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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"If you don't do anything with [RFID for yourself], the payback period is obviously going to be longer," Brown added.

Five months after Daisy became compliant with Wal-Mart's edict, an entire inventory management system based on pallet tags had been implemented. As goods move through facilities, workers don't have to take notes, since all pallets are tracked by RFID readers. A Second Chance

The experiences of Daisy Brand and TI could provide helpful lessons to small and midsize suppliers, should Wal-Mart revive its mandate.

And analysts say that the recent launch of an RFID program at Wal-Mart unit Sam's Club, a warehouse retail chain, could signal an imminent resumption of the program.

Wildeman noted that more than half of Sam's Club's suppliers are also Wal-Mart suppliers. "If you're asking a large portion of those same suppliers to start tagging to avoid a penalty, is that a step in the overall Wal-Mart journey to get its suppliers to be compliant?" he asked.

Sam's Club announced its plan on Jan. 7 and ordered that tags be attached to all pallets shipped to its DeSoto, Texas, distribution facility by Feb. 1.

Other distribution centers will come online as part of a graduated rollout over the next two and a half years.

Simley noted that untagged pallets that arrive at distribution centers after deadlines will be tagged by Wal-Mart employees. The suppliers will be charged a $2 fee per missing tag, which could quickly become a major expense.

Meanwhile, the fully equipped Wal-Mart stores have RFID readers installed in receiving bays to keep track of shipments and in so-called transition areas to monitor products as they move from the storage room to the store floor, where workers use handheld readers.

At those Wal-Mart locations, the program seems to be working, according to a report released last month by researchers at the University of Arkansas in Fayetteville.

The study of 16 Wal-Mart stores last year showed that RFID technology improved inventory accuracy by 13%, compared with stores that lacked the technology. The study determined that the overall savings can be "measured in millions of dollars."

"There have been speed bumps ... but I don't think for a second that Wal-Mart is walking away from their RFID commitment," Fontanella said. "They'll slowly tighten things down in terms of compliance."

Copyright © 2008 IDG Communications, Inc.

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