MINNEAPOLIS -- Closely following a widely publicized pilot by Wal-Mart Stores, Target here recently spoke to its top suppliers about conducting an RFID (radio frequency identification) test at a distribution center and 10 stores in the Dallas market, sources told SN.
According to Kara Romanow, an analyst for AMR Research, Boston, whose focus is consumer packaged goods manufacturers, Target held a meeting with its top suppliers on Aug. 9 to discuss the Dallas-area pilot, in which the suppliers would attach RFID tags to pallets and cases to facilitate real-time tracking of shipments.
Romanow said the plan, as suppliers described it to her, is that Target's top 100 suppliers would tag shipments of at least one product, while its top 19 suppliers would tag shipments of at least three products, for delivery into a Dallas-area DC by June 2005. The DC would be equipped with RFID readers that could track incoming or outgoing shipments. (Target was expected to open a new DC in Midlothian, Texas, between Dallas and Fort Worth, this year.) Ten stores served by the DC would also be equipped with readers in back rooms.
Romanow also said that the pilot could expand to 62 stores served by the DC by December, based on reader availability. It could also expand to include all products supplied by the top 100 vendors, but would likely not expand to other DCs, she said.
Target, which has not publicly announced the project, declined requests for comment, as did some suppliers at the meeting. Target, however, is known to be actively involved in RFID technology. At the Retail Systems conference in Chicago in May, Paul Singer, Target's chief information officer, strongly endorsed RFID in a panel discussion with Linda Dillman, Wal-Mart's CIO.
"We understand trend curves," Singer said at the conference. "It's blatantly obvious that now is the time [for RFID]. The technology is maturing rapidly, and it's going to happen. So you should get started now. The impact is virtually endless."
Romanow said she believed Target's business case was especially focused on creating a "virtual inventory" at the store level as RFID-tagged product is tracked entering the store. The RFID tags and technology will be based on the EPC (electronic product code), a chip-based digital identifier that is being commercialized and standardized by EPCglobal, an organization jointly run by Uniform Code Council and EAN International.
Pete Abell, president, ePC Group, Boston, another analyst with close ties to CPG suppliers, also said he had learned of Target's RFID pilot from suppliers at the meeting. He said the Dallas location, where Wal-Mart's RFID pilot has already been launched, makes sense for suppliers. "It's clear that the best approach for suppliers is to get as much of their volume going through the same geographic area to reduce their costs," he said.
Abell noted that while the suppliers in the Wal-Mart and Target pilots would be "generally the same," there would be some differences based on each retailer's specific requirements. Romanow said there would be a 90% overlap of vendors.
Abell said both retailers would be using RFID readers similarly in their DCs, at docks and on conveyor belts; supermarkets typically use forklifts rather than conveyor belts for selection. He said the timing of Target's Dallas-area pilot would coincide with the release of the "Generation 2" UHF RFID standard by EPCglobal.
Whereas Target has been private about its RFID strategy, Wal-Mart has been quite public about its plans. Following its initial announcement in June 2003, Wal-Mart officially launched its Dallas-market RFID pilot on April 30 of this year. The Wal-Mart pilot started with RFID-tagged pallets and cases of 21 products from eight manufacturers being shipped to a DC in Sanger, Texas, with subsequent shipments to seven supercenters in the Dallas marketplace.
Wal-Mart's top 100 suppliers -- plus 37 additional suppliers -- are working toward meeting a January 2005 deadline to be live with RFID in three DCs and about 100 stores in North Texas. The pilot would continue expanding throughout 2005 (see SN, June 28, 2004). Abell estimated that Wal-mart will spend about $3 billion on its RFID rollout.
Romanow characterized Target's RFID pilot as "kinder and gentler than others we've seen." She said Target is taking a more "collaborative" approach with suppliers, "sharing their expectations and business case." Target, she continued, plans to share individual and collective data on read rates, for example, with all participating vendors.