Big box meets big brother
Wal-Mart spearheads push on radio-frequency tags, but some suppliers balk
For big-box retailers with razor-thin margins--and that's pretty much all of them--knowledge isn't just power; it's also profit. A manager needs to know and understand what's happening in every square foot of his giant store, from the backroom warehouse to the sales floor. At Wal-Mart, Saturday afternoons are a peak period for high-turnover products like shampoo and toothpaste. Ideally, Wal-Mart would employ a real-time technology system that would quickly alert stockers to reshelve these products. "You want to keep track of these items and know whether they have been unloaded from the truck and moved to the backroom," says Carolyn Walton, vice president of information systems. "And you want to know whether the products have gone from the backroom to the sales floor for stocking and even whether the big box itself has gone to the trash compactor. You want to understand the whole cycle."
So starting this month, Wal-Mart is requiring its top 100 suppliers to tag select merchandise pallets with tiny radio-frequency identification tags--a kind of combination bar code, computer chip, and mobile phone. And so far, says Wal-Mart, "things are right on track," with nearly 100 percent compliance. Target, grocery chain Albertsons, electronics retailer Best Buy, and even the Pentagon have also begun to require suppliers to start using RFID tags.
Smart chip. While only a first step, Wal-Mart's efforts are crucial to creating a pervasive RFID system throughout corporate America by decade's end. RFID will help retailers get the right goods on their shelves at the right time for consumers but also potentially give all companies deeper insights into consumer behavior. Which products are most likely to get plucked off a shelf but then later put back? Find that out with RFID, and advertising and marketing strategies could be tweaked in response. Analysts also expect the radio tags to cut theft and make products safer. And late last year, the Food and Drug Administration said it would encourage an RFID tracking system to better follow pharmaceuticals from manufacturer to retail outlet.
Basically, RFID systems consist of two parts, the radio tag and a reader. The tag stores data on a chip--anything from a serial number to info about where and when the object was manufactured. The tags derive their power from an RFID reader, which generates a low-powered radio signal. When the RFID tag passes near a reader, that signal activates the tag's chip and causes it to transmit information through a small antenna back to the reader. RFID tags have lots of advantages over bar codes, which are line-of-sight devices that must be seen directly by a laser to be read. Bar codes also need to be clean and placed on the surface of the packaging. Radio tags, on the other hand, can be embedded inside the packaging or even incorporated into the item itself. Also, large numbers of tags can be read at once by a machine rather than individually.
No doubt there are plenty of hurdles to overcome--for one thing, the tags don't stick too well to frozen foods like Sara Lee cheesecakes--with the biggest obstacle being figuring out how to integrate all this new information. Yet "whether this is a revolution or not only really depends on the time frame," says Simon Ellis, supply-chain futurist at Unilever, maker of such consumer brands as Lipton, Slim-Fast, and Dove. "It can transform the way we do business." Unilever was one of the initial Wal-Mart suppliers to tag pallets currently being shipped to the retailer's Sanger, Texas, distribution center and then on to seven local supercenters.
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