Wal-Mart RFID - Recently we have seen a change in...

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Recently we have seen a change in Wal-Mart’s RFID efforts. First off Wal-Mart shifted their efforts towards stores rather than distribution centers. This shift is due to the fact that they've missed their goal of installing RFID in at least 12 out of its 137 distribution centers by last year. Second, in spite of the fact that many smaller Wal-Mart suppliers have had trouble find ROI (return on investment) by putting into operation RFID in their supply chain, Procter and Gamble (a Wal-Mart supplier) has found Wal- Mart’s RFID effort effective. It should be pointed out that not only was P&G on of the first 100 Wal-Mart suppliers to apply RFID. Their ROI in RFID can be seen in volume transactions, something that can’t be accomplished by smaller suppliers. It would be nice to think otherwise, the data so far, plus statements from some smaller suppliers, implies that compliance with Wal-Mart’s RFID initiative is hurting them. However, Wal-Mart is still pushing for RFID adoption. P&G has improved the accuracy of its deliveries to Wal-Mart, particularly during time-sensitivity promos, according to Paul Fox, a spokesman for P&G Global Operations. “Ensuring that the right product is at the right place at the right time is priceless,” he said. In addition, Fox said, “we have seen significant benefits within our own four walls. It’s helping streamline processes and making them more efficient. We know what we’re about to ship, and there are no errors and no picking the wrong case and no miscounting.” RFID has offered significant improvements over bar-code systems, Fox said. For instance, he noted that workers can’t scan the same RFID tag twice because each one has a distinctive identifier. Bar-code technology does not have those capabilities. RFID automation has also permitted P&G to speed the process of moving products to a distribution center. It took 20 seconds to manually compute bar-code data on a pallet opposed to five seconds to read the RFID technology. The RFID tags are very cost efficient at less than 10 cents a tag. He said P&G’s overall investment in RFID technology, which he would only say was multiple millions of dollars, has been recovered. “Fundamentally, it’s been a fruitful collaboration between ourselves and Wal- Mart,” Fox said. Some analysts remain unconvinced that the Wal-Mart RFID program will prove beneficial to all suppliers. “More data is needed to determine whether RFID technology is more cost effective than bar-code systems,” said an analyst at ABI Research. Simon Langford, director of RFID and transportation systems at Wal-Mart, said the second generation of RFID technology has improved performance and accuracy for the retailer. Langford acknowledged that the company’s top 100 suppliers, which went live with the technology during 2005, faced some challenges while learning how to use it. Smaller suppliers that implemented the technology later on benefited from lessons learned by the earlier adopters, he said.
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