Wal-Mart Maps RFID Expansion Plans

The CEO of the retailer's stores division says another 200 suppliers will be involved in the project by June, with the goal of having all U.S. suppliers involved by 2006.
Wal-Mart Stores Inc. by June will have another 200 of its suppliers involved in its efforts to track cases and pallets of products using radio-frequency ID technology, the CEO of the retailer's stores division said Tuesday.

Michael Duke, speaking at the Retail Systems trade show where Wal-Mart CIO Linda Dillman last year announced the January 2005 RFID deadline, laid out the company's high-level plan for RFID for the coming years. It includes a June summit with the 127 suppliers involved in Wal-Mart's initial RFID effort, which includes tracking cases and pallets into a Sanger, Texas, distribution center and stores by January. Next year Wal-Mart will expand the RFID effort to suppliers throughout the United States, with the goal of having all suppliers involved in 2006. An international rollout will come in 2005 and 2006.

Duke said he expects the biggest benefit from RFID eventually will be higher sales resulting from fewer out-of-stock products. "One of the greatest single benefits will be increased sales, because customers will be able to buy what they want to buy," Duke said. "When you're developing your ROI, start with the top line of your profit-and-loss statement."

Dillman shared the stage during a later panel discussion with Paul Singer, CIO of rival retailer Target Corp., which is also asking suppliers to embrace RFID supply-chain technology. Their goal was to emphasize that retailers need to use the same electronic product code standards that Wal-Mart and Target do, so suppliers won't face dueling technologies in meeting their mandates. "If we don't do this one way, the chances of it succeeding really go down," Singer said.

Dillman and Singer were joined by executives from Hewlett-Packard and Kimberly-Clark, two companies that are among the eight suppliers that began sending RFID-tagged shipments to Wal-Mart on April 30. The executives agreed that, in addition to getting RFID technology right, they all needed to improve data synchronization so that when two companies share data, they're each referring to a product in the same way. The RFID strategy "won't work if we don't do data sync first," Dillman said.

Dillman recommended that companies plotting RFID strategy do what Wal-Mart did in targeting an achievable first step. "You need to boil down all of the potential of what RFID could be, and focus on one or two places it can provide value," she said. For Wal-Mart, that centers on collecting one piece of information: What merchandise is in the back of its stores. "That's very easy for us to integrate into our system," she said. To do that, Wal-Mart "black-boxed it," Dillman said. While the company collects all the data from the reader, it relays to Wal-Mart's existing supply-chain systems only the data relevant to that goal of knowing what's in the back of its stores.

Among this group of true believers, there wasn't much room for doubt that RFID is the future. Singer describes its potential value as "blatantly obvious." Mike O'Shea, director of RFID strategy at Kimberly-Clark, said business-unit leaders are now coming to the RFID team with ideas how they can use the technology, and the team is helping the company prioritize. And Dillman cautioned executives against thinking that RFID is only for large companies-saying that many small suppliers are embracing it as well.

The vast majority of retailers aren't embracing RFID with the vigor of Wal-Mart or Target. And suppliers' use will run a wide gamut, from just meeting the most basic meeting of their retail customers' mandates to embracing it in their own supply chains and requiring it of their vendors. But Duke left little doubt what he thought the right approach should be: "You'd be remiss," he said, "if you don't start on your own roadmap for something that's inevitable."