Wal-Mart begins RFID trial in Texas

The testing includes participation from eight manufacturers

Retail giant Wal-Mart Stores Inc. began testing the use of radio frequency identification tagging at seven stores and a regional distribution center in Texas today in anticipation of a wider rollout of the technology that the company hopes will eventually replace bar codes.

Eight manufacturers are participating in the trial. They have agreed to implement case- and pallet-level tagging on a total of 21 products delivered to Wal-Mart's Sanger,Texas, regional distribution center.

The much-anticipated test comes after Wal-Mart threw down the gauntlet to its top 100 suppliers last year, setting a January 2005 deadline for them to place RFID tags on all cases and pallets destined for its Wal-Mart and Sam's Club stores in the Dallas-Fort Worth, Texas, area.

The trial is intended to kick off the RFID tag migration in anticipation of that deadline, said Simon Langford, manager of RFID strategy at Wal-Mart. According to Langford, all of its top 100 suppliers except two are on track to meet the deadline, with many planning to join the trial earlier.

Wal-Mart has been on the front lines of a move by retailers to adopt Electronic Product Code technology in an effort to increase efficiency within the supply chain process. The new tags work by using passive RFID chips with small antennas that emit a unique product identifier code when passed near an RFID reader. That information is then transmitted to an inventory control system.

In the trial, tagged cases and pallets will be read by RFID readers installed on the distribution center's dock doors. Readings taken there will be sent to the store's operations and merchandising teams, as well as the suppliers, to tell them that the products have arrived. The process will be replicated at the seven trial stores, where readers at dock doors will confirm shipment of the goods, Wal-Mart said.

While Langford said many of its suppliers had questions at first about the functionality and cost of implementing the new technology, they now believe it will result in greater cost savings in the long run by improving the efficiency of the supply chain.

What's more, volume purchasing of RFID technology will drive down the costs even further, he said. "Just in the last year, we have seen the price of tags and readers drop by 50% on average," Langford said.

While Wal-Mart and other RFID advocates say the technology will aid consumers by helping ensure that the products they are looking for are in stock, concerns have been raised that the tags could encroach on shoppers' privacy. RFID tags left activated on merchandise could possibly allow customers to be tracked, they say. Privacy advocates also fear that tags, which store information like purchasing histories, could be "read" without consumers' knowledge.

Wal-Mart is taking measures to allay these concerns by posting signs in stores participating in the trial, alerting them of use of the technology. The company emphasized that their RFID tags don't contain or collect any additional data about customers and added that it doesn't expect to have RFID readers on its main sales floors in the foreseeable future.

"There's been a lot of hype around privacy, but I think once customers see what's on the tag and what it's used for, they'll feel better," Langford said.

During the trial, the tags will be used mostly in supply rooms, since only the delivery cases and pallets are being tagged, not individual items. However, three products with packaging that also serves as a delivery case will reach store shelves tagged: Hewlett-Packard Co.'s ScanJet scanner and two HP Photosmart photo printers.

Wal-Mart said these items will be marked with an EPCglobal symbol, signifying that the retailer is abiding by the privacy principals set down by EPCglobal, an industry group that develops standards for RFID technology in the global supply chain.

Through EPCglobal, Wal-Mart is working on RFID issues with retailers such as Target Corp. and Tesco PLC in the U.K., as well as various airlines and pharmaceutical companies, Langford said.

Wal-Mart will be announcing additional RFID rollout plans in the third quarter of this year, with the U.K. and Canada being likely markets, Langford said. The company is keen to use the technology in Europe but is waiting for tags that include a global RFID standard, which is expected at year's end.

In addition to HP, the seven other manufacturers participating in the initial trial are The Gillette Co., Johnson & Johnson, Kimberly-Clark, Kraft Foods Inc., Nestle Purina Pet Care Co., Procter & Gamble Co. and Unilever PLC. Wal-Mart said it expects more suppliers to join the trial soon, including 37 small and medium-size manufacturers that have asked to participate.

Copyright © 2004 IDG Communications, Inc.

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