Michael Duke, executive vice president of Wal-Mart Stores Inc. and president and CEO of the Stores Division, said in a keynote address at the Retail Systems Conference in Chicago today that, despite a need for more time by some suppliers, Wal-Mart is on track to meet its goal of getting its top 100 suppliers shipping cases and pallets under an RFID tracking system by January. “I’m really amazed at the progress we’ve made,” he said.
Duke acknowledged, however, that some suppliers need more time than others to develop a system through which RFID tags attached to cases and pallets transmit shipment data through a network of readers at distribution centers and other points in the supply chain. RFID is designed to use radio frequency technology to transmit information about shipments over the web to retail managers and suppliers, who can then better plan for supply chain disruptions and avoid out-of-stock situations in stores.
Duke said Wal-Mart has met its main 2004 goal of working with its top 100 suppliers to begin testing RFID tracking of products shipped through its three Dallas distribution centers, which serve 150 stores. Its current Dallas pilot involves eight suppliers shipping through one distribution center and 75 stores, but a total of 137 suppliers, the top 100 plus 37 others, are on track to participate with RFID shipment to the three Dallas distribution centers in January, he said. Wal-Mart also went live with an RFID pilot at a pharmaceutical distribution center in November
Duke said the declining costs of RFID tags is helping to drive up participation by suppliers. He noted that tags now cost an average of 30 cents, down from 50 cents to $1 in the last couple of years, and are expected to drop to 20 cents in the third quarter of this year, then to about 5 cents by fourth quarter of 2006. “We think that fall could happen even faster” due to continued evolution of RFID technology, he added.
Next month, Wal-Mart will begin sharing details on RFID plans with its next largest 200 suppliers as part of its goal to have all suppliers shipping through an RFID system by January 2006. The overall goal of RFID, he added, is to prevent store out-of-stocks and to increase sales. “RFID helps manage expenses, inventory turns, but the greatest benefit is increased sales,” he said.