Doing In-Store Checks at Wal-Mart

Banker made calls to a number of consumer goods companies relative to the Sam’s Club announcement.

One of the consequences of Wal-Mart’s RFID initiative, Banker found from these calls, is that suppliers have sent more people into Wal-Mart stores to examine the store level processes.

“They have been exposed to warts and blemishes that the retailer may sometimes wish their "valued" suppliers had not seen,” Banker said. “The retail behemoth did not generate the expected benefits from ROI, in the view of key suppliers, because of a failure to execute at the store.”

SCDigest believes there is a bit of a chicken-and-egg syndrome here, as RFID in the end was supposed to fix these in-store execution issues, but nonetheless Banker’s research findings are interesting.

Banker found, for example, that “Initially, it was the department manager’s job to pay attention to the RFID data and go to the backroom when necessary to restock their department. This was a low priority task for these folks.”  Subsequently, Wal-Mart took this responsibility away from department managers and gave it to the assistant store manager.

“Some suppliers who have talked to store executives about execution problems surrounding their products have not gotten the response they were looking for,” Banker said.

One supplier told Banker about replenishment failures surrounding end-of-aisle promotions. When the supplier’s account managers visited some of the Wal-Mart stores, “What they saw was Wal-Mart associates breaking down the displays and putting the items on the shelves. A different manufacturer confirmed that they had seen this as well, and estimated that 15% of products supposed to be in end-of-aisle displays actually ended up on the shelves,” Banker said.

“Because of these types of problems, the on-going problem of inaccurate SKU scanning at the Point of Sale, and other failures that can’t be discussed without breaching confidentiality, some of our sources report that there is still a bad match between what the Wal-Mart inventory system shows is in stock,” he adds in the research note.

Plowing Ahead with Sam’s

Given the challenges with RFID at regular Wal-Mart stores, Banker asks, logically, “Why, then, is Wal-Mart pushing forward with RFID on the Sam’s Club side of the business?”

He discovered two different perspectives when speaking with consumer goods manufacturers.

“Some suppliers argue that there is more value to the doing RFID tagging for Sam’s Clubs than for Wal-Mart stores. The work flow and data flow are more straight forward than at traditional Wal-Mart stores,” he observes. “They are driving full pallets to the floor and ripping off the plastic to expose the products. You don’t see associates, like you do at a Wal-Mart store, with a cart that has a few of one SKU, a few more of a different SKU, and perhaps a full case of another.” As a result of these simpler processes, RFID can be more effectively deployed, according to this view.

Other suppliers are more skeptical, Banker found.

“They argue that in this store warehouse environment where full pallets are delivered and stocked on the floor, they rarely run out of stock in the store. The true problem involves getting associates to lower pallets to the floor from the slot above the selling position, or bringing the pallets out of the back of the store when the selling slot is empty,” he wrote – issues that may not require RFID to solve.

Push Back Will Come at Selling Unit Level

Most everyone seems to agree that the relatively small cost of tagging full pallets and the similar process ease of doing so means the program will probably move forward reasonably on schedule. But when the mandates for tagging “selling units” comes, consumer goods vendors are likely to protest again, for the same reasons they did at Wal-Mart stores – high costs, process challenges, and little clear benefit.

It seems clear, however, that when Wal-Mart moves to asking suppliers to track inner packs, there will be more push back,” Banker agrees. “The smaller the Unit of Measure (UOM) Wal-Mart asks them to track, and in some departments like the Pharmacy and CD section the UOM is just one unit, the harder the push back will be.”

Where’s it all going? Stay tuned to SCDigest for the most objective coverage available.

What’s your take on Banker’s observations? What would you add or counter? Do you think we will see similar vendor pushback when it comes to tagging at the selling unit level? Let us know your thoughts at the Feedback button below.