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Sam's Club's RFID fee

Wal-Mart has put pressure on suppliers to speed up their implementation of RFID by charging $2 per pallet starting in February for every non-RFID-tagged pallet shipped to a Sam’s Club distribution center in DeSoto, TX.

We asked Wal-Mart/Sam’s Club corporate spokesperson John Simley to help us sort through this announcement.

Simley feels suppliers have been given “fair warning” for the deadline.

According to Simley, “We had described exactly what we were asking of suppliers and by what dates, which is not unusual for a customer to request of its suppliers. In this case, we stated that on a graduated basis that we wanted them to supply, pallets, cases, and items that are tagged with EPC (Electronic Product Code) labels to certain [DCs] or stores aligned with those DCs by certain dates. If you don’t do that, we will have to apply those labels ourselves, and there is a cost associated with that, and so we’re going to pass that cost along to you. It’s not intended as a long-term solution for any supplier, it’s merely to accommodate them until they can develop their own solution.”

Sam’s Club is leading the process because it has fewer suppliers than Wal-Mart’s main superstores and fewer stock-keeping units, which means the implementation of RFID tagging is easier.

Sam’s Club has 585 locations, each with 5,000 items, compared to 3,600 Wal-Mart stores stocking 100,000 items, Simley says. He pointed out that all 22 Sam’s Club DCs will be installing RFID infrastructure equipment this year and that all 585 Sam’s Club stores will be using RFID this year, too.

We also asked Simley how the RFID implementation was going in general. While he echoed what we’ve heard regarding the benefit of reducing out-of-stocks, he also noted that RFID helps with reducing overstocks.

Based on his experience, Tim Kueppers, an associate with Packaging & Technology Integrated Solutions, LLC (PTIS) consultancy, and owner of RFID integrator Sense ID Corp., says that a surprising number of companies are still just entering into auto-identification.

To many, bar coding is a big step-and with familiar enough technology. I think it still comes down to justification of RFID based on paypack,” he says. “The fee represents a more attractive option for Sam’s Club to ‘force’ compliance versus terminating supplier relationships.”

Simley knows of no plans for Wal-Mart to introduce a similar fee for its noncompliant suppliers.

The Sam’s Club fee rises to $3 per noncompliant pallet in 2009. Yet more stringent measures could be in store.

For more analysis on this development, see •

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