Sunday, January 20, 2008

Wal-mart increases pressure on suppliers for RFID

The world's largest retailer is turning up the heat on suppliers that do not comply with its demands for RFID tags on all incoming pallets to its Sam's Club distribution center in Texas.

According to Information Week:
Wal-Mart has apparently tired of its investments in radio frequency identification turning into a prolonged pilot study and is stepping up pressure on suppliers to comply with its 3-year-old inventory-technology mandate. The retailer says that beginning Jan. 30, it will charge suppliers a $2 fee for each pallet they ship to its Sam's Club distribution center in Texas that doesn't have an RFID tag. The charge is to cover Sam's Club's cost to affix tags on each pallet, says a Wal-Mart spokesman. "It's really designed as a short-term solution for those suppliers that may need a little more time to implement their own tagging solution," he says.
To be clear, Walmart's action applies only to this one Sam's Club distribution center, not all Walmart warehouses. Walmart appears determined on "turning its 700-store Sam's Club warehouse-outlet division into an example of RFID supply chain technology in action," according to the article.

The fact that Walmart needs to adopt punitive measures to force compliance with its RFID initiative is a clear indication that the business value to many suppliers is simply not there. We pointed this out in a Computer Economics research piece about a year ago entitled, RFID Adoption Stalls. As we wrote in the executive summary,
Despite these factors, the adoption rate of RFID technology has stalled significantly in the last year. This slow-down is not being publicized by suppliers of RFID equipment and systems, since their success depends on continued promotion of the technology. Some reports of an RFID slow-down, however, are beginning to appear in the business press. For example, the Wall Street Journal recently reported that Wal-Mart has only installed RFID in five of its distribution centers, which is well behind its plan two years ago that called for 12 of its distribution centers to be up and running by now. The same article reports that apparel maker VF Corp. has curbed its RFID program, citing an absence of payback for its efforts in the foreseeable future.
There are a number of factors hindering widespread adoption of RFID, in areas such as cost, technical performance, and conflicting standards, as well as security and privacy concerns.

The full research article gives details.

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