WAL-MART: FOOD VENDORS ON PACE TO MEET RFID DEADLINE

LA JOLLA, Calif. -- Food suppliers to Wal-Mart Stores, Bentonville, Ark., will have 100% of their full product lines tagged by the time the company launches its radio frequency identification program in January, compared with only about 80% of the full lines delivered by nonfood vendors, Linda Dillman, executive vice president and chief information officer for Wal-Mart, said here last week."We've

LA JOLLA, Calif. -- Food suppliers to Wal-Mart Stores, Bentonville, Ark., will have 100% of their full product lines tagged by the time the company launches its radio frequency identification program in January, compared with only about 80% of the full lines delivered by nonfood vendors, Linda Dillman, executive vice president and chief information officer for Wal-Mart, said here last week.

"We've asked vendors to look at [tagging] their full lines," Dillman told the 2004 Information Systems and Logistics/Distribution Conference sponsored here by the Grocery Manufacturers of America, "but right now food suppliers will be tagging a higher numbers of items."

Dillman said Wal-Mart does not anticipate RFID will have any significant immediate impact on its business. "We believe we will still be learning throughout the first year," she said.

One of Wal-Mart's immediate goals in implementing RFID technology will be to improve in-stock conditions in its stores, Dillman said. "We will know if an item is in the back room or the sales floor, and if it's not on the floor, we can put it there so customers can buy it, which means a sales increase of 3% to 4% is possible."

Wal-Mart's much-anticipated RFID program is scheduled to begin next January at three distribution centers in the Dallas area that service 180 Wal-Mart supercenters, Wal-Mart discount stores and Sam's Warehouse Clubs, Dillman said.

The company plans to begin a pilot in Dallas next month with eight suppliers. It said earlier this month it has already begun testing RFID technology at one of its specialty distribution centers, where 500 tags from two suppliers have been scanned since last October.

Wal-Mart announced last June it would require its top 100 suppliers to apply RFID tags to pallets and cases by January 2005, with a December 2005 deadline for compliance by all suppliers. Besides the top 100 suppliers, Dillman said another 36 smaller companies have volunteered to participate "because they say it will give them an opportunity to gain a competitive advantage."

The RFID tags that Wal-Mart suppliers will use contain a microchip with a 96-bit identifier called the Electronic Product Code, along with an antenna that transmits the information when it is "woken up" by a nearby reader. Using RFID, retailers and suppliers will be able to identify and track individual products, cases and pallets throughout the supply chain in an automated fashion, rather than using employees to scan traditional bar codes.

Asked last week how much data will be contained on the RFID tags, Dillman said it will probably be more than Wal-Mart will be able to use initially. "Our approach will be to strip out the pieces we need and pull out more as we go along," she said.

The RFID program will require some redesign in the stores' back rooms and will probably require separate receiving and shipping doors at the distribution centers, Dillman said. Wal-Mart is installing systems at its stores and distribution centers to read the tags.

One of the industry's ongoing concerns is the cost of RFID tags, Dillman said, "but companies have got to get involved because the tags won't get cheaper until the number of orders for them increases. Since we announced our plans last June, the cost of the tags has come down by half."