Wal-Mart suppliers face tough RFID schedule

Wal-Mart invited 120 suppliers to a meeting to detail its guidelines for using RFID tags on shipping pallets and cases of...

Wal-Mart invited 120 suppliers to a meeting to detail its guidelines for using RFID tags on shipping pallets and cases of merchandise.

Only the top 100 suppliers face the January 2005 deadline that the retailer has set for compliance with its radio frequency identification technology directive, but the rest have been asked to follow suit by the start of 2006.

Some analysts and consultants said most of Wal-Mart's suppliers will be challenged to meet the deadline, and they will be hard-pressed to come up with a plan conceived well enough to justify the expense.

"Right now, the benefits are primarily for Wal-Mart, and the costs are the responsibility of the suppliers," said Kara Romanow, an analyst at AMR Research.

Romanow estimated start-up costs at $13m to $23m for a supplier shipping 50 million tagged containers a year. Costs include RFID tags, readers, system integration and changes to supply chain applications.

Romanow believed cost-sharing discussions between Wal-Mart and its suppliers will be needed. The tags, one of the key potential discussion points, which cost from 20 cents to 50 cents, according to analysts and consultants.

Wal-Mart said its RFID rollout will start at distribution centres in Texas serving about 150 stores and continue incrementally across the country. The schedule for the rest of the retailer's 108 distribution centers and 3,000 stores will be shared with suppliers later, on a rolling basis, through Wal-Mart's extranet site, called RetailLink.

Jeff Woods, an analyst at Gartner, said the quickest and cheapest way for suppliers to meet the January deadline for Wal-Mart's three distribution centres is by adopting a "slap-and-ship" strategy of merely affixing tags to case and pallets as they leave the shipping dock.

But some analysts and consultants said the only way suppliers will be able to justify the expense is to do the necessary supply chain and business process re-engineering that ultimately will help them to take advantage of the more accurate information.

Jonathan Loretto, a Toronto-based consultant specialising in RFID at Cap Gemini Ernst & Young, said the "Wal-Mart 100" face 18 months of hard work to comply with the retailer's requirements. He estimated first-year costs at $15m to $18m per supplier for the hardware, software, other systems and labour.

Carol Sliwa writes for Computerworld

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