I am in complete agreement that RFID was not a requirement to get a system-driven restocking program.  If the study you referenced concluded a significant out-of-stock reduction was directly due to RFID implementation, but was using a paper-driven system as a baseline for comparison (at the low end of the technology spectrum), there are cheaper, more traditional methods (middle of the tech spectrum) to achieve the system-driven restocking.  Assuming either would by definition require WMS programming for system-driven restocking, any standard barcode and data collection equipment would logically produce the similar results.

Michael Warren

JCREW

You said it – the Hawthorne effect is certainly at work. In addition to it being common knowledge that the store is being monitored, how obvious is it that certain SKUs are as well, with the EPC label displayed prominently???

Paul Pocialik

Chief Technology Officer

NOBLE STAR

I believe your out-of-stock reduction calculations are right on.

The other consideration is the cost.

As far as I can tell the incremental profit to the retailer and the manufacturer is much less than the cost of tagging every case of product, except for very high value products.

Don Mowery

Director eBusiness

Extended Enterprise Group North America

Nestlé Purina PetCare Company

A very sweeping and likely inappropriate answer to why OOS went down: someone was paying attention! RFID may have been the vehicle driving someone to pay attention, but let’s be cautious of assigning cause and effect. In the business community we could learn a lot from the scientific methodology of controlling experiments, isolating ONE variable, and testing.

Jim Lamb

Manager, Global Transportation and Logistics

Andrew

I do not work in retail but I am very surprised that they don't have system-generated putaways based on what was sold and the allocated shelf space for the product. They must have an idea of how much shelf space they want to use for a certain product. I think it shouldn't be that difficult to know how many garments can fit on a rack or how many boxes of a certain product can fit in dimensional shelving or even floor space. It seems almost counter-productive to me to have an employee scanning boxes in a back room to see if there is shelf space available or am I missing something?

Terry B

aol email

It must be that Wal-Mart and a few others want to prove they are 'right' so badly that they are prepared to treat a lot of their suppliers/partners as if they are ignorant.  I would think this is very insulting.  All I can think of is that they realize their maximum value for them will happen more quickly if it is ubiquitous much faster than how bar code evolved and they are prepared to do whatever is need to keep up the PR. 

Name withheld by request

When I read the report I had very similar reactions.  My grocery background is supply side, so I am not well-schooled in store shelf replenishment practices, but it does seem to me that there may be several alternative process improvement ideas to automate pick-list creation based on POS, shelf space plan-o-gram, and backroom book inventory data.  It's a good case study justifying automated shelf pick-lists, but I don't think RFID is the only way to get there from here!

Dave Sandoval

B.U.S. Systems, Inc

Your calculations are interesting.  Based on your numbers, it seems the sales and profit benefits from RFIB may not be as large as hoped. The result of a retailer having out-of-stock is an immediate reduction in sales. The implications for manufacturer or wholesaler’s brands are different.  If customers cannot find their favorite brand on the shelf, most people will select another brand.  So for a manufacturer, being out-of-stock is a much more significant and immediate problem than for a retailer. For the manufacturer, the out-of-stock can cost a sale and decrease market share since your competitors get your lost sales.  

Furthermore, your analysis assumes that all products have the same profit margin.  In fact profit margins may widely differ based on the local price and buying power. 

Specific information on which products were out-of-stock and their margins would allow someone to calculate the overall impact.  The repeat purchase intentions by customers are lowered by a retailer being out-of-stock.  At some point in time, customers will go to another store to be able to buy all of the goods they want in one location.  There is a substantial danger in loosing customers.  As more firms try to come closer to Wal-Mart’s low prices, the cost of two shopping stops rather than one is significant to many consumers.  Additionally based on the design and implementation of the specific inventory system, lost sales may adversely affect reorder sizes.  

Warren Martin, PhD

School of Business

University of Alabama at Birmingham

Page 3 of letters on Wal-Mart RFID study

Page 1 of letters on Wal-Mart RFID study

Do you have additional comments on the Wal-Mart out-of-stock study, our review, or any of these reader comments? Let us know your thoughts.