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RFID in 2005: The What Is More Important Than The When With Wal-Mart Edict

Although Wal-Mart’s RFID mandate is short on details, it basically nets out to RFID tags on pallets, cases, and cartons for its top 100 suppliers by January 1, 2005. Even without the announcement of full requirements, CPG manufacturers clamor to understan
Written by Scott Lundstrom, Kara Rom , Contributor

Although Wal-Mart’s RFID mandate is short on details, it basically nets out to RFID tags on pallets, cases, and cartons for its top 100 suppliers by January 1, 2005. Even without the announcement of full requirements, CPG manufacturers clamor to understand the implications and the cost. Top suppliers are being called to a meeting in Bentonville in November 2003, where more details will hopefully be shared, but that doesn’t leave much time to roll out an RFID program.

The Bottom Line: Wal-Mart is too concerned with when suppliers need to comply with its RFID desideratum. The retail giant needs to step back and build consensus as to what the vision is, what it will cost, and what can be done pragmatically in a short time frame.

What It Means: CPG manufacturers currently see RFID as a two-phase project: gaining Wal-Mart compliance, and then using the compliance to seek potential ROI in their own supply chains. For now, though, Wal-Mart’s decree creates more questions than answers--questions that suppliers should ask in November:

  • What exactly does compliance mean? Is it just tags on the pallet/case/carton? Or does it also include supply chain communication and automation? For example, will the ePC be part of the settlement? Should it be on the ASN? The PO? These are the details that companies need in order to understand exactly how much work they have in front of them to meet the January 2005 deadline.
  • Where do suppliers get tags and what technology standards will emerge? How will the Auto-ID Center reconcile the read-only tag in version 0 with the 96-bit programmable tag in version 1 and Wal-Mart’s need for a writeable eight-digit store code for routing purposes? Auto-ID, Inc. is taking over the standards and administrative role from the Auto-ID Center and will have its official coming out at September’s ePC Symposium. It will need to immediately resolve the technology issues to show leadership.
  • What will all this cost and what is the business case? Wal-Mart’s edict appears like a high-cost endeavor with little return for the manufacturers. The CPG industry, unlike some verticals, has already implemented ERP and sophisticated warehouse management applications. Therefore, for most suppliers, inventory accuracy is already at greater than 90%, so incremental gains will not justify the high cost of RFID. Will ROI come from settlement improvements or from cost sharing scenarios? Potentially both. Is the business case simply the opportunity to retain Wal-Mart as a customer? If so, suppliers just need to be informed. Most CPG manufacturers understand the potential supply chain savings, but they need to understand what Wal-Mart is willing to do to meet them partway.

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