On January 1st 2005 Wal-Mart's mandate to top suppliers, announced some 18 months ago, came into effect. Here we report, after two months into the year, what has happened so far.
Linda Dillman, CIO at Walmart, confirmed early this month that Wal-Mart's RFID strategy has been a success so far, "I don't have to stand up here and debate whether it will happen, because it did," she said. Due to technical issues some suppliers marginally slipped the deadline but by the end of January the required RFID systems were in place and many of Wal-Mart's suppliers were collecting data on the delivery of their products. Wal-Mart has installed RFID systems in 104 Wal-Mart stores, 35 Sam's clubs and three distribution centers. In total 14,000 pieces of hardware has been installed connected with 230 miles of cable.
After attending recent events on RFID, here we list some of the details of progress so far of RFID at Wal-Mart. For the full article, read this month's Smart Labels Analyst journal.
- By the end of February, Dillman explained that Wal-Mart stores using RFID have received 23,753 tagged pallets and 663,912 tagged cases and taken over 5 million tag reads
- Wal-Mart is making RFID data it reads available to suppliers within 30 minutes though its Retail Link extranet website
- About half of the top 100 suppliers decided that there was very little knowledge of RFID integration and choose to learn and setup the systems themselves rather than outsource it to consultants
- At case level, read rates have exceeded 90% for cases on carts, 95% on conveyors in distribution centers and 98% in trash compactors in the back room of stores
- The biggest headache is reading RFID tags on individual cases on fully loaded pallets, with read rates averaging 66%. Wal-Mart suppliers are working out the best position of the tag on the case for maximum readability, which varies according to the contents of the case
By October, Wal-Mart intends to be using RFID in 12 distribution Centers and 600 stores in the US. By Jan 2006, the next top 200 suppliers will be RFID compliant. It is clear suppliers cannot opt out of this. Wal-Mart are now also working on tracking recalls. Despite the forceful nature of this mandate and modest tag volume so far, most agree it has been a positive step for the RFID industry and retail and it has been a successful start for Wal-Mart, seeking to add competitive advantage by being first.
The general situation: Update of EPC tagging
Across the world, the first quarter of 2005 saw few deliveries of pallets and cases with EPC UHF tags. Although Wal-Mart, Albertsons, Target, the US Military and others had mandated them, they received only of the order of one million tagged pallets and cases between them all. Wal-Mart reported only 63% successful reads - totally unacceptable - and demanded 100%. Kimberley Clark reported zero reads on loaded pallets that were wet from being brought in from the cold. Gillette started work on redesigning item packaging in cases and case packaging to be UHF friendly, with better spacing and removal of metal. With dry, non-metallic products and packaging a number of players reported 100% reads and in Germany, Metro was getting 100% reads or thereabouts even with absorbent and reflective loads by reading the tags with nothing in the way and using omnidirectional tags such as the Rafsec's Flag Tag where an antenna pops up at right angles to the tag when it is applied.
In April 2005, IDTechEx assesses that the leading suppliers of EPC UHF pallet/ case tags were delivering at a rate of about 13 million tags per month and, although this was ten times the delivery rate at the end of 2004, it was woefully inadequate to meet the forecast of analysts and EPC global members of billions by year end or get the price down to the magic five cents where most of the world's 30-40,000 pallets and cases will be tagged. Selling prices had dropped however, from around one dollar two years ago to around 20 cents.
It now looks as if 2005 will see no more than 3-400 million UHF EPC tags delivered to the suppliers of the major retailers and the US Military. They will include Class 0, Class1 and Class 2, Gen 2, with the necessary chips becoming available from six chipmakers. Thus some users are choosing read only tags programmed at the tag maker, other choose read only ones they can program and others, a significant number, choose read write. Some important participants now anticipate supply shortages limiting deliveries over the next three years despite rapid ramp up of production output of tags. This is partly because tag dead on arrival and tag failures in use are not yet always at acceptable levels in the view of the retailers and their suppliers buying the tags.
Wal-Mart RFID update October 2005
Using RFID to increase sales works
Wal-Mart has issued a press release on their results using RFID to monitor stock levels, based on initial findings of an independent study from the University of Arkansas.
Researchers at the University of Arkansas found a 16 percent reduction in out-of-stocks. Additionally, the study also showed that out-of-stock items with EPC (Electronic Product Code) tags were replenished three times faster than comparable items using standard barcode technology. Equally important, Wal-Mart experienced a meaningful reduction in manual orders resulting in a reduction of excess inventory.
"This is no longer a take-it-on-faith initiative," said Linda Dillman, executive vice president and CIO for Wal-Mart. "This study provides conclusive evidence that EPCs increase how often we put products in the hands of customers who want to buy them, making it a win for shoppers, suppliers and retailers."
The 29-week study analyzed out-of-stock merchandise at 12 pilot stores equipped with RFID technology and 12 control stores without the technology. All Wal-Mart formats - Supercenters, Discount Stores and Neighborhood Markets - were included in the study.
While Wal-Mart commissioned the study, it was conducted independently
by the University of Arkansas. Specific items were selected to be analyzed at the beginning of the study and these items remained constant throughout the entire process to ensure data consistency.
To both establish a pre-study baseline and to measure the impact of RFID, out-of-stock items were scanned every day throughout the study period, at the 24 stores.
The study design allowed the researchers to examine differences between the 12 control stores and the 12 RFID-enabled stores. It also provided the ability to compare performance in the same stores through analysis of the baseline data and the data collected during the use of RFID.
"The study showed RFID-enabled stores were 63 percent more effective in replenishing out-of-stocks than the control stores," Dillman said. "The Wal-Mart RFID team knew that this technology would have a huge impact on out-of-stocks. Now we have an independent study that confirms RFID has a significant impact in retailing," Dillman continued. "However, we are not stopping there. This is only one of many changes that RFID will bring. We are already working on initiatives and enhancements that will build on this success."
IDTechEx note that others have found stock replenishment a fertile area for RFID. For example, Tesco have used RFID to monitor stock of DVDs in some stores. They chose DVDs because they tend to put few out, due to their value and therefore loose sales if they are not replenished fast enough. Tesco reported a 4% increase in sales as a result of using RFID to monitor stock outs.
What's next for Wal-Mart
As Wal-Mart announced earlier this year, it is currently more than tripling the number of stores where RFID has been installed. By the end of October, Wal-Mart will have more than 500 stores and clubs and five distribution centers live with RFID.
During January 2006, Wal-Mart's next top 200 suppliers will be live, shipping EPC-tagged cases and pallets. As with its top 100 suppliers, Wal-Mart has collaborated with these next top 200 suppliers, hosting a number of briefings and seminars to share knowledge back and forth. A number of the suppliers who went live in January 2005 also participated with the next 200, passing on their learnings and areas of benefit within their organizations.
In addition to the store and distribution center expansion this year, Wal-Mart will continue its rollout during 2006 and double the number of stores that are enabled, along with distribution centers that service the enabled stores. By the end of 2006, more than 1,000 stores, clubs and distribution centers will be using RFID to deliver improved service to customers.
For 2007, Wal-Mart expects the next wave of 300 suppliers to start shipping tagged cases and pallets by January 2007. Combining the 100 suppliers from 2005 with the 200 suppliers during 2006, this will bring the total number of suppliers live in early 2007 to over 600.
Wal-Mart will be ready to accept Gen2 tags during January 2006,
enabling its next wave of suppliers to start with Gen2 tags from the start. As Wal-Mart increases its enabled facilities and as costs continue to fall, Wal-Mart expects its suppliers to tag more volume.