Rfid in Walmart Essay

In June 2003 Wal-Mart first announced its plan to implement RFID technology in its supply chain by January 2005; this caught many of the suppliers unawares. Though the plans envisaged compliance from the top 100 suppliers, around 129 suppliers jumped into the fray, afraid of being left behind in the race. RFID technology was invented in 1969 and patented in 1973; after thirty long years WalMart has demanded its implementation. Expectations are high, unfortunately RFID technology is still in its infant stage. In November 2003, Wal-Mart once again asserted its requirements. The following were explicitly spelt out: 1. What the EPC (Electronic Product Code) would be, 2. What class of chips they would accept, and 3. Which distribution centres would start accepting RFID deliveries. Much has happened since then. To its suppliers, Wal-Mart has spelt the requirement of 96-bit EPC with a Global Trade Identification number, which is an international standard. The tags are expected to operate in UHF spectrum (868 MHz to 956 MHz). The plan is to standardize the Class 1 Version 2 of the EPC specification [RFIDJournal. Com]. The EPC global, a joint venture between Uniform Code Council and EAN (European Article Number) International, is developing this particular standard. This tag will carry the 96-bit serial number and will be field-programmable. This will enable the suppliers to write serial numbers to the tags, when they apply the tags to the products. The EPC-compliant tags in UHF band consists of 1. EPC data format on 2. One of the existing communication protocols, Class1 or Class0 two main the parts: chip Note: Class0 and Class1 specifications differ. Class0 is a factory programmable tag while Class1 permits the end users to write a serial number on it. They are not interoperable. A multi-protocol reader is required to read both tags. The Class1 Version2 that is being pursued is expected to incorporate both specifications of Class0 and Class1. This Version2 will be a globally accepted protocol. As of now Wal-Mart is already tracking pallets and cases from suppliers coming to one distribution centre. The plan is to expand to other suppliers soon and roll out the technology regionally across the US . By the end of this year, the intention is to track all pallets, and cases of all products from the top 100 US suppliers, and by late 2006, from all US suppliers. Wal-Mart will then begin rolling the technology out internationally. The increased demand has already set Manhattan Associates working on new software that will allow companies to plug RFID technology to warehouse management system, on all platforms. Wal-Mart dreams of achieving a great RFID enabled, fool proof, error free, transparent supply chain. To this end, RFID readers are being installed at distribution centres and stores and buying equipment for printing tags. The expense of investments in new technology every year will be covered in the normal capital budget Why WalMart is adopting RFID? The application of RFID deeper into retail operations than case or pallet-level tracking is not really an Asset Protection driven proposal. The ability to better track SKU level items, smooth out merchandise flow, and prevent out-of-stocks while eliminating non-productive, profit-draining overstock situations is a main tenant of retail. The better Walmart, or anyone can get at doing that, the more control they have in their merchandise investment and the more profit can be squeezed from each dollar invested. With improved profit to investment ratios along with cost-controlling measures such as improved productivity for store level associates, a company can use the gain to pass on in savings to their customers, which is the real secret to success. Asset protection will benefit from the improved operations as well. Shrink is unaccounted for invested dollars. A retailer invests in merchandise to sell and somewhere along the trail from factory to store it is lost, sometimes physically, sometimes in the handling and accounting process. The ability to quickly verify actual quantities of items in a store not only enables the retailer to replenish the stock at the right rate of sale, it also eliminates countless hours of searching for the products in backrooms, overstock boxes, risers and any number of other places merchandise finds to hide in a store. When the count is exact as the product is received, matches the invoice with precision, and is then accurately tracked until it is sold, shrink can theoretically become just a bad memory. There is still theft to consider, however RFID offers some improvements in that respect as well. The key is real-time knowledge of the status of key merchandise. Associates can react to missing one item, instead of hundreds or thousands of dollars worth, before they know there is a problem. Concerns have been expressed over privacy and tags could be used to identify concealed items, but that is not the path to success. If you wait to react to a theft, you still must deal with the situation and there are several pitfalls in apprehending shoplifters and processing internal theft situations. So the bottom line is that it is about immediately identifying loss and taking active measures to prevent further loss. To those expressing concern over the proliferation of technology like RFID in retail, the challenge is to keep the concerns on a productive level. Retailers are not motivated by big brother-like intentions. They are striving to become as efficient as possible in their operation to shave off every non-productive penny invested. It is how they can beat their competition in pricing giving the consumer the benefit of lower prices and the shareholders the benefit of improved profits. There are real concerns relative to unintended consequences of the misuse of technology. Creating a â€Å"personalized customer profile† is a tempting marketing strategy. Imagine knowing exactly what every customer who comes in the doors wants to buy, maybe even before they do. Questions of privacy must be addressed openly and a retailer must make efforts to prevent the misuse of data. This new era is where the professional retail LP leader can make a significant contribution. One day, cash registers may be obsolete. Currency could be exchanged virtually and attached directly to people through some kind of biometric authorization. The role of the LP professional will look much different when that day arrives. Getting from where we are to that point will be an interesting ride. WalMart and RFID: The Test Phase From initial experiences of roll out of EPC in select distribution warehouses and stores, there is confidence that the concept will be a long-term success. Experiments with various tag types and tag placements are underway to see how they impact readability on various products in a non-laboratory environment. Goods shipped to the stores with RFID tags are recorded once at their arrival . By simply waving the scanner at the boxes they are able to know what is inside without having to open anything. Even before the arrival it is possible to know where everything is, which helps to reduce loss during shipment. The tags are read again before they are brought to the sales floor , no reader is installed at the sales point, though. They are read finally at a box crusher after all the items in the case have been put on the store shelves. Their software monitors the different items sold to the customers and the number of cases brought to the sales floor. This generates the information – which items will soon be depleted from the shelves? Automatically, almost instantly, a list is generated of items that need to be picked from the backroom to replenish the store shelves. To reduce the amount of time spent at the backroom Wal-Mart has developed a handheld RFID reader. This acts as a kind of Geiger counter that beeps when a worker gets close to the item he or she needs to pick. It is intended to initially provide this in the original seven stores and then deploy them in rest of the 140 stores in a phased manner during the year. Wal-Mart has also established a retail link extranet with all its suppliers. This enables them to share data from all RFID read points with their suppliers. When a case is brought out to the sales floor, the status reads ~Q being put on the shelves’ , when at the trash compactor the status changes to ~Q on shelf’ . Thus within 30 minutes the suppliers get updated on the movement and location of their goods. Suppliers are also learning how to match tags with products and where to place tags for optimum readability. This initial experience will keep them ahead of their competitors.