E-commerce grew 20% for Costco in fiscal 2015—20 times faster than store sales.
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Although suppliers will bear the cost of installing tags, Wal-Mart has set up an organized system providing them support within the retailer’s executive and technology ranks. It helps to promote RFID projects with its suppliers by dedicating support teams of Wal-Mart executives and RFID technology specialists for each participating supplier. “They’re really trying hard to make RFID happen, so they’re collaborating on all levels with us,” says Mike O’Shea, director of corporate auto-ID RFID strategies and technology for consumer products maker Kimberly-Clark Corp.
By sharing information on RFID projects among its suppliers, Wal-Mart is learning how to benefit from RFID in ways that minimize the impact on network infrastructure, Langford says. “The biggest ideas we’ve shared is how to approach this in a simple way that allows us to benefit from this technology without having to re-engineer back-end systems and applications, such as inventory management,” he says.
Few pilots, much learning
In a sort of dry run for its January 2005 mandate, Wal-Mart and several suppliers will operate a pilot RFID system by the end of the first quarter in Wal-Mart’s three Dallas distribution centers, which serve 110 stores, testing the operation of RFID infrastructure and data flow. “We’ll be replicating our RFID position for January 2005,” Langford says.
Wal-Mart has done a number of RFID tests leading up to its Dallas distribution center pilot, a process that has exposed it to challenges and issues that need to be resolved. “A few pilots have given us a lot of learning,” Langford says. “We’ve shared ideas with system integrators and consultants to help our suppliers focus on further development of business solutions.”
Wal-Mart learned some basic lessons the hard way: after some of its RFID readers were damaged by forklifts, for instance, it figured how to better position readers to scan cases and pallets while providing clearance for moving large stockpiles of goods. “We’re fairly confident we worked out all the kinks,” Langford says.
In addition, it learned how to best position RFID readers and their antennas to produce an appropriate power level for scanning all cases on a pallet. And that experience put Wal-Mart in a better position to consider the advantages of new readers now becoming available with antennas as a single unit.
Some of the future benefits of RFID will take time for the technology to evolve, which makes the process of pilots all the more important, experts say. Wal-Mart was able to learn how to deal with some of RFID’s most significant shortcomings; its inability to send and receive signals through water and metals, for example.
“Don’t expect to read every case that comes into the dock at the distribution center,” Langford cautions. “Water and metal are no great friends of radio frequency, so if there’s a shipment of soft drinks in cans, there’s no way RFID can read cases in the middle of the pallet.” Well, at least not for now. By being aware of such problems, Wal-Mart is monitoring developments that would enable RFID tags and readers to communicate sufficiently to read an entire pallet of liquid-filled cans.
In the meantime, RFID experts note that retailers may need to operate a hybrid system that uses both RFID and barcodes to accommodate all products coming into loading docks.
There’s also work involved in making RFID an effective means of gathering and transmitting information, experts say. “There’s no one-size-fits-all solution,” says Higgins of BearingPoint. “RFID will involve a lot of custom work to make the technology work within each retailer’s four walls.”
To leverage the information absorbed by RFID readers in a sophisticated means that can update back-end software applications as well as provide browser-accessed product tracking, retailers will need to deploy middleware that translates data transmitted from tags so that the information can update enterprise resource planning systems or single applications like warehouse management.
A number of technology vendors, meantime, including Manhattan Associates Inc., webMethods Inc., RedPrairie Corp., IBM Corp., SAP AG, Yantra Corp., Sun Microsystems Inc. and Oracle Corp. have begun to offer RFID support systems for integrating RFID data with back-end software applications.
Supply chain alerts
In most near-term cases, RFID will help managers and store employees do better jobs of arranging to have the right products on display when and where customers are mostly likely to buy. By seeing on a web page that expected products have been checked into a distribution center or into a store’s backroom—or by getting an alert to a cell phone or laptop e-mail system that the wrong or insufficient products are being shipped—retail personnel can respond immediately. “Having RFID tags on cases and pallets will help retailers understand what they have and where they have it,” says O’Shea of Kimberly-Clark. “If retailers rely totally on POS data for what they have in store, a lot of stuff can go missing.”
He adds that a major advantage offered by RFID over existing barcode scanning systems is the real-time visibility RFID offers. When shipments arriving at distribution centers and stores are scanned for barcodes, data are usually batched and sent to managers every 24 or 48 hours. That can be too late when retailers have to respond quickly to surging demand for particular products. But with real-time data flow from RFID scans at multiple points along the supply chain, and instant browser-based access to the data, retailers can immediately see whether a particular store’s backroom has sufficient goods and, if it doesn’t, see where the desired goods are among its network of distribution centers as well its suppliers’ warehouses. At the same time, it can see if expected orders have not been scanned in at stores or distribution centers, then make alternate merchandising plans to satisfy customers.
This visibility also lets retailers stock less back-up inventory to guard against stock-outs, a costly technique that leads to inefficient use of warehouses. “We still have too much inventory within Wal-Mart’s operations,” O’Shea says, “because we don’t always understand where demand is on a timely basis.”
Easing the crunch