Eight manufacturers participating in first phase of implementing radio frequency identification technology at the case and pallet level
Bentonville, AR April 30, 2004 Wal-Mart today proclaimed the dawning of a new era in supply chain management as the retail giant and eight product manufacturers began testing electronic product codes, or EPCs, at select Wal-Mart "supercenters" and one regional distribution center in the Dallas/Fort Worth area.
This pilot is the next step in Wal-Mart's addition of radio frequency identification (RFID) technology to improve product availability for Wal-Mart customers. The real-world trial follows testing at the company's RFID lab and months of collaborative preparation by Wal-Mart and its suppliers. Field equipment testing has been underway in Texas since mid-month, but nothing with an RFID tag was placed on store shelves.
"It is imperative that we have the merchandise the customer wants to buy when they want to buy it," said Linda Dillman, executive vice president and chief information officer. "We believe RFID technology is going to help us do that more often and more efficiently. This will help us increase customer satisfaction in the near-term and ultimately play an important role in helping us control costs and continue offering low prices."
Wal-Mart has set a January 2005 target for its top 100 suppliers to be placing RFID tags on cases and pallets destined for Wal-Mart stores and SAM'S CLUB locations in the Dallas/Fort Worth area. Since announcing that initiative nearly a year ago, 37 additional suppliers have voluntarily chosen to meet that same milestone. The implementation beginning today will pave the way for achieving this goal.
EPC vs. Barcodes
While bar codes can tell a retailer that it has two boxes of product XYZ, EPCs help distinguish one box of product XYZ from the next. This allows retailers greater visibility in monitoring product inventory from supplier to distribution center to store.
RFID technology which facilitates EPC has been in use since the 1940s. Anyone using a toll tag or unlocking a car door using a keyless remote is already using RFID.
In the supply chain application, passive RFID chips with small antennae are attached to cases and pallets. When passed near a "reader," the chip activates and its unique product identifier code is transmitted back to an inventory control system.
Some consumer groups have raised concerns about privacy issues with regard to RFID, fearing that businesses or the government could scan the tags from afar to track consumers and their purchases. Dillman played down those fears, and Wal-Mart noted that the readers it uses have an average range of 15 feet.
"We can certainly understand and appreciate consumer concern about privacy," Dillman said. "That is why we want our customers to know that RFID tags will not contain nor collect any additional data about consumers. In fact, in the foreseeable future, there won't even be any RFID readers on our stores' main sales floors."
Dillman did say that RFID and EPC could directly affect consumers at some point in time, although she emphasized the potential positive impact. "Down the road there are so many possibilities to improve the shopping experience that we hope customers will actually share our enthusiasm about EPCs," she said. "As we look forward five, 10 years, we see the possibility of offering expedited returns, quicker warranty processing and other ways to minimize waiting in lines. There are also positive product recall implications and a critical ability to combat counterfeit pharmaceuticals."
Continuing, Dillman drew comparisons with a previous technology transformation in the retail supply chain. "If you think about it, this is really repeating the steps we took in introducing barcodes into our stores back in the early 1980s," she said. "And we're seeing much of the same consumer uncertainty that came with that technology. We're confident that EPCs will prove to be just as valuable to retailers and, more importantly, to their customers as the bar code."