Wal-Mart’s CIO Bangs The Drum For RFID

Feb 06, 2004

By George Anderson

The chief information officer of Wal-Mart, Linda Dillman, told Business Week that the benefits of radio frequency identification technology go beyond cost savings, as is frequently mentioned when the topic is being discussed.

“The technology will help us know where inventory is all the time. Today, we might know a case is somewhere in the store, but we don’t know if it’s in the back room or on the shelves. RFID will tell us it’s in the back room, for example. That will help improve our shelf management, so we can make sure merchandise is available when it’s needed,” she said.

The response from manufacturers to implementing RFID has been even better than expected, she said.

“As of two days ago, we had 129 suppliers signed up for the RFID program, though we’ve only asked our top 100 suppliers to participate.”

Fears about increased costs and the reliability of the technology have been overblown, said Ms. Dillman.

“The amount of money suppliers will need to spend on RFID technology isn’t as big as some people fear. In our stores, we essentially put in a black box that sits at the top of our legacy IT systems and sends us information from the tags. For suppliers, the setup will be similar. RFID also won’t lead to a significant change in the amount of data we’ll have to deal with — so it won’t, in most cases, require extra spending on basic software and hardware.

“The technology has been moving at an incredible pace the past 12 months,” she added. “Only in the past 60 days, researchers have figured out how to tag cases containing liquids. We expect that, by 2006, most of these issues will be past us, and that prices [for RFID] will fall substantially — leading to an explosion in the technology’s adoption.”

Moderator’s Comment: What do you believe is the most
interesting story angle (business opportunity or challenge) associated with

It will be interesting to see how much extra product is
taken out of the supply chain with RFID.

Manufacturers have sometimes benefited in the past by
being able to invoice (if not get paid) for product sitting in a retailer’s
or wholesaler’s warehouse.

If RFID improves management of stock as well as some such
as Wal-Mart are expecting, then it may keep product sitting in a supplier’s
DC that until now was being shipped.George
Anderson – Moderator

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