WAL-MART'S CIO DILLMAN DETAILS RFID TAG PLANS

Michael Garry

CHICAGO -- Wal-Mart Stores' chief information officer last week laid out the timetable the chain expects to follow in implementing new-generation RFID technology, a move expected to once again underscore the retail giant's ability to influence the implementation of new technology.

Speaking at the Retail Systems 2003 Conference & Exposition held here at McCormick Place, Linda Dillman, senior vice president and CIO, Wal-Mart, Bentonville, Ark., told a packed conference room that the chain had set Jan. 1, 2005 as the date when it would begin reading radio frequency identification (RFID) tags on pallets and cases received from "targeted" suppliers at stores and distribution centers.

"We are asking probably 100 key suppliers to make sure they are ready to go live with us on that day," she said. Asked later by SN whether Wal-Mart would make this a mandate to these suppliers, she said, "I don't think we will make it a mandate [initially]; at some point, like EDI, it will become a requirement to do business with Wal-Mart." She said Wal-Mart's goal is for tags to be applied to all cases and pallets supplied by all suppliers.

Wal-Mart has estimated that if its 100 top suppliers tagged all of their cases, "just short of one billion tags per year" would be required, said Dillman.

The RFID tags that Wal-Mart's suppliers will be using are based on a design developed by the Auto-ID Center at MIT, Cambridge, Mass., over the past four years. The tags will comprise a microchip containing a 96-bit identifier, called the Electronic Product Code (EPC), along with an antenna that transmits the information when activated by a reader. Using EPC tags and readers, retailers and suppliers will be able to identify and track individual products, cases and pallets throughout the supply chain in an automated fashion, rather than using employees to scan traditional bar codes. Among Auto-ID technology's other projected benefits: reduced out-of-stocks; theft prevention; automated checkout; and even applications in the home. The technology is being touted as having the potential to dramatically impact the retail and CPG industries.

EPC-based tags and readers are in the process of being groomed to be a standard identification system for retailing and other industries. The Uniform Code Council, Lawrenceville, N.J., has taken up a leading role in the development and commercialization of Auto-ID technology and standards through the formation, with EAN International, of a new organization, AutoID Inc. (See SN, June 2, 2003.)

Michael Di Yeso, executive vice president and chief operating officer, UCC, joined Dillman at the Retail Systems presentation in outlining the UCC's plans for Auto-ID technology.

Even prior to Dillman's presentation, reports had been circulating about Wal-Mart's intentions regarding Auto-ID. Sources told SN that Wal-Mart and Procter & Gamble executives had indicated at recent conferences that the chain would be asking its suppliers to start shipping pallets and cases with RFID tags by 2005. (See SN, May 19, 2003.)

But Dillman's presentation marked the chain's first detailed description of its plans for Auto-ID technology and its experiences with it to date. "It's viable today [for pallet and case tagging]," she said. "You can afford a 30-cent tag for both. It adds value in the supply chain all the way to the store."

Dillman said in the third quarter Wal-Mart will begin "compatibility testing" to ensure that the correct tag readers are in place. She said Wal-Mart has been "having a hard time" finding readers that are sufficiently flexible, standards-compliant and interoperable, and can be applied in different locations. "We won't implement anything proprietary," she said.

In the fourth quarter, she said, Wal-Mart will conduct another briefing with suppliers and tell them "exactly what our expectations look like." Then, late this year or early in 2004, the chain will begin testing the technology leading up to the go-live date of Jan. 1, 2005.

Wal-Mart expects to roll out the Auto-ID system for pallets and cases during 2005 and 2006, said Dillman. As for item-level implementations, that will depend on the cost of the tags. Even at today's prices -- 25 to 30 cents per tag -- Wal-Mart could afford to put tags on high-ticket items like pharmaceuticals, jewelry, electronics and tires, she noted, adding that full-scale item implementation would come once the tags are five cents or less.