Will WalMart get RFID Right this Time

In a move that many in the RFID community knew WalMart has been planning for months, news came late last week that the retail giant was planning an ambitious program to RFID tag all the apparel goods it sells at the item level. The new has buoyed RFID system providers, who hope that program will re-energize the use of RFID in the consumer goods to retail sector, caused privacy experts to raise concerns about the impact on consumers, and has everyone wondering if WalMart will finally get its RFID program right on the third try.

The WalMart program will start with tagging of men's jeans and basics (socks, undershirts and underwear). It has been working with suppliers of those products for many months, with word starting to leak out into the industry starting this past Spring.

The History

WalMart first announced plans for a broad supplier requirement to tag full pallets and individual cases of products with the Electronic Product Code (EPC) form of RFID in 2003. The roll-out started in 2005 with a couple of hundred suppliers tagging cases being sent to 2 or 3 WalMart distribution centers in Texas, but rapidly fizzled, as WalMart searched for the right value proposition, suppliers pushed back on absorbing the tagging costs, WalMart’s program management seemed lacking, and the world’s largest retailer seemed to move to other priorities, such as Sustainability and changes in the overall way it managed inventories.

It later tried to jump start a much smaller scale program at it Sam’s Club warehouse club chain, starting with tagging at the pallet level only and announced plans for the first “chargebacks” to suppliers for lack of RFID compliance - but that program suddenly stalled in early 2009.

The failure of WalMart’s earlier efforts was frustrating to a few leading consumer goods companies, such as Procter & Gamble and Kimberly-Clark, which saw many benefits to themselves from end-to-end supply chain visibility through using RFID.

The program’s challenges also frustrated supply chain software makers and manufacturers of RFID tags, readers, label print and apply machines and others, who initially viewed the WalMart RFID rollout as a “gold rush” of system and hardware sales and an eventual catalyst that would drive other retailers to follow suit with their own RFID programs.

Now the gold rush may be on again, as item-level tagging even if only for apparel will likely require hundreds of millions of tags annually. RFID vendors will hope the program – if it proves successful this time – may lead eventually to WalMart tagging again start to tag non-apparel items and to force other apparel vendors to start their own RFID programs in response.

What May be Different This Time

WalMart likely learned some lessons from its previous RFID efforts, and there are three primary differences for this initiative versus its previous efforts.

First, the value proposition and ROI for item-level tagging in apparel is becoming increasingly clear. Vertically integrated retail chain American Apparel has said it has seen strong results from its several year-long initiative in this area, and studies by the University of Arkansas have found strong benefits from item-level apparel tagging in the areas of inventory accuracy at store level and labor reduction in cycle counting, based on tests at department stores chains such as Dillard’s and Bloomingdale’s.

Second, though not completely clear, it appears WalMart – for now at least – will be picking up part of the costs that suppliers will bear for the RFID tag “inlays” that are embedded in a label or the packaging material of the item. That will substantially reduce vendor push back, especially as they may benefit themselves from the program in terms of reduced store-level stockouts and improved inventory visibility.

Third, WalMart apparently has said the program won’t necessarily involve every apparel item being tagged. Instead, the retailer will look at different products on a SKU-by-SKU basis to see where there is a strong value proposition – an approach that was missing in the one size fits all approach of the previous programs.

Also interesting is the fact that this latest initiative will be led in the US by Myron Burke, Wal-Mart's director of store innovation. In the past, WalMart’s RFID efforts were led by Simon Langford, manager of global RFID strategy for the company.

Privacy Watchers are Nervous

Several privacy related groups have expressed concern about the new program, especially because the tags will be used at the item-level, which in some minds might give someone the capability to track what specific consumers buy or even what items they have in their homes.

For example, Katherine Albrecht, director of a group called Consumers Against Supermarket Privacy Invasion and Numbering and author of the book “Spy Chips” earlier in the decade, told USA Today that "This is a first piece of a very large and very frightening tracking system,"

However, WalMart says it will ask suppliers to only use tags in an easily removable label, or on product packaging, not the item itself. It seems unlikely privacy concerns will derail the program or even slow it down.

Source: http://www.scdigest.com/