October 18, 2007
Supply Chain Digest: Wal-Mart is Changing Its RFID Tune, Launching a New Set of Pilots
By SCDigest Editorial Staff
Through a special arrangement, what follows is an excerpt of a current article from Supply Chain Digest, presented here for discussion.
Wal-Mart recently announced three new and very specific RFID initiatives. Consequently, it has aligned itself more clearly and directly where a few leading consumer goods companies, such as Procter & Gamble/Gillette and Kimberly Clark, have been promoting the opportunities for some time – focusing on promotional products to ensure high levels of execution compliance in-store.
“We’re coming at RFID from a different angle,” Wal-Mart’s VP of Information Technology, Carolyn Walton, said at the EPC Global conference on Oct. 5.
The first new Wal-Mart program will involve a pilot to tag pallets – not cartons – sent to a Sam’s Club DC. That DC will be testing readers on racks to automatically track pallet putaway without the need to scan bar codes.
The second program involves asking only suppliers with featured promotional products to tag displays and products for those promo items. Wal-Mart will be testing new readers designed specifically to track execution and activity at various “hot spots” within its stores – such as end of aisle displays. RFID reads will tell store managers how well these promotions are being executed, and signal the need for action if a display or inventory is needed.
The third program tests to see if tagging across an entire category – presumably ones that have particular inventory issues – can increase sales by reducing out of stocks. The first pilot will involve air fresheners.
The first move, involving the Sam’s Club pilot, has the advantage of only requiring pallet-level tagging – a much less costly requirement than earlier loose mandates asking for carton level tagging.
The second two are clearly aimed at refocusing Wal-Mart’s RFID efforts at programs that can have a more immediate and clear return for vendors – and to limit tagging requirements for now to test programs that can demonstrate a return for a specific group of vendors or products, not all products all the time. This more targeted approach will reduce vendor push-back, and more closely resembles the tack taken by Wal-Mart rival Tesco in the UK.
“From where we sit, this looks like good news,” said a logistics executive at a $300 million housewares manufacturer that was part of the last wave of vendors to face general tagging requirements. So far, the company has tagged only a small percentage of cartons it sends to Wal-Mart, and none it sends to Wal-Mart competitors.
The shift signals a sharp change from the more general, broad-based program first announced in 2003 that has generated significant controversy and debate ever since. Many consumer goods companies have privately and sometimes publicly stated that there was little return from the costly case-level RFID tagging requirements.
Discussion Questions: What do you think of Wal-Mart’s new approaches to executing RFID programs? Do you think it will improve the rollout of RFID technology across retail? What do you particularly think of the focus on testing RFID programs around improving in-stock positions and floor level execution for promotional products and displays?
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If you’re real quiet you can hear it…sigh of relief!…from the many vendors that were on the Wal-Mart mandate list but could see no value in RFID from their end. The new specific programs make a lot more sense and will probably add value, therefore, the resistance of the vendors to participate will go away. Becoming more of a partner to your vendor always works much better than a mandate “like it or not” attitude.
RFID has always been a viable solution in certain applications. So this new attitude will allow RFID to grow and prosper where it adds real value.
The focus on testing RFID on improving in-stock positions in the retail store is right on. That’s where the retailers are missing big dollars and need a better solution.
One last note: although I didn’t agree with the RFID mandate in 2003-2004, you’ve got to agree that it certainly created a “buzz” in the marketplace and pushed awareness of RFID into the forefront. The buzz created lower prices, new vendors, research, technical design enhancements, and much more. So, realistically, the mandate did accomplish many goals and it would never have happened without Wal-Mart stepping up to the plate!
As the author of this article, I think two of the above comments really hit the mark.
First, the comment about a rifle shot versus a shot gun blast. The fundamental problem with Wal-Mart’s approach (in contrast to Tesco’s) was that it was a blast with new waves of vendors facing a “mandate” (it really wasn’t a mandate, exactly–just a strong suggestion) before the first waves were really much complying or seeing ROI. Wal-Mart wasn’t even seeing ROI. Why would you then roll out the next wave.
Second, as we also wrote in a new piece today, in retail right now it isn’t really about the supply chain with RFID, it’s about in-store execution and intelligence. In reality, once the supply chain gets the product to the DC or store, it’s kind of done. No, I not arguing for some silo mentality, I am just being realistic. The insights and benefits from the promotions tracking are of interest mostly to the consumer goods company brand manager, not the supply chain manager.
RFID is alive and quite well in many other supply chain applications, however, mostly of the “closed loop” kind.
Reading between the lines reveals a kernel of wisdom about RFID, I think. Wal-Mart may be recognizing that it’s not just about the supply chain. It’s about in-store implementation and its impact on every day shelf maintenance, promotion performance, and even the value of its shopper media network.
RFID is a potential enabler for a wider initiative to improve compliance at the shelf. Having a plan to put product where it’s supposed to be on time, getting the work done and measuring performance is the “golden sequence” for implementation. RFID could be a great help on the measuring piece in particular, which will force better planning and provide clearer incentives for getting tasks done in store.
Forcing vendors to apply RFID technology was a bad idea because it was carried out with too little attention to the plan-do-measure golden sequence. Wal-Mart is apparently living and learning. Sparing use of RFID can pay benefits today. It will probably be a valuable component of success tomorrow. But pursuing RFID as an end unto itself would be a mistake.
Well, this will give all the Wal-Mart bashers a new three week’s worth of fodder. Ever heard that definition of insanity? “Continuing to do the same thing and expecting different results”! Well this would seem to be proof that Wal-Mart is not insane. Apparently they have studied their performance and determined that the results so far are short of what they had projected. To achieve their goals, they are changing the scope and method of their endeavor. My advice–buy stock.
Many years from now, when I tell my grandchildren “I remember when RFID tags were put on the boxes” and they will look at me like I had a black-and-white TV. We are witnessing the evolution of a new form of tracking and validation, and this move by Wal-Mart is just the next step. Since the strategy of second tier retailers is a “me too” and third tier is to flank the leader, whatever results Wal-Mart achieves on the positive side will be copied rapidly. I’m sure the attitude of most Retailers and Manufacturers is that they are glad WM and their partners are also footing the bills for these experiments too. Can’t wait to see what the “next” step will be.
Half a loaf is better than none! RFID is coming for sure, and anything that expands it incrementally will aid in crossing lots of hurdles–mindshare, experience, reduced costs of infrastructure and tags and contribution to profits.
This is a great move.
RFID has much better return on investment when it’s tested on a narrow rifle shot basis, not a broad shotgun effort. Some merchandise categories and some logistics functions tend to have higher ROI when using RFID and some don’t. Tracking a pallet is lot cheaper per unit of sale than tracking each individual shopper-level item. Tracking high-margin merchandise improves profits faster than tracking low-margin and low-price items. As for tracking promotion displays, why not use surveillance camera images on private internet locations? Or use snapshot images saved by in-store DVRs connected to surveillance cameras? The snapshots can be e-mailed anywhere, and the capital cost is already paid for.
I have said all along that RFID alone is not enough, and that targeted solutions that approach specific problems is the way to go. I’m glad to see Wal-Mart refocus its efforts, and I’m particularly glad that they are choosing problems that are a clear pain point for CPGs.
The question is, will Wal-Mart be willing to make process changes in stores that inevitably will be required to make sure that promotional displays make it out to the floor and stay stocked? Historically, stockouts at the shelf have been blamed on the supplier. But early RFID pilots showed significant issues within store operations–things the retailer needs to change. It will be interesting to see whether Wal-Mart is truly dedicated to improving the business and solving stockout issues, or just in it to beat up suppliers.
Let me start by reaffirming that RFID is a good idea. It was just presented by some retailers in a way that made it difficult for many trading partners to accept. Wal-Mart, one of the strongest supporters of initiatives like Collaborative Planning, Forecasting and Replenishment (CPFR®), should have known that working with vendors is more effective than issuing mandates. By starting with displays and moving to higher priced items, and by working more closely with the vendors of these programs, Wal-Mart will gain a lot more traction for RFID use than it did by commanding its high volume suppliers to participate in what turned out to be a laborious effort on everyone’s part.
Nikki’s points are dead on. We can’t innovate (and solve problems) if we don’t test potential solutions. I applaud Wal-Mart LOUDLY for bravely stepping forth into unknown waters to gauge the temperature. What they are doing will open the door to learnings that will very likely help the industry evolve…I just hope to be exposed to results!
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If you’re real quiet you can hear it…sigh of relief!…from the many vendors that were on the Wal-Mart mandate list but could see no value in RFID from their end. The new specific programs make a lot more sense and will probably add value, therefore, the resistance of the vendors to participate will go away. Becoming more of a partner to your vendor always works much better than a mandate “like it or not” attitude.
RFID has always been a viable solution in certain applications. So this new attitude will allow RFID to grow and prosper where it adds real value.
The focus on testing RFID on improving in-stock positions in the retail store is right on. That’s where the retailers are missing big dollars and need a better solution.
One last note: although I didn’t agree with the RFID mandate in 2003-2004, you’ve got to agree that it certainly created a “buzz” in the marketplace and pushed awareness of RFID into the forefront. The buzz created lower prices, new vendors, research, technical design enhancements, and much more. So, realistically, the mandate did accomplish many goals and it would never have happened without Wal-Mart stepping up to the plate!
As the author of this article, I think two of the above comments really hit the mark.
First, the comment about a rifle shot versus a shot gun blast. The fundamental problem with Wal-Mart’s approach (in contrast to Tesco’s) was that it was a blast with new waves of vendors facing a “mandate” (it really wasn’t a mandate, exactly–just a strong suggestion) before the first waves were really much complying or seeing ROI. Wal-Mart wasn’t even seeing ROI. Why would you then roll out the next wave.
Second, as we also wrote in a new piece today, in retail right now it isn’t really about the supply chain with RFID, it’s about in-store execution and intelligence. In reality, once the supply chain gets the product to the DC or store, it’s kind of done. No, I not arguing for some silo mentality, I am just being realistic. The insights and benefits from the promotions tracking are of interest mostly to the consumer goods company brand manager, not the supply chain manager.
RFID is alive and quite well in many other supply chain applications, however, mostly of the “closed loop” kind.
Reading between the lines reveals a kernel of wisdom about RFID, I think. Wal-Mart may be recognizing that it’s not just about the supply chain. It’s about in-store implementation and its impact on every day shelf maintenance, promotion performance, and even the value of its shopper media network.
RFID is a potential enabler for a wider initiative to improve compliance at the shelf. Having a plan to put product where it’s supposed to be on time, getting the work done and measuring performance is the “golden sequence” for implementation. RFID could be a great help on the measuring piece in particular, which will force better planning and provide clearer incentives for getting tasks done in store.
Forcing vendors to apply RFID technology was a bad idea because it was carried out with too little attention to the plan-do-measure golden sequence. Wal-Mart is apparently living and learning. Sparing use of RFID can pay benefits today. It will probably be a valuable component of success tomorrow. But pursuing RFID as an end unto itself would be a mistake.
Well, this will give all the Wal-Mart bashers a new three week’s worth of fodder. Ever heard that definition of insanity? “Continuing to do the same thing and expecting different results”! Well this would seem to be proof that Wal-Mart is not insane. Apparently they have studied their performance and determined that the results so far are short of what they had projected. To achieve their goals, they are changing the scope and method of their endeavor. My advice–buy stock.
Many years from now, when I tell my grandchildren “I remember when RFID tags were put on the boxes” and they will look at me like I had a black-and-white TV. We are witnessing the evolution of a new form of tracking and validation, and this move by Wal-Mart is just the next step. Since the strategy of second tier retailers is a “me too” and third tier is to flank the leader, whatever results Wal-Mart achieves on the positive side will be copied rapidly. I’m sure the attitude of most Retailers and Manufacturers is that they are glad WM and their partners are also footing the bills for these experiments too. Can’t wait to see what the “next” step will be.
Half a loaf is better than none! RFID is coming for sure, and anything that expands it incrementally will aid in crossing lots of hurdles–mindshare, experience, reduced costs of infrastructure and tags and contribution to profits.
This is a great move.
RFID has much better return on investment when it’s tested on a narrow rifle shot basis, not a broad shotgun effort. Some merchandise categories and some logistics functions tend to have higher ROI when using RFID and some don’t. Tracking a pallet is lot cheaper per unit of sale than tracking each individual shopper-level item. Tracking high-margin merchandise improves profits faster than tracking low-margin and low-price items. As for tracking promotion displays, why not use surveillance camera images on private internet locations? Or use snapshot images saved by in-store DVRs connected to surveillance cameras? The snapshots can be e-mailed anywhere, and the capital cost is already paid for.
I have said all along that RFID alone is not enough, and that targeted solutions that approach specific problems is the way to go. I’m glad to see Wal-Mart refocus its efforts, and I’m particularly glad that they are choosing problems that are a clear pain point for CPGs.
The question is, will Wal-Mart be willing to make process changes in stores that inevitably will be required to make sure that promotional displays make it out to the floor and stay stocked? Historically, stockouts at the shelf have been blamed on the supplier. But early RFID pilots showed significant issues within store operations–things the retailer needs to change. It will be interesting to see whether Wal-Mart is truly dedicated to improving the business and solving stockout issues, or just in it to beat up suppliers.
Let me start by reaffirming that RFID is a good idea. It was just presented by some retailers in a way that made it difficult for many trading partners to accept. Wal-Mart, one of the strongest supporters of initiatives like Collaborative Planning, Forecasting and Replenishment (CPFR®), should have known that working with vendors is more effective than issuing mandates. By starting with displays and moving to higher priced items, and by working more closely with the vendors of these programs, Wal-Mart will gain a lot more traction for RFID use than it did by commanding its high volume suppliers to participate in what turned out to be a laborious effort on everyone’s part.
Nikki’s points are dead on. We can’t innovate (and solve problems) if we don’t test potential solutions. I applaud Wal-Mart LOUDLY for bravely stepping forth into unknown waters to gauge the temperature. What they are doing will open the door to learnings that will very likely help the industry evolve…I just hope to be exposed to results!