WALMART READING RFID TAGS IN TEXAS 2004-05-10 (1)

MICHAEL GARRY

SANGER, Texas -- Wal-Mart Stores last week began reading RFID tags on pallets and cases from eight manufacturers at its regional distribution center here and at seven supercenters, formally launching a new of way of identifying and tracking products.

The RFID (radio frequency identification) tags contain an antenna that transmits digital information in an embedded microchip to a nearby reader, automatically identifying the contents of a pallet or case. The tags will eventually be used to identify individual products, though that is not the primary focus of the Wal-Mart rollout, which is to track the location of pallets and cases into the DC and stores.

The information on the tag is based on the Electronic Product Code, or EPC, an identification system considered the eventual successor to the bar code. Standards for the EPC and RFID technology are being developed by EPCglobal, a joint venture of the Uniform Code Council and EAN International, which oversee bar codes around the world.

Wal-Mart's announcement on April 30 that it has begun reading RFID tags here in what it calls a pilot marked the first step in its adoption of RFID technology, which has been closely followed throughout the retail world. Last June, the Bentonville, Ark.-based retailing giant advised its top 100 suppliers that it wanted them to begin placing RFID tags on pallets and cases by January 2005.

Since Wal-Mart first announced its RFID plans last year, a handful of major retailers have followed suit with their own RFID projects, including Metro Group, Tesco, Target and Albertsons. None of those chains are as far along as Wal-Mart, which has worked on RFID technology for several years as one of the early supporters of the Auto-ID Center at MIT. At the Retail Systems conference in Chicago next week, research will be released showing many large retailers "are going to do something [with RFID] over the next 18 months," said Peter Abell, senior partner, ePC Group, Boston.

Abell said retailers will be able to leverage the fact that most of their large suppliers will now have processes in place to tag pallets and cases because of the Wal-Mart program. However, he added, "It is not an automatic that the same benefits will apply to supermarkets as most supermarket supply chain practices are not the same or even close to Wal-Mart's."

Gus Whitcomb, a spokesman for Wal-Mart, told SN last week that Wal-Mart's January deadline for its top 100 suppliers -- who have been voluntarily joined by 37 other suppliers -- would apply initially to three DCs, including the one here and about 100 stores and Sam's Clubs in the North Texas and South-Central Oklahoma markets. The initial seven supercenters are located in the Dallas-Forth Worth area.

"It is imperative that we have the merchandise the customer wants to buy when they want to buy it," said Linda Dillman, executive vice president and chief information officer, in a statement. "We believe RFID technology is going to help us do that more often and more efficiently."

The eight manufacturers participating in the first phase of the trial are Gillette, Hewlett-Packard, Johnson & Johnson, Kimberly-Clark, Kraft Foods, Nestle Purina PetCare Co., Procter & Gamble and Unilever. Additional suppliers will be added throughout the year leading up to the Jan. 1 deadline. Wal-Mart plans to hold an RFID meeting with manufacturers next month near its headquarters in Bentonville.

Initially, 21 products will be handled in the trial, including paper towels, lotion, cat food, shampoo, feminine hygiene products, laundry detergent, deodorant, shaving cream, soap, toothpaste, peanuts and HP printers and scanners. Whitcomb said Wal-Mart intended to read tags on all pallets and cases carrying the targeted products. "We are working with suppliers on how they need to tag cartons to assure readability," he said. RFID tags on liquid or metal sometimes have interference problems.

Whitcomb said tagged pallets would be read as they entered the DC here, and tagged cases would be read as they were moved into and out of storage on conveyor belts. Both Wal-Mart and its manufacturers are informed of a product's arrival at the DC. At stores, tagged pallets as well as cases would be read as they entered the back room, which will be equipped with readers.

Associates at the test stores will be in a better position to advise customers on whether a product is available in the back room, said Whitcomb. "Using a computer, they'll be able to see whether the product is on the left side or the right side of the back room."

Whitcomb said the tags in the initial rollout will be what EPCglobal has designated Version one, both Class 0 (factory programmable) or Class 1 (end users can write to it). EPCglobal is expected to ratify standards for Version two of the tags by the fall. "We would like one standard, and we are pushing for Class one, Version two of the tags," he noted. Tag costs have not dropped below 50 cents apiece, he added.

Wal-Mart said that while tags would be placed on pallets and cases of shipments for 18 of the 21 initial products, they would go directly on packaging of three electronics products from Hewlett-Packard. The three products -- two HP Photosmart photo printers and an HP ScanJet scanner -- may feature RFID tags on the outer packaging that consumers see on store shelves.

The chain said the outer packaging of the HP products will be marked with an EPCglobal symbol indicating they contain RFID tags with EPC chips. In addition, Wal-Mart pilot stores will feature supplemental signs to help customers further identify the tagged HP products, as well as EPC education pamphlets. Consumers may choose to retain or remove RFID tags after purchasing the tagged HP product, Wal-Mart said.

Whitcomb said Wal-Mart has not heard any complaints yet from privacy groups regarding the tagged HP products. "Hopefully, we have addressed their concerns by being up front with customers about the technology."

Separately, Wal-Mart has been testing RFID tags at a pharmaceutical DC on "warehouse packs of pharmaceuticals," said Whitcomb. He declined to identify the location of the DC for "security reasons."