Wal-Mart promises RFID will benefit suppliers

Company pushes ahead with aggressive compliance schedule

Wal-Mart wrapped up its three-day RFID event for suppliers this week in Springdale, Ark., with additional RFID product tag compliance dates for tier one and tier two suppliers and some optimistic words about the benefits of RFID for its supplier network.

While Wal-Mart traditionally does not talk to the trade press and this was not a public meeting, the details were gleaned from attendees at the event speaking to InfoWorld.

For those suppliers believing Wal-Mart might extend the schedule for RFID tag deployments for its top 100 vendors due to the complexity of the challenge, the news was not good.

The original date of January 2005 for suppliers shipping products to any of three specified distribution centers and 150 stores remains intact.

By June 2005, three additional distribution centers will be added and another 100 stores. By October 2005, 800 stores receiving products from suppliers must have RFID tags in place.

The next 200 suppliers, tier 2, will have until Jan. 1, 2006, to meet tier 1's October deadline, according to Steve Brown, executive vice president of business development at Acsis and an attendee to the Wal-Mart event.

The big message from Wal-Mart to all of its suppliers was that tagging products will not only benefit Wal-Mart but will have value for them as well. Wal-Mart executives promised that they intend to create a feedback mechanism to share data on the movement of their products that was not available with simple bar code reads.

RFID readers will now be deployed at the back door of its stores so that suppliers will know when goods have arrived. In addition, another RFID tag will be placed at the entrance to the sales floor so a supplier can tell what is on hand, such as what is on the sales floor and what is left in the backroom.

This type of information will give vendors a good read on their inventory and sales velocity and give them more demand signals for forecasting.

However, Jeff Woods, principal analyst at Gartner Group, said the additional data does not ensure that suppliers will do replenishment any better than before.

"We already know how much inventory is in the store and what is moving out. What's new is what is in the back and what is in the front [of the store]. But we don’t know if that is really enough to justify all these RFID tags. It is not clear," Woods said.

Justification is in dollars, and while Wal-Mart is predicting a plummet in the cost of tags from a high of 50 cents now to five cents by 2006, Gartner Group predicts a far slower decline to 20 cents per tag within the next five years.

Wal-Mart also promised that it would place RFID tags on point of purchase displays usually used as end caps in stores during promotions.

Merchandisers spend a lot effort on promotional end caps which often become high-priced shelves in the back room rather than being displayed in the store in a timely manner, according to Brown.

"Now with RFID you can track compliance with the promotion," Brown said.

Chris Easton, director of business development at ObjectStore, a division of Progress Software, said that in order to share this kind of data Wal-Mart will need to create a service-oriented architecture to have the various vendor systems interoperate with Wal-Mart. "Wal-Mart can make that available as a service for the vendors to query as required," Easton said.

However, while Wal-Mart plans to create an automated way to extract information out of its supplier portal being put in place, the industry still does not have any standards about handling data and vendors still need to build repositories to place the data in, said Woods.

All the infrastructure costs are not yet fully understood. According to Woods, vendors are waiting to see the data that comes out of Wal-Mart's Dallas trial in order to figure out if there is there is in fact return on their future investment.

Copyright © 2004 IDG Communications, Inc.