Several articles last year stated that Wal-Mart’s plans with RFID was receiving a lukewarm reception from its suppliers. They were not required to use the tags, but it was highly suggested. After more than a year of suppliers balking at using the RFID tags, Wal-Mart has decided to force the issue.
Beginning January 30, 2008, Wal-Mart will charge its suppliers $2 per tag, for each tag they place on pallets entering their Sam’s Club distribution center in Texas. While many will shrug their shoulders and think it no big deal because it is one distribution center, this will affect hundreds of stores. A distribution center is a single drop off point for suppliers. Millions of shipments arrive here yearly before they are broken down into smaller shipments and sent to other distribution centers or directly to stores.
Worse yet, Wal-Mart will be requiring all distributors to mark their merchandise with RFID tags at the item level by 2010. So, while they aren’t quite the big bully on the block just yet, they will be in two years. Because Wal-Mart is the largest retailer in the United States, many companies that are forced to comply with their policies will simply make all their products RFID compliant to all the other retailers.
All this has execs at companies that conformed early to Wal-Mart’s RFID mandate, including Daisy Brand, smiling smugly. The manufacturer of sour cream and cottage cheese started shipping RFID-tagged cases and pallets to Wal-Mart in the fall of 2004. Daisy says its investment in RFID has been a boon, helping it better manage the flow of its perishable products through Wal-Mart stores and ensure marketing promotions proceed as planned.
Daisy’s information systems manager, Kevin Brown, says he can track, by lot number, how quickly pallets of products make it to stores and when they’re unpacked using Wal-Mart’s Retail Link Web site for suppliers, since Wal-Mart has readers at its dock entrances and on its cardboard-case compactors. If a Wal-Mart store is scheduled to run a sales promotion on sour cream, certain information will signal that the promotion is taking place as planned, such as the destruction of a large number of cases in order to fill up the waist-high coolers typically used for refrigerated-product promotions. In fact, some in the industry speculate Wal-Mart soon will require any retailer running a promotion in its stores to use RFID.
While this is a great tool for businesses because they can track their perishables, there is no reason to tag things at the item level. Once this happens, the cost of each individual tag will be passed on to the consumer.
This type of RFID tagging, however, is what we should be supporting. It isn’t implanted into anyone. It isn’t keeping track of an individual’s data. It is only providing a better way to track pallets of merchandise. While I despise Wal-Mart, and they are strong-arming their suppliers, it does appear that they are pushing their suppliers to create a more efficient mode of transporting and tracking their merchandise.
Tagging the pallet still brings concerns of not really knowing what merchandise is on the pallet, but it can keep track of the pallet and where it is, making it easier to locate what specific item is supposed to be on the pallet. It won’t prevent thefts, but it may be able to track them quicker to pinpoint where the thefts occurred.
Even with these changes, Wal-Mart will still be seen as a monopsony. They bought the merchandise. They should be doing the tagging, not the suppliers.