RFID Keeps Wal-Mart in Stock

Oct 17, 2005

By George Anderson

The results of a study conducted by the University of Arkansas show that using radio frequency identification (RFID) technology has helped Wal-Mart reduce out-of-stocks (OOS) and decrease the amount of time it takes to get products restocked.

According to a report on the Information Week Web site, researchers discovered that stores using RFID labels with EPC codes were able to achieve a 16 percent reduction in OOS.

Dr. Bill Hardgrave, director of the RFID Research Center at the University of Arkansas and executive director of the Information Technology Research Institute, said, “Our analysis consistently found, throughout the test period, that the RFID-enabled pilot stores statistically outperformed the control stores without RFID technology in terms of providing improved on-shelf availability of items for customers. Essentially, this meant fewer total out-of-stock items and fewer occurrences of empty shelves when the merchandise was in the backroom.”

The use of RFID enabled Wal-Mart to get product to empty shelves faster than stores that do not use the technology.

Simon Langford, strategy manager for RFID at Wal-Mart, told Information Week, “An RFID tagged item made it to the shelf three times quicker than a non-tagged item. These items were identified as being in the back room three times quicker than those without RFID tags.”

According to Information Week, the University Arkansas study is the first to compare how RFID with embedded EPC on merchandise impacts product availability in stores serving customers. The study was conducted over a 29 week period with researchers analyzing OOS at 12 pilot stores (Wal-Mart Supercenters, Discount Stores, and Neighborhood Markets) with RFID and 12 control locations not using the technology.

Moderator’s Comment: Generally speaking, how does Wal-Mart compare to other retailers when it comes to OOS? Will others achieve the same type of results
using RFID labels with EPC codes? What other insights do you have on this study and what Wal-Mart and others are doing with their RFID trials?

By the end of next year, Wal-Mart plans to have more than 1,000 stores, clubs, and distribution centers using RFID. Beginning January 2007, 600 suppliers
will be shipping cases and pallets with RFID tags to the retailer.

George Anderson – Moderator

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6 Comments on "RFID Keeps Wal-Mart in Stock"

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Ron Margulis
16 years 7 months ago

Wal-Mart is better at keeping products in stock than most other retailers, and RFID will continue to help the company improve that position by providing greater visibility to product in the supply chain. Working in tangent with the RFID effort is Wal-Mart’s use of the industry-leading demand forecasting engine, this helps the retailer figure out what consumers will want when and where they want it, which in turn helps determine product inventory requirements.

Another point is that because Wal-Mart runs only a few circulars during the course of the year, it is difficult to compare OOS positions on promoted items. This, in my mind, is the more critical statistic for any mass retailer, and for the consumer who is more disappointed by the absence of promoted items than others.

Mark Lilien
16 years 7 months ago

From reading the original article on-line, I have a strong feeling that the 12 control stores knew they didn’t have RFID. When medical testing is done, the doctors and nurses and patients involved are not told who gets the placebo. When retailers test new systems, they usually make it clear what results are sought after, and assign extra attention (staffing hours, visits by big shots, extra training) to the strategy being “tested.” Were the non-RFID stores told they were the controls? Did they get placebo RFID tags and equipment? Did they get big-shot visits and the same staffing and training as the RFID stores? I’m all for better technology, when it pays, but I’m skeptical when it appears that the “fix is in.” I hope that my skepticism is unwarranted, and that the test was conducted appropriately.

Mark Burr
16 years 7 months ago

I’m with Mr. Lilien on this one. I’m very skeptical. Hmmm…University of Arkansas? A major contributor asks you to do a study to prove results on an initiative that you are forcing your vendors into. If you aren’t skeptical on this one, you should be.

Wal-Mart is touted as having the best supply chain in the world. With that, one might imagine technology and disciplines are at a very high level to begin with in the stores to facilitate their achievement at today’s level. Now, take that and improve it by 5%, it might be believable. That alone would convert to huge dollars at their sales levels. The 16% rate seems incredulous. But then again, WM doesn’t have to be credible; they just have to say so and it will be.

I’m very skeptical – very.

Gene Hoffman
Gene Hoffman
16 years 7 months ago

We know that Wal-Mart is ahead of the curve in keeping stock on their shelves and RFID is just another step-cadence in the passing parade of progress in which they are so proficient.

Perhaps RFID is as magical as Wal-Mart says, or perhaps Wal-Mart is promoting it because it has some unannounced loop holes that Wal-Mart would like other retailers to be challenged with.

Any retailer that tries to emulate Wal-Mart with RFID or any other new methodology without having the same efficient infrastructure and Wal-Mart’s knowledge base is just trying to stay in the game. Let’s wait to see how this plays out.

Bill Bittner
Bill Bittner
16 years 7 months ago
It is very difficult to assess the results described by this article. I agree with the other respondents that the lack of a “double-blind” test makes the results suspect. Not only do the stores that don’t have RFID know it, but the stores that do have RFID are no doubt aware that the company is interested in seeing this venture succeed. It is well understood that there need to be changes in the handling procedures of items having RFID’s. We also don’t know “what the start point is.” Do the control stores have a wireless network that allows sales floor personnel to check for inventory online? (We know the RFID stores must.) How often were the sales floor locations checked in both groups of stores? I am sure the distribution center and purchasing departments know which stores have RFID. What was the service level from the warehouse to both groups of stores? Were the sales floor out of stocks always available in the backroom? How many of these items were single unit cases that did… Read more »
Mahesh M
Mahesh M
16 years 6 months ago

The success of this study should not just be determined by the improvement of OOS, but should also consider the cost of implementing the solution…essentially the ROI.

I don’t have any doubts of RFID improving the efficiencies in the supply chain, but the bigger question is whether the returns from RFID initiatives justify the investments required.


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