June 12, 2003, 12:00 AM

Wal-Mart moving toward RFID despite challenges

Despite initial problems related to radio frequency interference and the availability of readers, Wal-Mart is on course to begin tracking products with RFID tags this quarter and is requiring its top 100 suppliers to be set up with RFID by January 2005.

Wal-Mart Stores Inc. is moving steadily toward a broad RFID strategy to track products at the pallet, carton and product item level, despite initial technical problems in data transmission, senior vice president and CIO Linda Dillman told a standing-room-only audience at the Retail Systems 2003 Conference and Exposition this week.

"We believe very strongly in the potential of this technology," Dillman told an audience of more than 500 people who had crowded into her 8:30 a.m. session, standing along the perimeter of the room as all 400+ seats filled up.

Eventually, in cooperation with global data standards organizations, RFID, or radio frequency identification, data is expected to be widely transmitted over the Internet among supply chain points, stores and back-end software systems, said Mike DiYeso, executive vice president and COO of the Uniform Code Council Inc., who co-presented the RFID session with Dillman. The UCC is a non-profit organization that supports the use of global product data standards.

In a test last year, Wal-Mart used RFID tags to track the movement of 500 pallets of paper towels through its supply chain. Although the test revealed problems such as radio-wave interference and other obstacles--such as readers occasionally getting knocked by forklifts--that sometimes prevented readers from deciphering the coded information on pallet-mounted tags, Dillman said these were minor difficulties not expected to hold back Wal-Mart expectations of using RFID to expedite and lower the cost of moving goods through its supply chain.

A larger concern for long-term use of RFID technology, she said, focused on the price of individual tags, about $1 depending on the volume of tags purchased from RFID technology manufacturers such as Texas Instruments. DiYeso added that as more companies follow Wal-Mart`s lead, however, the price of tags should drop over the next few years, causing increased usage of RFID on individual items as well as pallets and cartons.

When tag prices get as low as 25-30 cents each, for instance, Wal-Mart would consider using them to track individual products such as automobile tires, jewelry and consumer electronics, and if tag prices get to 5 cents each, Wal-Mart would consider putting them on broad number of products, Dillman said.

In the meantime, Wal-Mart is working with the Auto-ID Center, a non-profit RFID research and development organization based at the Massachusetts Institute of Technology, to support the development of the Electronic Product Code Network, which will support the transmission of RFID data over the Internet. For example, as RFID readers track the movement of pallets through distribution centers, information on when and where a pallet passed a distribution checkpoint will be instantly available for viewing on a web page by retailers and their suppliers.

The Auto-ID Center plans to launch the EPC Network at the first EPC Symposium, Sept. 15-17 at McCormick Place convention center in Chicago. Both Dillman and DiYeso urged their Retail Systems audience to get involved with RFID technology and plan how it would support their supply chain processes, so that the entire retail industry can benefit from better visibility in supply chains. In about five years, DiYeso said, he expects RFID tags to become widely used throughout the retail industry.

 

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