reduce costs," said Hewlett-Packard spokesman Ian Robertson.

The company said it is already shipping some RFID-tagged consumer products to select retailers.

Radio frequency identification tags are considered an improvement over bar codes because RFID tags can be easily scanned. While a bar code has to be in line of sight, RFID tags do not. The scanner will pick up the serial number no matter where the tag is placed.

Also, bar codes can't tell if a scanner has read three different products or the same product three times. When a scanner is passed over an RFID-tagged item, the tag won't read but once.

Some privacy groups have voiced concerns over the possible use of RFID tags to track shoppers' habits and even gather personal information on them. Dillman scoffed at such claims, and said it will take education to convince skeptics that "there is no privacy issue" with RFID.

As for the ways RFID will benefit shoppers, Gallagher said better product availability heads the list.

"RFID will allow product to be on the shelf when the customer wants to purchase it," she said. "Additionally, because the system will create pick lists for the associates, (they) will be able to spend more time on the floor helping customers and stocking merchandise rather than spending time in the back room looking for product. Down the road, we can see customer benefits related to battling counterfeit products, including pharmaceuticals."

Also, in the event of a product recall, an RFID tagged item can be located not only in the warehouse but even if it makes it to the register, Dillman said.

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