Wal-Mart updates RFID road map, revises expectations for '05 deadline

It expects top suppliers will be tagging 65% of their product cases by January

CHICAGO -- Wal-Mart Stores Inc. executives here at the Retail Systems Conference yesterday unveiled an updated road map for the company's rollout of RFID technology and discussed its revised expectations for suppliers working to meet a January 2005 deadline set last year.

The Bentonville, Ark.-based retailer plans to meet next month with its top 100 suppliers to share what it has learned and refine the rollout process for its next 200 suppliers. After going live with its top 100 suppliers -- and an additional 37 volunteers -- in January, the company plans to continue its domestic expansion, with all domestic suppliers expected to participate by the end of 2006. The retailer will also be evaluating an international rollout.

Wal-Mart has challenged its top suppliers to tag all of the product cases and pallets they ship to its three Dallas/Fort Worth-area distribution centers by January and to ensure that the tags can be read with a 100% accuracy rate (see story).

While the goal remains unchanged, Wal-Mart now expects that, on average, suppliers will be tagging 65% of the product cases and pallets they send to those three distribution centers in January, according to Linda Dillman, executive vice president and CIO at Wal-Mart.

"And it could change," Dillman said.

Wal-Mart spokesman Gus Whitcomb said the 65% figure figure is based on feedback from suppliers. He said the company provided them with a set of goals and then spent months meeting with them and asking "what was actually feasible." Suppliers offered predictions of the percentage of pallets and cases they will be able to tag by January, and 65% represents the average of the figures they submitted, according to Whitcomb.

Wal-Mart "never expected in reality 100%," but it set the goal to "shoot for 100" for everyone, including its internal team, and directed suppliers to "tell us what you can do," Dillman said. "That way we know what's really possible. We don't want to be the ones limiting what those suppliers can do."

She likened the 100% directive to a manager setting a goal for a sports team. "You never heard a good coach go out to the team and say. 'We only expect you only to win by three today,'" Dillman said. "You say our goal is to win by as many points as we can, and when you win by three, you're really happy. If you told everybody, 'We only expect to win by three,' you might actually lose the game."

Dillman said suppliers are "doing everything from 1% to 100%," but each of them has laid out a detailed merchandise-tagging plan. She said a supplier such as Proctor & Gamble Co. might say it can tag Oil of Olay at one level and Bounty paper towels at a different level. Dillman said Wal-Mart has been been meeting individually with suppliers to learn more about which factors, such as tag cost or reader cost, are having an impact.

"There is not going to be one number that we're going to force every supplier to," Dillman said. "What we want to know is: You've got to have looked at 100% of your items. Here is your business model; here is your business case. What makes sense for you, what doesn't and why?"

Dillman said that Wal-Mart is expecting a "best effort" from each supplier and that compliance will be considered on an "individualized" basis.

"We've never ever said, No. 1, that we were going to do any kind of punishment or what are you going to call it, for people that didn't," she said. Instead, the company has often used the word participate in relation to its RFID directive. "We're balancing that obviously with wanting everybody to be aggressive with their goals," Dillman said.

During a keynote address at the Retail Systems Conference, Michael Duke, president and CEO of Wal-Mart Stores Division, characterized RFID as an initiative that he is "very passionate about." Duke noted that bar codes transformed the way business is done, and RFID presents an even greater opportunity. At this point, it's difficult to "even imagine what all the benefits will be," he said.

Duke emphasized that Wal-Mart has no plans to slow the deployment of RFID. "We're full speed ahead," he said, adding that he has been pleased with the progress to date. Duke added that only two suppliers have said they need more time to meet the January date.

Wal-Mart is conducting a pilot with eight major suppliers at one regional distribution center and seven stores in Texas. Duke urged other companies to start working with cases and pallets today.

"You don't want to be the last one in," he said.

Duke said RFID will help companies better serve their customers by keeping items in stock, which he said would result in increased sales. Although the price of the RFID tags has been a concern for many suppliers, Duke said the cost has plummeted in the past year and is expected to hit 5 cents by the end of 2006.

Copyright © 2004 IDG Communications, Inc.

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