RFID will benefit suppliers, promises Wal-Mart

Wal-Mart Stores has concluded its three-day RFID event for suppliers this week with additional RFID product tag compliance dates...

Wal-Mart Stores has concluded its three-day RFID event for suppliers this week with additional RFID product tag compliance dates for first and second tier suppliers

The original date of January 2005 for suppliers shipping products to any of three specified distribution centres and 150 stores remain. By June 2005, three additional distribution centres will be added and another 100 stores. By October 2005, 800 stores receiving products from suppliers must have RFID tags in place. 

The next 200 suppliers, tier 2, will have until 1 January 2006, to meet tier 1's October deadline, according to Steve Brown, executive vice-president of business development at Acsis. 

The big message from Wal-Mart to all of its suppliers was that tagging products will not only benefit Wal-Mart but will have value for them as well. Wal-Mart executives promised that they intended to create a feedback mechanism to share data on the movement of their products that was not available with simple bar code reads. 

RFID readers will now be deployed at the back door of its stores so that suppliers will know when goods have arrived. In addition, another RFID tag will be placed at the entrance to the sales floor so a supplier can tell what is on the sales floor and what is left in the backroom. 

This type of information will give suppliers a good read on their inventory and sales velocity and give them more demand signals for forecasting. 

However, Jeff Woods, principal analyst at Gartner Group, said the additional data does not ensure that suppliers will do replenishment any better than before. 

"We already know how much inventory is in the store and what is moving out. What's new is what is in the back and what is in the front [of the store]. But we don’t know if that is really enough to justify all these RFID tags. It is not clear," Woods said. 

Wal-Mart has predicted a plummet in the cost of tags from a high of 50 cents now to five cents by 2006. However, Gartner predicted a far slower decline to 20 cents per tag within the next five years. 

Wal-Mart also promised that it would place RFID tags on point of purchase displays usually used as end caps in stores during promotions. 

Merchandisers spend a lot effort on promotional end caps which often become high-priced shelves in the back room rather than being displayed in the store in a timely manner. 

"Now with RFID you can track compliance with the promotion," Brown said.

Chris Easton, director of business development at ObjectStore, a division of Progress Software, said that in order to share this kind of data Wal-Mart will need to create a service-oriented architecture to have the various suppliers systems interoperate with Wal-Mart.

"Wal-Mart can make that available as a service for the suppliers to query as required," Easton said. 

However, while Wal-Mart plans to create an automated way to extract information out of its supplier portal being put in place, the industry still does not have any standards about handling data and suppliers still need to build repositories to place the data in, said Woods. 

Suppliers are waiting to see the data that comes out of Wal-Mart's Dallas trial to see if there is there will be a return on their future investment, he said.

Ephraim Schwartz writes for Infoworld

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