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What We Can Learn From Wal-Mart

Mar 10, 2005
By

Scott Robinson






January 2005 has come and gone, and true to industry predictions, few of Wal-Mart's hundreds of suppliers were able to comply with its edict that they implement RFID tagging of products and pallets according to the retail goliath's implementation schedule.

Many faked it (with "slap-and-ship" -- adding the tag to please Wal-Mart but without implementing the requisite infrastructure), many complied but only on a fraction of the pallets they shipped. It was widely known in the latter days of 2004 that less than half of Wal-Mart's suppliers were even able to make a good-faith effort.

RFID tagging, the practice of putting radiant identification tags on cases and pallets of products, will be a major step forward in supply chain technology.


Wal-Mart's desire to have this technology implemented is understandable and would represent a win-win for everyone in the end. But many industry voices insist that the technology is not yet stable enough, nor the equipment high-quality enough for the level of implementation Wal-Mart seeks.

That is debatable, but what is crystal-clear from the Wal-Mart experience, is that you can't just force technological evolution across the board, no matter how big you are.

What has happened with Wal-Mart is not just a set-back for supply chain IT, but a lesson in good business. Most of the suppliers of the world's biggest vendor of consumer goods are paying out money they can't afford to accommodate a technology that doesn't yet meet the needs of the process participants.

And these suppliers are spending this money just to keep their stronger partner happy and this is bad for everyone!

If this sounds harsh, let's look at the other side and realize that RFID is very promising, and Wal-Mart deserves kudos for moving it forward, even if heavy-handedly. And we need not be too discouraged at the sluggishness of this particular deployment: we have a success to inspire us, it just wasn't Wal-Mart.

Across the Pond

The European Metro Group is a consortium of retailers that has aggressively deployed RFID and succeeded in ways Wal-Mart did not by adhering to a very different deployment strategy.

They went into production in November 2004, and lest it all sound like a remote victory, a number of domestic manufacturers were on board: Kraft Foods, Colgate-Palmolive, and Esprit Europe, to name a few.

Here's what the Metro did differently:

  • The implementation was top-down, and done in phases and RFID was initially required at the pallet level only. This was a far simpler row to hoe for the suppliers than implementing case-tagging from the start. It was far less expensive and bought the technology time to improve.

    Leaving some space for this to happen was a wise move: the state of the art in RFID is that the resolution of RFID readers in warehouses is still not what it needs to be for case-level tagging (improvements are, however, progressing at breakneck pace. Expect major enhancements in the coming year!).

    While pallet-level tagging, however, can be accommodated by today's technology. The Metro Group simply set aside case-level and transport pack-level tagging for a future project phase.

  • Metro also called for one change at a time in the internal systems of its suppliers, rather than a whole-hog turnover.

    By starting with a pallet-level-only phase, upgrades in track-and-manage systems that trace moving product throughout distribution chain were the focus. This one-"bite-at-a-time" approach means that product movement overview is already in place when a supplier is ready to step up to transport packaging tagging, and the move to case-level tracking throughout the chain is more manageable.

  • Probably the biggest mistake on Wal-Mart's part is the use of its industry muscle.

    Forcing partner companies that are orders of magnitude smaller to do your bidding is old-school thinking that is self-defeating in the global economy.

    To place such a tremendous burden on loyal partners who, for the most part, could ill-afford per-unit tagging of almost $1 on top of the cost of their established tracking systems, seems less than reasonable. Even those suppliers that can readily afford to overhaul their infrastructures can't necessarily afford to do so as rapidly as Wal-Mart wants.

    The Metro Group did it right. The deployment decisions and timing of the phases were decided collectively, by partners of varying influence. The burden was more evenly distributed, and thus the implementation has been smoother (and faster) for all parties.

    What have we learned? If you're pursuing the implementation of RFID, consider these points:

  • If you're going RFID, go top-down. Consider starting at pallet-level tagging and working your way down to case-level. This will allow for a smoother and more gradual, phased implementation of the technology (not just for you but for your partners).
  • Apply the same approach to the implementation of changes in the systems that will use the RFID data. Keep everyone in the loop on the same page, and move on only when everyone is ready.
  • Are you bigger and stronger than your partner companies? Instead of acting tough, consider investing in your partners: help pay the bills and you'll get things done faster. Invite all parties concerned to sit down at the table for planning and discussion. You'll not only get RFID implemented more effectively, you'll have stronger partnerships in the end.
  • Scott Robinson is an enterprise systems consultant with Quantumetrics, Inc., a consultant's collaborative. Robinson is presently working in distributed healthcare information systems with HCHB/Allegro IT, and has worked with such well known organizations as the Dept. of Defense (DOD), Dept. of Energy (DOE), Wal-Mart, and Roche Pharmaceuticals. He is also a regular contributor to TechRepublic and can be reached at (812) 989-8173, or by email at scottrobinson@att.net.


     

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