May 5, 2004, 12:00 AM

Pharmaceutical suppliers give Wal-Mart’s RFID plans a chill pill

Even Wal-Mart Stores Inc. can’t always get its way. In its pace-setting goal of getting suppliers to ship cases and pallets through an RFID tracking system, pharmaceutical suppliers have blown its first deadline.

Even Wal-Mart Stores Inc. can’t always get its way. In Wal-Mart’s pace-setting goal of getting suppliers to ship cases and pallets through an RFID tracking system, pharmaceutical suppliers have blown the first deadline. Wal-Mart had expected 18 of them to begin shipping RFID-tagged cases and pallets by March 31, but some now expect to be three months late. “Some made the deadline, others are close behind, but it will be June 30 before all 18 are compliant,” a spokesman says.

RFID uses radio frequency identification tags and readers to track shipments, making status available over the Internet so retailers and suppliers can immediately respond to disruptions in the flow of goods. Industry analysts say many companies are experiencing difficulty meeting the costs and technical challenges of setting up RFID, which requires the placement of thousands of tags costing 50 cents to $1 each as well as tag readers, at about $1,000 each, at transfer points throughout a supply chain.

Although Wal-Mart stands to gain from RFID’s improved supply chain visibility, the benefit to suppliers is not as clear. “There is no business case for most suppliers in the short term,” says Christine Overby, analyst at Forrester Research Inc. She says RFID roll-outs will cost Wal-Mart’s largest suppliers several million dollars each to tag millions of cases and pallets bound for Wal-Mart each year.

Nonetheless, Wal-Mart expects its 100 largest consumer product goods suppliers to be RFID compliant by Jan. 1. But Overby says she has seen indications that some of Wal-Mart’s largest CPG suppliers will be ready by next January to place RFID tags on cases and pallets only at Wal-Mart’s distribution centers rather than at their own warehouses, as Wal-Mart wants. Such a stop-gap measure would only let Wal-Mart track shipments once they arrive at its distribution centers, instead of from when they leave suppliers’ shipping docks. m

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