SCDigest Editorial Staff

SCDigest Says:

The second two new pilot programs are clearly aimed at refocusing Wal-Mart’s RFID efforts at programs that can have a more immediate and clear return for vendors – and to limit tagging requirements for now to test programs that can demonstrate a return. What do you say? Send us your comments here

So just how dramatic is Wal-Mart’s announced change in RFID strategy?

It’s clear that Wal-Mart has now aligned itself more clearly and directly where a few leading consumer goods companies, such as Procter & Gamble/Gillette and Kimberly Clark, have been promoting the opportunities for some time – focusing on promotional products to ensure high levels of execution compliance in-store.

The announcement by Wal-Mart’s VP of Information Technology, Carolyn Walton, came at the annual EPC Global conference on Oct. 5.

Walton announced three new and very specific RFID initiatives – which signal a sharp change from the more general, broad-based program first announced in 2003 that has generated significant controversy and debate ever since. Many consumer goods companies have privately and sometimes publicly stated that there was little return from the costly case-level RFID tagging requirements.

There were some exceptions, as Procter & Gamble, Kimberly-Clark, Campbell’s and a few others, who were both highly bullish on RFID generally and especially around the value in improving in-stock positions and floor level execution for promotional products and displays.

Earlier this year, in an interview with SCDigest, P&G’s Dick Cantwell said, ““I’ve been in this industry with Johnson & Johnson, Gillette and now P&G for over 25 years, keeping up on both the marketing and the supply side. I’ve seen every plan in the book to get better retail execution [of store promotions], and I’ve not seen anything that had ever lived up to its expectations. What RFID does is it gives you for the first time real, actionable visibility. It gives you the systems to really know where your products and displays are.” (See Unplugged Interview with Procter & Gamble on RFID Part 2 .)

Seems Wal-Mart has now got the message.

“We're coming at RFID from a different angle," Walton said at the EPC Global event.

Three New Wal-Mart RFID Pilot Programs

The first new Wal-Mart program will involve a pilot to tag pallets – not cartons – sent to a Sam’s Club DC. That DC will be testing readers on racks to automatically track pallet putaway without the need to scan bar codes.

The second program involves asking only suppliers with featured promotional products to tag displays and products for those promo items. Wal-Mart will be testing new readers designed specifically to track execution and activity at various “hot spots” within its stores – such as end of aisle displays. RFID reads will tell store managers how well these promotions are being executed, and signal the need for action if a display or inventory is needed.

The third program is another test that will see if tagging across an entire category – presumably ones that have particular inventory issues – can increase sales by reducing out of stocks. The first pilot will involve air fresheners.

The first move, involving the Sam’s Club pilot, has the advantage of only requiring pallet-level tagging – a much less costly requirement than earlier loose mandates asking for carton level tagging.

The second two are clearly aimed at refocusing Wal-Mart’s RFID efforts at programs that can have a more immediate and clear return for vendors – and to limit tagging requirements for now to test programs that can demonstrate a return for a specific group of vendors or products, not all products all the time. This more targeted approach will reduce vendor push-back, and more closely resembles the tack taken by Wal-Mart rival Tesco in the UK.

“From where we sit, this looks like good news,” said a logistics executive at a $300 million housewares manufacturer that was part of the last wave of vendors to face general tagging requirements. So far, the company has tagged only a small percentage of cartons it sends to Wal-Mart, and none it sends to Wal-Mart competitors.