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Wal-Mart And RFID: How High Should I Jump?

When the world's biggest buyers yell jump, you'd think their suppliers would be crouched and ready to elevate. But when Wal-Mart yells jump, some suppliers are more apt to roll over, or complain that it's breaking a noise ordinance.

So it goes with Wal-Mart's RFID mandate. In August 2003, the world's largest retailer announced that it would require all suppliers to put RFID tags with Electronic Product Codes on their pallets and cases by the end of 2006. As of April 2007, Wal-Mart said that 600 suppliers were using RFID -- just 3% of its base of 20,000.

We've heard the excuses over the years: Wal-Mart is such a demanding, price-obsessed customer that making special technology investments at its behest is cost-prohibitive, especially for small companies scraping by on slim margins. Call me a Wal-Mart apologist, a cold-hearted capitalist (and some of you will), but isn't this one way small suppliers become big suppliers -- by honing their technology strategies for their biggest potential markets even in the face of considerable risk?

Pacific Coast Producers isn't mom and pop (it's about a $400-million-a-year company), but it got to be that big in part by listening to its customers -- and then jumping even higher. As my colleague Mary Hayes Weier reports, the California-based producer of canned fruits, sold at Wal-Mart under the Great Value brand, has been complying with the retailer's RFID program for two years. "While we met the Wal-Mart mandate, we did things above and beyond what was expected,” says CTO and VP of IS Peter Wtulich.

Pacific Coast Producers points to all the standard supply chain benefits. Mostly, it gets better information, helping Wal-Mart restock in a timely fashion and thus boost its own sales. The supplier has even created a cross-functional RFID team of IT, sales, and customer service employees, who work with Wal-Mart to discuss ways to improve inventory control. But it's not hung up on ROI. "We didn't go into this trying to get some dollar return on investment," Wtulich says, "but we did this in mind that our ROI would be an improved relationship with Wal-Mart."

No excuses. Just a clear vision of the end goal.

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