I can’t be the only one to notice that the once ubiquitous news about Wal-Mart and RFID seems to have considerably fallen from the front pages and the podiums of late. The company’s Simon Langford, who was heading up RFID efforts, was seemingly everywhere for awhile. Ditto with then CIO Linda Dillman, who became the lead spokesperson for the press on RFID. Now former Supply Chain exec Rollin Ford is CIO, and while certainly supportive, he has been noticeably less vocal on the topic (Dillman took a spot as head of risk management).
| Gilmore Says:
"If you don’t have a clear idea what the real value is, it isn’t a program/mandate, it’s still a pilot."
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As most of us know, Wal-Mart has rethought its RFID strategy. Most of the old carton-level mandate approach is out. What is “In” instead is a focus on promotional items (following the lead of Procter & Gamble, Kimberly-Clark and others), some experimentation with category management applications, and a new mandate for now around pallets for Sam’s Club stores.
So, getting myself in trouble as usual, I will just say this: that Wal-Mart’s initial plan was likely to fail was actually quite apparent at the time, and should seem obvious now.
We were certainly somewhat cynical here at SCDigest all along. I will say I talked with many others back in the 2004-2005 timeframe who felt the same way, but who were generally afraid to say anything that was at all critical of Wal-Mart. That’s too bad.
So, here are my observations on both the fundamental problems and some key lessons learned.
- Don’t Announce a Huge Initiative and Major Mandate on Unproven Technology: We are still experimenting with the EPC form of RFID today, and working to fully understand performance, read characteristics, software requirements, etc. That’s in 2008. We knew far less in 2004, when the Wal-Mart initial strategy/mandate was first announced. How can you possibly announce that sweeping of a program with the technology still in the state of flux it was in then?
- Under-Promise and Over-Deliver: I have no real idea what the dynamics were inside of Wal-Mart at the time. The stock price was struggling. This was certainly positioned to Wall Street as a key initiative that would help the bottom line. But given where the technology and understanding were back then, clearly Wal-Mart should have kept expectations to a modest level. It did the exact opposite. So, the many attacks started coming because the company over-promised and under-delivered. Big mistake, and one Wal-Mart seems to have finally grasped.
- Beware SCM Initiatives that are Only Touted by CIOs: Did anyone else notice that, especially at the consumer goods company level, that the only vocal supporters of RFID seemed to be CIOs or others on the IT side of the house? When a negative Wall Street Journal story appeared last year, and of course which now seems to have been spot on, Wal-Mart rounded up some supporters, each of whom was a CIO. The lack of support from supply chain, merchandising and other operational execs should have raised a lot of questions all along.
- Get the ROI Story Straight: A mandate really only has any chance of working if there is a clear ROI story. That ROI doesn’t even have to be for the supplier – they can be convinced, and the retailer will be more effective in using its leverage, if there is a clear, strong return even just for retailer. But there was no clear ROI story from the beginning, and the story kept changing, as Wal-Mart hoped University of Arkansas studies would find the answer. So, if you don’t have a clear idea what the real value is, it isn’t a program/mandate, it’s still a pilot. In which case, you work with your suppliers much differently, and don’t roll out a mandate to 600 of them eventually while you are still, in fact, in pilot mode. The initial “pilot” with eight large CPG companies was really just to get the basics understood, not to really quantify value and nail down needed business process changes.
During that time, the Gillette/Procter & Gamble's and Kimberly-Clark's were, in fact, doing real research and pilots, and guess what - they came up with answers.
- Make Sure the Economics Seem Reasonable to Everyone: As I have written before, at the time of the first mandates and roll-out, the cost of just the tag itself was in the 20-25 cent range. Now, it’s come down, but is still probably at that level if you include the labor and other effort to tag each case in distribution. For CPG companies for which the total cost to receive, store and ship a case is at, or not much above, that level, how could anyone expect they could just start absorbing that cost? Companies may resist but are more likely to support customer requirements that involve a one-time investment. But a huge on-going increase in variable costs? That’s something very different, and why Wal-Mart’s program was never likely to scale as designed.
I could add a few more, but you get the idea. Wal-Mart is on a much better path now. The big CPG companies have some excellent insight about where this can all go and how, but are doing it smartly, methodically, in tune with the resulting benefits at each step, and keeping expectations aligned with results delivery. Meanwhile, I note this week an announcement from Lowry, a large systems integrator but still in the grand scheme of things a relatively small company, that they have installed an active RFID system at their 200th customer.
So, do I have this wrong? If not, why didn’t more commentators say so?
Also, please note we have updated very nicely SCDigest’s home page (www.scdigest.com). Please take a look. It’s more accessible than ever, as always is packed with valuable content, and features our revised line-up of expert columnists/bloggers. Make it your home page, or at least visit often.
What’s your reaction to Dan’s list of observations on Wal-Mart’s RFID efforts? Do you think most of this was obvious at the time, or only now in retrospect? What lessons learned would you add? Let us know your thoughts at the Feedback button below, and as always we’ll keep your comments anonymous upon request.