Wal-Mart is stepping up pressure on suppliers to comply with its three-year-old RFID mandate. The retailer says it will charge a $2 fee for each pallet not tagged with RFID that comes into a Texas distribution center for its Sam's Club warehouse stores beginning Jan. 30.
Wal-Mart also has told suppliers that in less than three years, all Sam's Club products passing through 22 distribution centers need to be tagged with RFID at the selling-unit item level.
The charge going into affect this month is to cover Sam's Club's cost to affix tags on each pallet, said a Wal-Mart spokesman, since the retailer needs to have every pallet tagged to meet inventory efficiency goals. The tag fee is "really designed as a short-term solution for those suppliers that may need a little more time to implement their own tagging solution," the spokesman told InformationWeek.
In 2003, Wal-Mart issued a mandate for all of its suppliers to tag their pallets and cases of product with RFID by 2005 to let both sides better track products in the supply chain and improve store inventory levels. Yet the retailer hasn't taken a strong-arm approach with the well over 15,000 suppliers that still haven't complied with RFID for products heading to its Wal-Mart stores.
Now Wal-Mart seems focused on turning its 700-store Sam's Club division into an example of RFID supply-chain technology in action, down to the item level, by 2010. It makes sense: Sam's Club has far fewer suppliers than Wal-Mart stores, and customers buy products by the case, the pallet, or individual packages that are larger (like a 48-count box of granola bars) than what's typically sold in retail stores. That makes the cost of RFID tags, at about 20 cents a piece, more digestible for Sam's Club suppliers. The division contributed $41.5 billion to Wal-Mart's $344.9 billion in revenues for its 2007 fiscal year.
Wal-Mart's been talking to Sam's Club suppliers for months about RFID compliance, and sent them a letter dated Jan. 7 that includes a 21-month timeline to have RFID in place. The timeline is as follows:
-- Jan 30, 2008: pallet-level tagging for DeSoto, Tex., distribution center.
-- Oct. 31, 2008: pallet-level tagging for an additional four distribution centers, case- and mixed-pallet level tagging for Texas distribution center.
-- Jan. 30, 2009: pallet-level tagging for remaining 17 distribution centers, case- and mixed-pallet level tagging for an additional four distribution centers.
-- Oct. 31, 2009: case- and mixed-pallet level tagging for the remaining 17 distribution centers; selling-unit -level tagging for Texas distribution center.
-- Jan. 30, 2010: selling-unit-tagging for an additional four distribution centers.
-- Oct. 31, 2010: selling-unit-tagging for remaining 17 distribution centers
The pallet fee apparently came as a surprise to some suppliers. What's more, it'll rise to as high a $3 for suppliers who don't meet compliance by next year. "We started getting calls from people on Jan. 8 and 9 about this," said Jim Caudill, senior VP of marketing at RFID tag and software supplier Xterprise Inc. On Jan. 11, Xterprise began offering a service to help companies quickly ramp up. Suppliers can provide configuration requirements and order their RFID tags online from Xterprise, which will print and send them in overnight mail.