'Wal-Mart Says So'

Computerworld - Let's get one thing straight about this plan by Wal-Mart requiring suppliers to put radio frequency identification tags on what they ship to Wal-Mart stores. For the 100 suppliers that have to start putting RFID tags on every case and pallet they send to the world's largest retailer starting in January 2005, this isn't about supply chains or business process re-engineering or, really, about business or IT at all.
It's about doing what the 800-pound gorilla wants.
That's important to understand, especially when industry analysts blithely babble about the need for cost sharing on this project because it will be so expensive for Wal-Mart's suppliers. If history is any guide, there won't be cost sharing. And there won't be accommodation for multiple standards, or flexibility in the deadline, either.
This is not a negotiation. It's not a process or a discussion or a partnership. It's a simple reality: If you want to do business with Wal-Mart, you'll do it Wal-Mart's way. Otherwise, the 800-pound gorilla will find somebody else to do business with.
How do we know this? Because the RFID project at Wal-Mart is shaping up to be the spitting image of a technology rollout that happened almost two decades ago.
Back then it was Sears and Kmart that required suppliers to start sending invoices, bills of lading and other shipping-related documents using electronic data interchange. As the 800-pound gorillas of U.S. retailing in the 1980s, they could make that demand. And what they demanded, they got.
So starting around 1985, if you wanted your products in Sears stores, you spent big bucks on EDI. Either that or you stopped being a supplier to Sears -- which some companies did. And they were replaced. And nobody at Sears shed a tear.
There was no cost sharing. There were no negotiations. None of the data or IT requirements were created for the benefit of the suppliers.
In fact, other 800-pound gorillas in the 1980s were demanding EDI from suppliers too -- and no two EDI versions were exactly the same. So suppliers that did business with Sears needed an EDI system. And if they also did business with General Motors and Ford, they needed two other, different EDI systems. Efficient? Not for suppliers. The efficiencies of EDI were all for the gorillas.

And you can expect Wal-Mart's RFID implementation to work pretty much the same way. Wal-Mart is the toughest cost-cutter in discount retail, a business segment that operates on razor-thin margins anyway. You can expect no cost sharing, no IT accommodation, no sweetness and light. If you want to stay a Wal-Mart supplier, you'll do what the gorilla wants.
Is that one-sided? Sure. Face it, the business case for this IT project consists of three words: "Wal-Mart says so."
And in IT shops, where the past few years have taught us that every IT project must show a return on investment or demonstrate improved efficiency or at least generate a credible advantage for your business, this is all wrong. There's no ROI or efficiency or benefit for a supplier -- just the cost of all those RFID tags and the infrastructure to support them.
Sounds sort of like Y2k all over again, doesn't it? Another no-choice, no-negotiation, no-business-benefit, no-extension-on-the-deadline IT project. Except this time it's dictated by Wal-Mart, not a technical glitch.
You may be able to squeeze some benefit out of the situation -- say, better internal quality tracking using the RFID tags or improved warehouse efficiency. If your company is a Wal-Mart supplier, you should be figuring out your options and presenting them to your top management. They'll want to know how they can make the best of an expensive situation.
But don't kid yourself. That 800-pound gorilla doesn't care whether your business benefits from RFID.
As for that -- and for paying the tab -- you're on your own.
Frank Hayes, Computerworld's senior news columnist, has covered IT for more than 20 years. Contact him at frank_hayes@computerworld.com.
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