Wal-Mart will require suppliers to another 500 of its stores to use radio frequency identification (RFID) for tracking shipments, putting more pressure on processors to embrace the technology.
Wal-Mart announced today that it will have about 1,000 of its stores using fully traceable RFID by the time the transition is complete. RFID reduces the amount of out-of-stocks items, and excess inventory, the company said.
“We're aggressively moving forward with the expansion of RFID-enabled facilities,” said Rollin Ford, Wal-Mart's executive vice president, in a company statement. “We believe this technology, when coupled with new work processes, will deliver even more benefits than we are currently receiving. We are actively engaged in designing some new initiatives that will accelerate our program even further and, in so doing, create even more value for everyone involved.”
Over the coming years, RFID is forecast to become standard within the industry as manufacturers seek better traceability and accurate product sourcing. Driving the technology's integration into the supply chain are retailers such as Wal-Mart, who are beginning to mandate that their suppliers invest in RFID systems.
However, the relatively high price of RFID tags compared to the current bar coding system has held back its use by manufacturers.
In the lastest boost to its program Wal-Mart expects its 300 largest suppliers to begin shipping cases of RFID labeled goods in October as a test.
Wal-Mart expects its RFID system to be fully functioning by January 2007, with more than 600 supplier companies using RFID technology in conjunction with Wal-Mart.
“We continue to work with suppliers to help them see the vast potential of RFID,” said Ford. “We're already fully convinced of its value and are ready to step up the pace since we know we are only touching the tip of the iceberg when it comes to the benefits of this technology.”
Wal-Mart is pushing forward RFID in conjunction with the use of the Electronic Product Codes (EPCs), an international standard being developed by EPCglobal.
EPCglobal, an industry organisation, is working to create common interfaces among RFID software and hardware, allowing organizations to exchange and leverage RFID data independent of the applications in which data is created or stored.
A University of Arkansas study of Wal-Mart's use of RFID found that the technology had reduced the company's out-of-stock problems by 16 per cent. Items were replenished three times faster than those using standard bar code technology.
Wal-Mart has also announced it will begin the transition to Generation 2 RFID tags. Gen 2 tags are designed to work globally in an integrated RFID system. These types of tags have recently been approved by the International Organization of Standardization (ISO) for use in international commerce.
With pressure from retailers, manufacturers are searching for low-cost RFID alternatives. The price of traditional silicon-based RFID tags, which currently range from $0.20 to $1.00, has kept many manufacturers from integrating their systems with RFID.
Some companies have made promising breakthroughs. Colorado-based OrganicID is developing a low-cost, printable RFID circuit that uses organic materials. The company estimates that its method will decrease the price of RFID tags to less than one cent and thereby enable the use of RFID tags in item level tracking.
Wal-Mart is one of the world's biggest retailers. It operates 6,500 stores and wholesale clubs across 15 countries with a staff estimated around 1.8 million. About 3,900 of those locations are in the US.
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