When Wal-Mart announced that it would require its top 100 suppliers to begin marking shipments to three Texas distribution centers with radio frequency identification (RFID) tags by January 1 of this year, most of those companies had to be drafted into the program. Many of them attributed their resistance to concerns about RFID's expected high cost and low return on their investments.

Not every Wal-Mart supplier is reluctant to apply RFID technology, though. Beaver Street Fisheries, a seafood distributor in Jacksonville, Fla., has gone ahead and started shipping pallets with RFID tags, even though it isn't one of the retail giant's top 100 suppliers. Beaver Street, in fact, volunteered to take part in Wal-Mart's program to introduce RFID technology into the supply chain—the first company that was not a top 100 supplier to do so.

"A year ago, I called [Wal-Mart Chief Information Officer] Linda Dillman and…told her that we were excited about the prospect of RFID and could we join the team," recalls Beaver Street CIO Howard Stockdale.

Last November Beaver Street Fisheries began shipping three products marked with RF tags to Wal-Mart: jumbo breaded shrimp, catfish nuggets, and snow crab clusters. Those products represent only about 5 percent of the stock-keeping units (SKUs) that Beaver Street ships to Wal-Mart. (For more on Beaver Street's RFID deployment, see the sidebar on Page 34.)

Beaver Street's "start small" approach is hardly unique. A recent report from research firm ARC Advisory Group in Dedham, Mass., suggests that most Wal-Mart suppliers are tiptoeing into RF tagging, despite the retailer's aggressive advocacy of the technology. For that report, ARC surveyed 24 companies that were already investing in Electronic Product Code-based RFID and found that most of them are shipping fewer than a dozen SKUs with RF tags on them.

That contradicts the widespread impression that Wal-Mart would force its suppliers to put RFID tags on all of their shipments or lose the business. In reality, say analysts, Beaver Street's experience appears to be the rule rather than the exception.

"The perception out there is that come January 1, everybody will have 100 percent of SKUs tagged. That isn't true," says Jeffrey Woods of the research firm Gartner Inc. in Stamford, Conn. "Most have scaled back the number of SKUs that will be tagged. People have selected the SKUs that pose the least problem for the tagging initiative," he observes.

Bentonville, Ark.-based Wal-Mart says it wasn't responsible for creating an impression of inflexibility. "People have misinterpreted the initiative," says spokesman Gus Whitcomb. "We challenged them [the suppliers] to do 100 percent, but they put in a tagging plan that's actually possible." To date, he says, suppliers are tagging about 65 percent of the cases headed to the Texas distribution centers.

The percentage of tagged products varies from supplier to supplier. In December, Gillette Co. spokesman Paul Fox said that all of the SKUs his company ships to those DCs would be marked with RF tags. Procter & Gamble spokesperson Jeannie Tharrington, meanwhile, declined to reveal the percentage of SKUs her company planned to ship with RF tags but did say "a good deal of our brands will be tagged." Continued...

1 2 3 Next