Despite mandate and looming deadline, retailer showing flexibility as top suppliers move toward compliance, ARC finds
Dedham, MA — November 19, 2004 — The scope of Wal-Mart's program to incorporate radio frequency identification technology into its supply chain has been exaggerated in public reports on the initiative, and the retail giant has shown more flexibility in negotiating with top suppliers on RFID adoption than was previously believed, according to a new study from technology consultancy ARC Advisory Group.
ARC conducted an RFID Deployment Best Practices study in which the consultancy talked to 24 companies that were actively investing in electronic product code (EPC) RFID. ARC discovered that public reporting on the status of Wal-Mart's RFID efforts has been misleading.
"The impression conveyed to the public by many pundits is that all Wal-Mart [stock keeping units (SKUs)] bound for three of the retailer's Texas distribution centers from the top 100 suppliers will be RFID tagged starting January 1. This is incorrect," said Steve Banker, service director for supply chain management at ARC.
In fact, Banker said, Wal-Mart has conducted a set of negotiations with its top 100 suppliers, and in these negotiations, Wal-Mart has shown more flexibility than many anticipated.
Wal-Mart has mandated that by January 2005 its top 100 suppliers must apply passive RFID tags based on EPC-global standards to cases and pallets headed toward three specific distribution centers (DCs) in Texas. Virtually all manufacturers of consumer goods will eventually be affected by this because Wal-Mart's moves in RFID are being copied by other retailers.
Different suppliers negotiated a wide range of agreements with Wal-Mart. One large supplier will be shipping over 700 RFID-tagged SKUs starting on Jan 1. Many other companies, even very large companies, will be shipping fewer than a dozen.
Further, January 1 is not always the deadline; in certain extenuating circumstances, Wal-Mart has granted a deferment. One company interviewed by ARC had a good reason for not starting on January 1, so they will not start RFID tagging until mid-2005. The top eight began shipping a limited number umber of SKUs to Wal-Mart in 2004. Once companies have begun, they are expected to keep shipping those SKUs. These early RFID shippers may begin shipping even more SKUs starting January 1.
Companies anticipate meeting the commitments they made to Wal-Mart, and ARC believes that the public discussion of the status of the Wal-Mart RFID project has been misleading. "Companies believe they will meet their commitments," ARC reported. "However, the commitments suppliers are meeting are usually far less than applying RFID tags to all SKUs that these suppliers ship to Wal-Mart's three RFID-enabled distribution centers in Texas."
Moving forward, meetings between suppliers and Wal-Mart will occur on an ongoing basis, and even if a supplier in initial negotiations was able to commit to only a small number of SKUs for tagging, that supplier knows that in upcoming meetings Wal-Mart will press for an expanded list of SKUs.
According to Banker, "The focus right now is on Wal-Mart, and the question people are asking is 'What is the status of your effort?' The more interesting questions should be directed at Wal-Mart's suppliers. Those questions are, 'How successful were you in your negotiations with Wal-Mart? What does it take to do well in those negotiations?'"
In its report, "RFID Deployment Best Practices," ARC is offering information on the status of the Wal-Mart mandate and advice on how to prepare for mandate meetings with retailers; an analysis of how companies are changing their processes to meet these mandates and the strengths and weaknesses of the various process choices; and an analysis of three critical inflection processes when it makes sense to move from handling RFID in a certain way to doing it differently.
The report also provides an analysis of the reliability of RFID technology, as well as companies' satisfaction with various RFID solution providers; the costs of preparing the RFID infrastructure; the benefits of RFID and what will be necessary to reap those benefits; and 13 key recommendations for companies to save money in the event that they must implement RFID to meet a mandate.
Additional information on this study can be found at http://www.arcweb.com/research/ent/rfid-epc.asp.
For more information on trends relating to radio frequency identification, follow this link for an extensive listing of SDCExec.com articles, featuring the latest research findings on the RFID, including adoption, return on investment and barriers to implementation.
Dedham, MA — November 19, 2004 — The scope of Wal-Mart's program to incorporate radio frequency identification technology into its supply chain has been exaggerated in public reports on the initiative, and the retail giant has shown more flexibility in negotiating with top suppliers on RFID adoption than was previously believed, according to a new study from technology consultancy ARC Advisory Group.
ARC conducted an RFID Deployment Best Practices study in which the consultancy talked to 24 companies that were actively investing in electronic product code (EPC) RFID. ARC discovered that public reporting on the status of Wal-Mart's RFID efforts has been misleading.
"The impression conveyed to the public by many pundits is that all Wal-Mart [stock keeping units (SKUs)] bound for three of the retailer's Texas distribution centers from the top 100 suppliers will be RFID tagged starting January 1. This is incorrect," said Steve Banker, service director for supply chain management at ARC.
In fact, Banker said, Wal-Mart has conducted a set of negotiations with its top 100 suppliers, and in these negotiations, Wal-Mart has shown more flexibility than many anticipated.
Wal-Mart has mandated that by January 2005 its top 100 suppliers must apply passive RFID tags based on EPC-global standards to cases and pallets headed toward three specific distribution centers (DCs) in Texas. Virtually all manufacturers of consumer goods will eventually be affected by this because Wal-Mart's moves in RFID are being copied by other retailers.
Different suppliers negotiated a wide range of agreements with Wal-Mart. One large supplier will be shipping over 700 RFID-tagged SKUs starting on Jan 1. Many other companies, even very large companies, will be shipping fewer than a dozen.
Further, January 1 is not always the deadline; in certain extenuating circumstances, Wal-Mart has granted a deferment. One company interviewed by ARC had a good reason for not starting on January 1, so they will not start RFID tagging until mid-2005. The top eight began shipping a limited number umber of SKUs to Wal-Mart in 2004. Once companies have begun, they are expected to keep shipping those SKUs. These early RFID shippers may begin shipping even more SKUs starting January 1.
Companies anticipate meeting the commitments they made to Wal-Mart, and ARC believes that the public discussion of the status of the Wal-Mart RFID project has been misleading. "Companies believe they will meet their commitments," ARC reported. "However, the commitments suppliers are meeting are usually far less than applying RFID tags to all SKUs that these suppliers ship to Wal-Mart's three RFID-enabled distribution centers in Texas."
Moving forward, meetings between suppliers and Wal-Mart will occur on an ongoing basis, and even if a supplier in initial negotiations was able to commit to only a small number of SKUs for tagging, that supplier knows that in upcoming meetings Wal-Mart will press for an expanded list of SKUs.
According to Banker, "The focus right now is on Wal-Mart, and the question people are asking is 'What is the status of your effort?' The more interesting questions should be directed at Wal-Mart's suppliers. Those questions are, 'How successful were you in your negotiations with Wal-Mart? What does it take to do well in those negotiations?'"
In its report, "RFID Deployment Best Practices," ARC is offering information on the status of the Wal-Mart mandate and advice on how to prepare for mandate meetings with retailers; an analysis of how companies are changing their processes to meet these mandates and the strengths and weaknesses of the various process choices; and an analysis of three critical inflection processes when it makes sense to move from handling RFID in a certain way to doing it differently.
The report also provides an analysis of the reliability of RFID technology, as well as companies' satisfaction with various RFID solution providers; the costs of preparing the RFID infrastructure; the benefits of RFID and what will be necessary to reap those benefits; and 13 key recommendations for companies to save money in the event that they must implement RFID to meet a mandate.
Additional information on this study can be found at http://www.arcweb.com/research/ent/rfid-epc.asp.
For more information on trends relating to radio frequency identification, follow this link for an extensive listing of SDCExec.com articles, featuring the latest research findings on the RFID, including adoption, return on investment and barriers to implementation.
