Some suppliers gain from failed Wal-Mart RFID edict

Daisy Brand and TI credit the long-delayed plan for their launch of successful programs.

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"Gosh, if [someone] could spell 'RFID,' it seemed they thought they could hang out a shingle," said Tom Shields, educational technology service and RFID manager at Texas Instruments Inc. (TI), which became compliant with Wal-Mart's requirements in January 2006.

He noted that after Wal-Mart issued the RFID mandate, "there were [suppliers] hemorrhaging money to become compliant." Most were shooting in the dark, trying to implement the technology without having any examples to follow, Shields said.

At the same time, Wal-Mart needed to get its own RFID house in order, according to some analysts.

For example, the company was slow to install RFID equipment in its own stores. John Simley, a Wal-Mart spokesman, said that at least some RFID technology is used in 1,300 of about 3,600 U.S. stores today. Most have full implementations, though some are just getting started, he noted.

The retailer won't comment on whether it plans to resume the program, or discuss a schedule for installing RFID technology in the remaining Wal-Mart stores.

John Fontanella, an analyst at AMR Research Inc., also noted that Wal-Mart disbanded an internal RFID program office in the months after the mandate, transferring responsibility for the program to a general operations department. Simley declined to discuss the office.

"I think they were very visionary for [seeing] the potential for RFID, but the infrastructure to support that vision was still being built," Shields said. "The lack of infrastructure, the cost and all the troubles created the perfect storm" that slowed RFID adoption, he noted.

Although Wal-Mart's mandate has been abandoned at least for the time being, it has led to some successful RFID implementations.

For example, TI has been tagging pallets and cases of goods shipped to Wal-Mart for two years. And Shields said the company is ready, should other major retailers, such as Target Corp., move to RFID.

Shields credited TI's patience for its successful implementation of the Wal-Mart RFID program.

The electronics provider researched options for implementing RFID for 18 months before spending a single dollar on equipment, he said. The company now tags only shipments headed to Wal-Mart, thus minimizing RFID hardware investments.

In addition, the price of RFID equipment dropped considerably during the evaluation, further reducing start-up costs, Shields noted.

Shields also said that TI created an RFID study team with employees from IT, supply chain operations, field sales and the finance department, letting each part of the organization feel invested in the project.

Kevin Brown, Daisy Brand Inc.
Kevin Brown

"We were compliant for under half a million dollars," said Shields. "We were meeting our customer's requirements. That's what business is. You can't always measure it as ROI. Part of it is more of an ROR -- a return on relationship."

Meanwhile, Daisy Brand has extended the RFID efforts undertaken for Wal-Mart into other parts of its business.

Kevin Brown, director of information systems at Daisy, said the return-on-investment criteria weren't based meeting a single customer's requirements, but on how the technology addressed the supplier's own business needs.

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