Wal-Mart has always been a trailblazer when it comes to finding ways to save money so the company can increase profits. So radio frequency identification (RFID) technology seems like it would be the perfect solution to help the retail giant reduce labor and inventory costs while adding to its bottom line. But it appears the company’s RFID plan may have been a little too aggressive for the rest of the world.
A typical RFID system uses a tag containing a silicon chip and an antenna and a reader that can talk to each other via radio signals.
RFID tags are more versatile than traditional bar codes because they can store considerably more information like shipping details, product serial numbers, manufacturing dates and locations and when the product was sold.
Wal-Mart set its sights on RFID technology back in 2003 when it set a timetable for 600 of its largest suppliers to start “tagging” cases and pallets sent to test locations in Oklahoma and Texas. According to reports, the company plans to require 700 additional suppliers to start using RFID in the near future.
But a recent article in the Wall Street Journal reported that Wal-Mart’s RFID plans have not received the reception the company hoped they would. Originally, the big box discount chain had planned to implement the technology in a dozen of its 120 distribution centers around the country by January of last year. But as of earlier this month, the world’s largest retailer had only installed the technology in five of its distribution centers.
According to the Wall Street Journal article, Wal-Mart originally was pushing RFID with the goal of increasing efficiency, saving money and, ultimately, increasing profits. But many of the suppliers are saying it isn’t the solution the company needs and, in fact, some say it is even adding to the cost of their products.
Currently, each RFID tag costs approximately 15 cents versus the price of a bar code, which is less than a penny. Suppliers also are responsible for buying all of the other hardware (antennas, transponders, readers) and software needed to use the technology. Some other concerns include the cost of retrofitting Wal-Mart’s warehouses and stores and the consumer’s perception that Big Brother knows where all of the products are all of the time.
While Wal-Mart has said it does not plan to implement widespread item-level tagging of products in the near future, it would like to use the technology throughout its supply chain. Perhaps if Wal-Mart appeared more willing to share the financial burden and subsequent risk, suppliers might be more eager to embrace the technology. Maybe the best approach would be to use the technology only where it makes the most sense.
In November, associate editor Meghan Boyer wrote about how several large growers had successfully implemented RFID technology in their growing operations. These growers are using the technology to organize and sort expensive shipping carts and to track benches as they move though the greenhouse.
The RFID tags are not used to track every individual product nor are they required to be used at all. These growers examined their business and growing operations and decided how the technology would work best for them. They didn’t force it on anyone.
That’s something Wal-Mart might want to think about in the future.