Perspectives on Wal-Mart’s RFID Timeline

Discussion
Mar 04, 2009

By Dan Gilmore, Editor,
Writer, Commentator, SupplyChainDigest

Through a special arrangement,
presented here for discussion is an excerpt of a current article from Supply
Chain Digest
.

The recent news that Procter & Gamble
was ending its successful test of putting EPC/RFID tags on promotional
displays going to Wal-Mart with the implied issue being Wal-Mart’s inability
to act on the data to drive better execution of getting displays to the
floor triggered us at Supply Chain Digest to take a look back
on the whole RFID program at Wal-Mart.

It was an interesting review.

You can find a graphic of
that timeline here (Wal-Mart RFID Timeline),
but on RetailWire we just wanted to provide some perspective on
the nearly six year Wal-Mart journey.

Wal-Mart first made its
announcement of a plan to require tagging at the pallet and case level
in June of 2003. That was several months before EPCGlobal as
an organization, taking over the pioneering work of MIT’s auto ID center,
was actually launched.

The initial plan called
for the first “top 100 suppliers” to begin tagging pallets and
cases in June 2005. The scope was unclear at first, but eventually the
requirement was limited just to product being sent to three distribution
centers in Texas. During 2004, eight large suppliers (Gillette, HewlettPackard,
Johnson & Johnson, KimberlyClark, Kraft Foods, Nestlé Purina PetCare,
Procter & Gamble, and Unilever) did some testing with Wal-Mart with
a limited number of SKUs.

In the fall of 2003, a Wal-Mart
executive said all suppliers would be tagging by the end of 2006. That
of course never happened.

Many of the top 100 suppliers
more or less met something close to the requirement for tagging by the
end of January 2005 for the three DCs. The requirement
for the next 200 suppliers, which were scheduled to go live in January
2006, really never materialized.

In October 2005, a Wal-Mart
sponsored research effort by the University of Arkansas said preliminary
data showed RFID tagging reduced store stock outs by 16 percent.

In April 2006, Wal-Mart
CIO Linda Dillman, the public point person for
Wal-Mart’s RFID program, took a new executive role in human resources.
Former supply chain head Rollin Ford became CIO – and took a much
lower profile on RFID.

In February 2007, The
Wall Street Journal
wrote a negative article on Wal-Mart’s RFID efforts,
citing internal delays and the low value prop for manufacturers. Wal-Mart
rebutted the thesis, and found a few suppliers that agreed, but at about
the same time Sara Lee’s CIO said the value wasn’t there (yet).

In the fall of 2007, Wal-Mart
announced it was significantly changing its RFID strategy, focusing on
Sam’s Club, promotional displays, and a pilot in category management.

In 2008, the Sam’s Club
tagging program, including the first ever actual compliance penalties,
was announced. In January 2009, the Sam’s Club schedule was pushed out,
and the penalties dramatically reduced; “fines” for lack of tagging
went from $2-3.00 per pallet to 12 cents Wal-Mart’s cost to apply a pallet
tag.

In February 2009, P&G
ended its promotional display efforts.

So, what can we take away
from all this?

  1. Wal-Mart
    clearly overestimated its ability to drive change;
  2. Wal-Mart
    confused the public campaign, announcements, etc. with its real operational
    goals. It got caught in a sense by its own PR campaign, and overpromised
    and underdelivered, when as usual the opposite would have been the better
    path;
  3. Slow
    but steady often really does win the race.

RFID will come, benefiting
from the lessons of its history.

Discussion Question: What lessons can be
learned from Wal-Mart’s program to bring RFID to retail? Do you agree
that Wal-Mart overestimated its ability to drive change? What’s the next
step for RFID?

Please practice The RetailWire Golden Rule when submitting your comments.

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14 Comments on "Perspectives on Wal-Mart’s RFID Timeline"


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Dick Seesel
Guest
13 years 2 months ago

I agree that RFID will be embraced by Walmart’s vendors sooner or later. There is too much inherent benefit to the technology and too much expense and energy devoted to it (by Walmart in particular) to let the initiative die. This may be a rare case, however, where Walmart needs to do some collaborative cost-sharing with its key vendors until the technology becomes more cost-efficient, rather than putting all the expense burden on their shoulders. (I know…you’re skeptical.) RFID is one of the key elements of collaborative supply chain management in the future.

David Biernbaum
Guest
13 years 2 months ago

One lesson is fairly obvious from Wal-Mart’s RFID Timeline, and Procter & Gamble’s reaction that the data was not being used; expectations and implementation didn’t match up. Unfortunately, it appears this was an experiment that wasted time, money, and resources. Too bad, because it’s a technology that if taken to heart, would work well.

Mark Burr
Guest
13 years 2 months ago

In order to be ultimately successful, technology for retail has to have a benefit to the consumer. In this case, it’s hard to make that case. It also has to have a benefit to the ‘people’ that will ultimately implement or use it, again, it’s hard to make that case. If that were the opposite, it would have immediate traction and more than that, it would be implemented and in use.

Simply looking at the survey results, where nearly half responding even here see this as 5 years to never, would indicate to me that this is going nowhere fast.

Determining a positive impact to the consumer and a means to measure it is the only sure way to rapid advancement retail technology. I am not seeing that anywhere in this whole conundrum of RFID.

Mark Baum
Guest
Mark Baum
13 years 2 months ago

I agree with Susan. The key fundamentals around implementing RFID have not changed, even though the technology has stabilized and adoption has slowed to a snail’s pace. Companies need to adopt long-term strategies, rather than rushing into RFID simply to comply with mandates. CPG companies should focus on optimizing their current operations and using existing technology infrastructure, while allowing room for growth and the adoption of RFID in the near future.

So did Wal-Mart overestimate its ability to drive change through RFID? Perhaps it was more a case of an overly ambitious timeline. While the spotlight has been shining down on Wal-Mart, we’ve seen an increased focus on closed-loop systems. We are more optimistic about closed-loop environments, as opposed to the market for mandate-related hardware, software, and services. Closed-loop systems give companies a cost-effective entry point to RFID and help them obtain a much quicker ROI, compared with a typical RFID business case focused on compliance issues.

Mike Spindler
Guest
Mike Spindler
13 years 2 months ago

Well said Jamie. The only amplification I can add is at the heart of the real issue. Measurement. If you measure you will manage and plans will be executed. Then if results are less than stellar…we will all know it’s the plan, not the execution of the plan.

This cannot happen without measurement. Measurement using RFID is a looonnnnnggg way off. Even the program run by Walgreens impacts only a small portion of displays and an even smaller portion of the total merchandising effort (displays, new item cut-ins, POG changes and Point of Sale Material.) I know there are better methods, less expensive, less process disruptive either available now–or soon.

At the same time, if no one is going to do anything with the measurement information (i.e. use it to manage) well then….

Ralph Jacobson
Guest
13 years 2 months ago
Another point is the business case for RFID. With all the effort that went into this program, did all stakeholders have their contributions and benefits clearly articulated? RFID is only one component in the fight against out-of-stocks. However, there are more pieces to that puzzle, like store execution, CRP, etc. So when one piece of the RFID “system” has challenges, including readability, costs, etc, we don’t look to additional benefits of the tool, including enhanced supply chain visibility, product traceability, etc. We need to keep pushing to overcome this age old dilemma of OOS. It is crazy that we haven’t solved this yet. RFID can work, it doesn’t have to be the exclusive silver bullet, but it can, and does work. (The largest food supplier in The Nordics, Matiq, is using it as we speak for traceability.) We need to pick a problem to solve (OOS), and address it with all elements of the task, not relying on only one piece and throwing our hands up when that one piece underdelivers to one or more… Read more »
Bill Bittner
Guest
Bill Bittner
13 years 2 months ago
I apologize for my late response to this one, but having an opportunity to read everyone’s comments I did not see anyone say “It doesn’t work.” I often feel like I am living the modern version of the “Emperors New Clothes” fairy tale when it comes to discussing RFID. First, the costs have not yet made it affordable to tag individual units. Second, the read distances for the tags are not as far as expected. Third, no one has really worked through all the software changes that are needed to avoid embarrassing consumer mistakes, like retailers charging customers for the products they bought last week but are carrying in their coats. The one hope was that RFID could be used to monitor business processes and execution at store level. This made sense because it does not require as much precision as inventory management and does not involve the consumer. Now it is appearing that even when RFID points out failure in execution it will take more than merely raising awareness to correct problems. Maybe the… Read more »
Mark Lilien
Guest
13 years 2 months ago

The Supply Chain Digest Walmart RFID timeline should go back to 1992, when IBM teamed up with Walmart to produce another RFID system. That alliance project was terminated a few years later, because no one could prove a reasonable return on investment. RFID has a long history of project failures, certainly not just at Walmart. The failures are most often financial, not technological.

Nikki Baird
Guest
Nikki Baird
13 years 2 months ago
I just have to shake my head at the whole thing. In the interest of full disclosure, I was at the big meeting that Walmart called shortly after the very first announcement where the top 100 vendors came to learn what was really expected of them, and some technology providers (including my old company) were invited to demonstrate that real business process could be enabled with RFID. And I was pushing my company to be more involved in it, in part because of the flurry of activity driven by Walmart. But pallets? I never understood why they started there. Most companies don’t do enough with the data they already get related to pallet and case, even without the RFID tag. The whole point of RFID is stockouts at the shelf, and pallets are not the place to start with that. Funny thing though, as soon as they started exploring shelf issues with RFID, a lot of in-store execution issues became highly visible. I’ve seen Kraft do a detailed explanation of root causes of stockouts at… Read more »
Susan Rider
Guest
Susan Rider
13 years 2 months ago
Wal-Mart’s program was the stimulus package for this technology that worked. Many lessons were learned by both Wal-Mart and suppliers. But no matter the outcome, Wal-Mart’s edict spurred interest, standards and enhancements to the technology. RFID is far more advanced than it would have been if Wal-Mart had not challenged the suppliers. Wal-Mart did not realize the internal cost to support such a plan. To roll out RFID in all DCs and all stores is very expensive and the ROI was less than tangible. They were driving change from suppliers because, quite frankly, the suppliers didn’t have a choice. If they overestimated anything it was the internal cost and process changes. The gain on the RFID program was clearly for Wal-Mart no matter how the “spin” was positioned to suppliers. There are retailers like Dillard’s and other specialty stores that remain actively involved in RFID and have realized huge gains from shrink and inventory control. They remain involved with the University of Arkansas RFID program. The next step for RFID is at a slower pace.… Read more »
James Tenser
Guest
13 years 2 months ago

Can’t–help–self. Must–repeat–dogma….

RFID–no–solution. Just–tool. Pointless–without–in-store–compliance–discipline.

Phew. Glad I got that out of my system. This review of the RFID saga provides a valuable perspective on how even big players sometimes confuse a promising technology with a workable solution.

Point solutions are pointless in the absence of core underlying implementation practices. Most chain grocery and mass stores today cannot comply effectively with planogram, promotion, new item introduction or other merchandising plans because they lack systematic practices, enabling communications and measurement tools to back them up.

There’s no single solution to this, but there is a solution path, and RFID may well be one of the stops along the way. When companies like Walmart begin to share daily data on merchandising implementation performance, issues and compliance rates using portals like Retail Link, the true journey will begin.

Russell Jones
Guest
Russell Jones
13 years 2 months ago

Ms. Baird’s comments go to the root of the problem. RFID offers little, if any, advantage over current bar code technologies in the shipping/receiving process, yet that is where RFID was deployed at Wal-Mart. As she points out, RFID can offer benefits only when it can track items at the shelf location. Unfortunately, significant technical barriers, that have been known for years, appear likely to prevent effective RFID tracking in the noisy world of the retail aisle.

It’s unfortunate that, in their quest for another revenue opportunity, so many tech firms and tech advisors ignored the inherent problems with RFID. Retailers that jumped into RFID early are finding that the pie in the sky vision that launched RFID back in the midst of the Internet bubble has become a money pit instead.

Ken Wyker
Guest
13 years 2 months ago
What struck me after reading the article was the similarity between the development of RFID and the development of loyalty marketing. In both instances, the benefits are real and understandable, but they are also elusive. What really drove home the parallel with loyalty marketing was the P&G comment that Wal-Mart was ‘not using the data’. That has always been the frustration with loyalty marketing programs; getting actionable insights from the program and delivering genuine store and customer benefits. Loyalty marketing has finally moved beyond the tipping point. Retailers have discovered effective ways to deliver on the promise of loyalty marketing and are now using it to more effectively and efficiently market to their customers. In time, the same will happen with RFID. The benefits to the supply chain are clear, but until the numbers work and the effort can demonstrate a profitable impact on the bottom line, it will simply be an investment in new technology. During these times, it’s easy for retailers and manufacturers to cut back on investments that don’t have an immediate… Read more »
Bryan Larkin
Guest
Bryan Larkin
13 years 2 months ago
After spending time with many folks in the RFID space and being an adviser to the National RFID Center (which is focused more on business process than the technology) I have to say that RFID works, but works best in closed loop environments. That was where early value was shown and it is where it continues today. Perhaps Wal-Mart dropped their latest compliance penalties to 12 cents because it realized that they were really only asking suppliers to tag so Wal-Mart could realize some level of better closed loop functionality within their own business. Certainly supply chain value wasn’t seen. One thing that I saw with RFID companies–and that was borne out in a great article by Louis Sirico entitled “RFID is Dead. The Intelligent Sensor Network is Born”–is the fact that many of the founders and fanatics thought that they had created something new and that the world revolved around RFID. RFID middleware and other solutions were rolled out by many the companies, including some with thoughts suggesting that they’d discovered supply chain track… Read more »
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