Wal-Mart plays catalyst to RFID uptake

Daily Newsletters

Sign up to ZDNet UK's daily newsletter.

NEWS
Retail giant Wal-Mart is expected to throw its weight behind RFID (radio frequency identification) technology at the Retail Systems 2003 industry conference in Chicago on Tuesday. Sources familiar with the company's plans said executives will make a presentation encouraging its top 100 suppliers to start using wireless inventory tracking equipment -- chips affixed to products, and scanners in warehouses -- by 2005. Wal-Mart's endorsement of RFID gives an important boost to efforts to overhaul the world's supply chains, a makeover that could provide a shot in the arm for technology companies struggling to find buyers for the latest products and services. RFID is expensive, but backers say it offers long-term benefits that could dwarf the impact of the bar code on inventory control and distribution. RFID spending will be "bigger than...Y2K", predicted AMR Research analyst Pete Abell. "I imagine there will be a rush on investing in RFID". Suppliers are already exploring the use of RFID technology in tracking goods from the factory to warehouses. But backing from retailers is considered important because it could ultimately allow products to be tracked on store shelves. Executives from Wal-Mart are expected to aggressively push for the adoption of RFID technology during a presentation at an upcoming event for retailers, suppliers and distributors, sources said. Part of the discussion will involve the significance of standards development and its effect on the widespread adoption throughout the supply chain. Wal-Mart representatives did not return calls for comment. RFID tags have the potential to streamline and improve inventory management by allowing manufacturers to more efficiently enter and track the flow of goods. For example, RFID could let a company add a boxful of goods to its inventory systems all at once, without having to unpack the carton and scan each piece separately. An RFID scanner can pick up signals from all the chips in the sealed box, something bar code systems can't do. The cost savings could be substantial for Wal-Mart, the world's biggest retailer with sales of about $218bn (£131bn) in 2002. AMR's Abell estimates that Wal-Mart's costs associated with supply chain -- including storing, transporting and keeping track of goods -- are about 10 percent of overall sales. RFID, Abell said, could save 6 percent to 7 percent of those costs annually. Using the 2002 figures as a model, that would amount to about $1.3bn to $1.5bn (£781m to £900m) saved. Such savings are an attractive brass ring, but installing the technology is no small task. Wal-Mart suppliers "may find it difficult to meet the early 2005 time frame," Abell said. Problems aside, chip and equipment makers are already gearing up for expected demand. "In 2004, we are going to see a broad range of serious (RFID) pilots," said Vinny Luciano, vice president of product management, mobile computing systems, at Symbol Technologies. "We'll see full-scale rollouts of RFID systems in 2005. It's not too soon to start looking at the impact of RFID on business and what the opportunities will be." In the past, Wal-Mart has helped to promote other technologies that have helped to streamline inventory and supply-chain management. Teaming with K-Mart and other retailers in the 1980s, Wal-Mart helped to promote the use of bar code scanning. A bar code standard was approved in 1973, but by 1984 only 15,000 suppliers were using codes on their products. Wal-Mart threw its weight behind bar codes in 1984, and by 1987 there were 75,000 suppliers using bar codes, according to AMR Research. As it looks to cut costs, Wal-Mart has been quicker with its support of RFID technology than with bar codes. RFID-related technologies such as EPC (Electronic Product Codes) are gradually gaining industry support, which should help penetration. "While still being developed, EPC will be a common method of tracking inventories and objects using RFID technology," said Ian McPherson, analyst with Wireless Data Research Group. "The two are related in the same way that bar codes and scanners are related." EPC is being developed by the Auto-ID Centre and the Uniform Code Council, and many see it becoming commonplace in pallets and cases over the next five years, according to Paul Fox, a Gillette representative. Although cartons and pallets are the focus of RFID now, the technology isn't expected to truly take off until RFID tags are used on store shelves to give more up-to-date information on sales and in-store inventory. Trials are ongoing, but cost is the major hitch with such tags. Currently tags cost 50 cents to 60 cents apiece. To be practical for manufacturers to use, they'll have to drop to around 5 cents, according to Dave Krebs, an analyst with research firm VDC. "As volumes increase, prices will come down, but suppliers don't really have an incentive at this point," Krebs said. "They are footing the majority of the tag cost, and retailers are reaping a majority of the benefit." Krebs added that for the benefits of supply chain, products have to be tagged at the source: suppliers. A large retail company issuing favourable terms or promotions for suppliers could certainly encourage the adoption of the technology. "Right now, everyone involved in RFID technology is examining the cost ramifications, but we're optimistic that the price hurdles will be overcome," said Fox, who said the tags can be had already for as low as 10 cents each. "The cost of tags and readers will decrease over time." News.com's Alorie Gilbert contributed to this report.
Who's watching you? Get the latest on spy networks such as Echelon and Carnivore, as well as privacy issues for companies and individuals alike, at ZDNet UK's Privacy News Section. Let the editors know what you think in the Mailroom.

Talkback

i would actually like to know the benefits disadvantages and see a chart or graph illustrating either thevolume of goods tagged or the variety of different items tagged by now in one of the companies like wal mart.
can you help?

via Facebook 31 May, 2005 14:55
Reply

Post your comment

In order to post a comment you need to be registered and logged in.

You can also log in with Facebook. Log in or create your ZDNet UK account below

  • Login

Will not be displayed with your comment

By signing up for this service, you indicate that you agree to our Terms and Conditions and have read and understood our Privacy Policy. Questions about membership? Find the answers in the Community FAQ

Get ZDNet UK's daily newsletter

Enter your email address to sign up

ZDNet UK Live

bootlegger

Make that 13 people now - I got refused today at Manchester airport. I thought I was up to date on this legislation - I knew of the EU ruling from...

3 hours ago by bootlegger on UK airport body scans will not be opt out
tinycg

Don't forget to check out apps like GoodReader or SlideShark either, they're indispensible for people on the go in presentation situations. Best...

5 hours ago by tinycg on Four top iPad apps for people on the move
TerryRK

Well it seems there is something a number of us agree on. Why is the Ubuntu Unity launcher so ugly? I thought perhaps it was something to do with...

10 hours ago by TerryRK on A tale of two distros: Ubuntu and Linux Mint
Freebies202

Duplicate comments are not made intentionally. Its very good to know that now you are keeping check on this problem because sometimes a commenter...

19 hours ago by Freebies202 on Microsoft fixes blog comments, speeds up blogs with open source
kevinmchapman

"the very significant number of users" and "many (most) of us" - you have no evidence for these statements. It is a fact that most users are saying...

1 day ago by kevinmchapman on A tale of two distros: Ubuntu and Linux Mint
Marg Menzies Harrison

Another grammar faux pas is the improper use of "you". When sitting down down in a restaurant, for example, I get cringe when the waitress...

1 day ago by Marg Menzies Harrison via Facebook on 10 flagrant grammar mistakes that make you look stupid
zdnetukuser

And NOW, folks, for Canonical's next trick... Kubuntu is late. Here's a pencil. Draw your own conclusions. cf.:...

1 day ago by zdnetukuser on Linux Minterface
Moley

@kevinmchapman. The discussion here reflects the very significant number of users who really do like the traditional menu system and who wish to...

1 day ago by Moley on A tale of two distros: Ubuntu and Linux Mint
kevinmchapman

Er, no... It is an efficient means of finding the application/file/setting you need in one place. The icons are a simply a fallback for when you...

1 day ago by kevinmchapman on A tale of two distros: Ubuntu and Linux Mint
TerryRK

Isn't the provision of a text based search an admission by the developers that the mass of icons approach does not work? I don't need to use a...

1 day ago by TerryRK on A tale of two distros: Ubuntu and Linux Mint
kevinmchapman

"Unity and GNOME 3 both abandon the old text-based cascading menus in favour of a graphical icon-driven system." Point truly missed. Both use a...

1 day ago by kevinmchapman on A tale of two distros: Ubuntu and Linux Mint
TerryRK

whs001 - Thank you, I'm glad you liked the article. I absolutely agree with you on your first point. I should perhaps have made it clearer that...

1 day ago by TerryRK on A tale of two distros: Ubuntu and Linux Mint
Dennis Nilsson

If we allow corporate interest to dictate the way our government circumvents due process against foreign entities then we should accept the same...

1 day ago by Dennis Nilsson via Facebook on ACTA stumbles in Germany
GHar123

I totally dislike pirating of works, I fear that artists will be deterred from creating works if they think that they are going to get ripped off....

2 days ago by GHar123 on ACTA stumbles in Germany
JCB33

How dare film makers, artists or anybody that invests in creativity stop us pirating their works for free. I want to be able to walk into my local...

2 days ago by JCB33 on ACTA stumbles in Germany
Moley

@GrueMaster. I prefer horses for courses rather than one size fits all. I, and I suspect most other computer users, do not really wish to have...

2 days ago by Moley on A tale of two distros: Ubuntu and Linux Mint
greycynic

The product that scares me every time I have to use it is the Office 2007 version of Excel. The first bug that I found was applying the median...

2 days ago by greycynic on Ten flawed products that derail productivity
GrueMaster

Nice review and very informative. One thing I'd like to add (in reply to whs001's 1st question), the main reason to have the same interface from...

2 days ago by GrueMaster on A tale of two distros: Ubuntu and Linux Mint
Frederick Wrigley

I'be been using Mint 12 since the RC came out, and I am far more happy with the Cinnamon, the Mate, and, yes (with extensions), theGnome 3...

2 days ago by Frederick Wrigley via Facebook on A tale of two distros: Ubuntu and Linux Mint
bdantas

Excellent article. One small correction, though--although a fresh installation of Linux Mint 12 will, indeed, provide the user with a version of...

2 days ago by bdantas on A tale of two distros: Ubuntu and Linux Mint