RFID CUTS OUT-OF-STOCKS BY 16% IN WAL-MART STUDY

Michael Garry

BENTONVILLE, Ark. -- In the first study of the effect of radio frequency identification (RFID) on product availability at outlets operated by Wal-Mart Stores here, researchers at the University of Arkansas, Fayetteville, found a 16% reduction in out-of-stocks.

Additionally, the study, commissioned by Wal-Mart, showed that RFID helped replenish out-of-stock items three times faster than comparable items could be replenished using standard bar code technology.

Wal-Mart has been engaged in a test of RFID technology this year at 130 outlets, including stores and clubs, and three distribution centers in north Texas. About 130 suppliers have been shipping pallets and cases equipped with RFID tags to enable Wal-Mart and the suppliers to track the movement of goods through the delivery cycle.

The tags use electronic product codes (EPCs), a digital identification system, to identify the contents of pallets and cases.

By the end of last month, the number of outlets in the program increased to 500 and the number of DCs to five.

"This is no longer a take-it-on-faith initiative," said Linda Dillman, executive vice president and chief information officer, Wal-Mart, in a statement. "This study provides conclusive evidence that EPCs increase how often we put products in the hands of customers who want to buy them, making it a win for shoppers, suppliers and retailers."

The 29-week study analyzed out-of-stock merchandise at 12 pilot stores equipped with RFID technology and 12 control stores without the technology. All Wal-Mart store formats -- supercenters, discount stores and Neighborhood Markets -- were included in the study.

Wal-Mart said it has seen other benefits from RFID. "The initial changes we made in our stores didn't stop at reducing out-of-stocks," said Rollin Ford, executive vice president for logistics, Wal-Mart, in a statement. "We are also using the technology to reduce our inventory in the whole supply chain. With little effort we have been able to make inroads into this area. Manual orders placed by stores were reduced by approximately 10%."

During January 2006, Wal-Mart is bringing its next top 200 suppliers into the RFID program with live shipments of EPC-tagged cases and pallets. Wal-Mart expects a subsequent wave of 300 suppliers to start shipping tagged cases and pallets by January 2007, putting the total number of participating suppliers to over 600.

In addition, Wal-Mart will continue its rollout during 2006, doubling the number of stores and DCs in the program. By the end of 2006, more than 1,000 stores, clubs and distribution centers will be using RFID, Wal-Mart said.

Wal-Mart's plans have met with opposition from privacy groups. On Oct. 15, a group organized by CASPIAN (Consumers Against Supermarket Privacy Invasion and Numbering) picketed a Wal-Mart supercenter in Dallas, protesting the use of RFID tags on Hewlett-Packard printer/ scanners sold in the store.