WAL-MART: BENEFITS WILL BE SHARED

Lynne Richardson

DALLAS -- Speaking in the market where Wal-Mart Stores' radio frequency identification (RFID) program is being rolled out with more than 100 suppliers, Linda Dillman, chief information officer, countered questions raised about the program's cost for suppliers.

Dillman said the benefits of the new technology will be shared by supplier, retailer and customer alike, when the technology becomes widespread, which is a given. She made these comments to an overflow crowd in the opening keynote address at RFID World 2005, held last week at the Gaylord Texan Resort here.

"It will fundamentally change the way business is done," she said, as she introduced three short video presentations from suppliers -- Hampton Locks, Beaver Street Fisheries and Hewlett-Packard -- who had joined in Wal-Mart's embrace of RFID technology.

Dillman, who spoke about the program in New York in January at National Retail Federation's annual conference (SN, Jan. 24, 2005, Page 1), was more bullish last week. In her NRF speech, she reported that just 57 suppliers had met the January 2005 RFID mandate Wal-Mart had imposed on its top 100 suppliers two years ago. At last week's conference, she said, "We no longer have to debate the question of RFID. January 2005 is passed, and it's happened."

Dillman said more than 100 suppliers have complied with the retail giant's request to ship pallets and cases fitted with RFID tags containing an electronic product code (EPC) identification chip and a transmitting antenna. Some of those suppliers are volunteers who were not among the top 100 required by Wal-Mart to participate, of which a few were given an extension.

Wal-Mart has found the tags are being read well by RFID readers stationed in 104 Wal-Mart stores, 36 Sam's Clubs, and three distribution centers in and around the Dallas market. By stimulating the tags' antennas to transmit the information in the chip, the readers give Wal-Mart and its suppliers up-to-the-second visibility into where shipments are in the supply stream.

However, a chorus of complaints has been heard about the cost burdens Wal-Mart has imposed on its top suppliers, who are expected to foot the bill. Last November, Grocery Manufacturers of America issued a report that concluded that very few consumer packaged goods manufacturers, if any, can generate a positive return on investment for widespread deployment of RFID tags at the case and pallet level (SN, Nov. 29, 2004, Page 1). Dillman tried to defuse those concerns with the three testimonials.

One of them, Hampton Locks, which supplies Wal-Mart with locks and doors for furniture, was an early convert to RFID. "They came to us and said, 'We want to participate,' back at the start," said Dillman. Hampton was prepared to be a guinea pig for Wal-Mart, sorting through the necessities of finding which tags were most suitable for what items. The company now can track and trace their cases, "from their warehouse, to the back room, the store shelf and all the way to the box crusher," declared Dillman.

Another early advocate was Beaver Street Fisheries, which supplies Wal-Mart with fresh shellfish and seafood, where tracking is critical. BSF's video extolled the virtue of "coming in early, not only for the compliance issue, but for our own efficiencies." The company hopes to be able to use sensor technology to ensure the product stays at optimum temperature from producer to end-user.

Hewlett-Packard is a major supplier to Wal-Mart and had been utilizing RFID even before Wal-Mart issued its directive to suppliers in June 2003. HP is one of the few suppliers whose tagged cases make it onto the sales floor. HP and Cisco are also partners in the international thrust by EPCglobal. EPCglobal is the Lawrenceville, N.J.-based standards body overseeing standardization and commercialization of RFID technology. Dillman lauded the move to take the technology worldwide.

As for Wal-Mart itself, she said the company is already seeing benefits in its stores. For example, associates can more easily restock shelves even during busy times, allowing them to return to servicing customers more quickly. They find what they need in the back rooms speedily by using a device that beeps like a Geiger counter as it approaches the sought-for item. "The associates love it, and the customers think we have more people on the floor," she declared.

Within Wal-Mart's supply chain, during the first month there were 5.6 million readings of tags on cases and pallets of products. Dillman drew an appreciative response from the audience for a slide showing an RFID chip, dwarfed by a magnified pinkie-finger tip, which holds more information than a desktop computer and "uses less power than a honey bee's brain."

Dillman also extolled the work of EPCglobal's Public Policy Steering Committee, which is formulating standards for privacy; dealing with government and legislative issues; and directing worldwide research into other non-retail applications. The pharmaceutical industry, wary of fake drugs being transported around the country, sees a future for RFID, as do hospitals, which could track patients to and from various wards and facilities.

She stressed to the fearful that they could "start small. Wal-Mart had five people working on this to begin with. Even now, there's only nine."

One recent development that could facilitate RFID adoption was the release last December of a new "Generation 2" standard for EPC-based RFID technology, which raised hopes that the tags would become less expensive -- they now cost upwards of 25 cents apiece -- and more widely adopted.