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Wal-Mart's RFID program: Paying back suppliers

When Wal-Mart first came out with its mandate for RFID compliance, many were skeptical that this initiative would have any benefit for the suppliers that were being forced to comply.

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It was clear to many that Wal-Mart’s supply chain operation could benefit; that was no surprise to anyone. After all, Wal-Mart is a leader in using its purchasing clout to get their suppliers—consumer packaged goods companies, CPGs—to do more for less. Vendor managed inventory (VMI), shipping label compliance mandates, packaging compliance mandates, and ASN compliance (EDI-Electronic Data Interchange) are just a few examples. If Wal-Mart didn’t invent the chargeback for compliance failure, many of its suppliers will tell you that Wal-Mart has darn near perfected it.

When issuing the new RFID mandates, Wal-Mart tried to convince its suppliers that they too would benefit. Most thought this was just a “spoon full of sugar” to convince them to go along. Now, Wal-Mart is quietly making the promise of supplier benefit a reality. Wal-Mart has operated a supplier portal for sometime that allows registered suppliers access to information about their shipments and orders. Over the past several months, Wal-Mart has added a section that posts the RFID tag scans of that supplier’s shipments.

Scanning points

These scans occur for multiple transactions in Wal-Mart’s processing of the movements of product through the supply chain. Specifically, scans occur at receipt into the DC, shipment from the DC, receipt in the “backroom” of the store, movement from the backroom to the retail floor, and placement of the empty container (with the RFID tag still attached) into the store’s compactor. Although making no claims that all tags are read at all places, Wal-Mart, has made the scan results of these locations available on its supplier portal.

This is real evidence of RFID delivering value to both the shipper and receiver, the supplier and the customer. Creative CPG companies should see the possibilities that this data opens up for them. Specifically, there are several programs that come to mind:

1. Confirmation of a shipment/pallet/case being received at Wal-Mart. This can be used to preemptively deal with shipment shortages, delivery mistakes (shipment going to the wrong DC), carrier failures (didn’t deliver on time), etc. It can also be used to challenge Wal-Mart’s short shipment claims.

2. Visibility into product sales performance. The movement of cases from the backroom to the retail floor is more readily available through this means than is typical of most point of sales (POS) systems. It gives the CPG timely (and time stamped) information about how its product is doing in the marketplace.

3. Support for replenishment programs. The consumption data can be used to help trigger replenishment shipments.

4. Support of sales promotion programs. Using the consumption data, an innovative CPG can craft promotion programs that can be used to sell more in targeted markets or to enhance sales of lagging products. The data can be used to assess the success of the promotions and to help win Wal-Mart’s support.

It is encouraging to see Wal-Mart share this information with its suppliers. Actions like this, coupled with innovative programs by the CPG companies themselves, will go a long way to accelerate the adoption of RFID in the consumer/retail industry. It is hard to resist initiatives that shield a company from increased costs while helping to grow sales.

Thomas Ryan is an information technology and logistics professional with more than 25 years of experience in warehouse and transportation operations and systems, enterprise integration technology architecture, and supply chain collaboration enablement through the application of technology. He has worked for Procter & Gamble, among other companies. Ryan is currently Principal, TKR Consulting Associates.

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