Wal-Mart's CIO talks about the potential for RFID to revolutionize the retailer's "take-care-of-the-customer" processes.

Laurie Sullivan, Contributor

September 11, 2004

3 Min Read

InformationWeek: How will RFID help Wal-Mart serve customers better?

Dillman: When you shop Wal-Mart on a Saturday afternoon, there's a pretty good chance many items aren't on the shelf anymore. Associates do their best restocking items, which is one of our biggest challenges. We know when inventory comes into the building. We don't know exactly where and when it needs to go from the backroom to the shelf. We've looked at this 100 times in the last 10 years. All the technology we reviewed would put restrictions on our ability to move products around the store and out to the customers.

People have tried to handle that by locking down the back room, which is process driven. We drive the business on [such] a take-care-of-the-customer process that I cannot fathom telling an associate they can't get merchandise for a customer until someone is there to check it out for them. We've struggled to concur that.

This is it. It works because stuff coming in and out of the rooms is at case level. We know if it goes to the floor, and then to the compactor, that we've emptied the case. We can draw some conclusions about what we have on the shelf versus what's in back, and what's been sold that day. I can also draw conclusions based on what the shelf holds. The shelf holds 24 [items], and inventory says we have 20 [on the shelves] and I know we have quantity in the back room. That inventory should go on the shelf because it will fit.

We know the quantity, but don't have a clue where the merchandise is. If anyone has been in the back room of a major retailer at Christmas, finding product can be a daunting task. That really was the killer app. And we don't have to have 100% reads. If I miss the read to the floor, I get it coming back from the floor and then to the compactor.

InformationWeek: You have a reputation as the most powerful CIO. How does it feel to know that you have the influence to change the world with your decision to use RFID technology?

Dillman: It's frightening. I would tell you the RFID announcement took a lot of discussion. We don't typically go public with our initiatives. We presented the project to our suppliers in February 2003, once we came to the conclusion it would involve our top 100. Suppliers originally thought they'd have a lot of time because the tech folks weren't the ones being told. They needed to understand it's not something they can do in a month. So we announced the project at the Retail Systems show in 2003. The coverage caught us by surprise. We didn't think it would get the kind of press it did.

InformationWeek: Can the RFID project fail?

Dillman: This one's not going to fail. Will it play out how we've envisioned it? It will take different twists and turns, but this one has extremely high probability. I have yet to meet someone who disagrees.

Taking one problem at a time, in a slow methodical approach, ensures success. It's not just a retail initiative. The travel industry, technology, health care, and government are all interested in what it can do.

InformationWeek: What is your biggest challenge?

Dillman: With RFID, the biggest challenge is communication--trying to keep our suppliers less confused based on whose article they read last. You have no idea how much time that consumes. They're calling every week, nearly every day. I spend a lot of time talking with suppliers.

Collaborating with competitors has been very interesting. [CIO] Paul Singer at Target and I had a phone conversation, and agreed as this moves forward the best way is to collaborate and have the same vision. To make it easier for suppliers is the reason we both started the project in Dallas using the same standards and requirements.

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