250 million reasons for Wal-Mart's RFID exploits

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250 million reasons for Wal
Mart's RFID exploits

By: Joaquim P. Menezes

IT World Canada

(22 Jun 2007)

Harnessing RFID (radio frequency identification) t
echnology to reduce retail shelf out
and improve inventory profitability could generate an additional $250 million in annual sales, on a
global basis, at Wal
Mart Stores Inc.

"This is certainly grabbing our attention," said Nicole O'Connor, Dire
ctor of ISD at Wal
Canada Corp.

Mart is the largest retailer, largest private employer and second largest corporation in the
world (after ExxonMobil).

O'Connor was speaking at the
Collaborative Supply Chain Forum

held earlier this week in
sauga, Ont.

In an address titled
Using EPC/RFID to Increase Product Visibility
, the Wal
Mart executive
detailed the tremendous benefits

current and anticipated

Mart and all its stakeholders are
experiencing from this technology.

In the case of Wa
Mart customers, she said, the gains are very tangible.

For instance, the retail behemoth estimates that of the seven million people who shop at Wal
Mart stores each week, around 100,000 currently need to make a second trip because the
merchandize they s
eek is not in stock the first time.

"If [by improving inventory management via RFID technology] we could eliminate the extra trip for
these 100,000 customers, we could [collectively] save them 15,097 litres of gas

and $5.7 million
a year," O'Connor said

Mart's early adoption of RFID, she said, is inextricably linked to the retailer's "everyday low
price" objective.

"Sam Walton (Wal
Mart founder) said years ago that we [serve as] an agent for our customers.
That focus hasn't changed, and it's demons
trated in our
everyday low price

At Wal
Mart Canada, she said, RFID is being used to execute on that mandate in four key ways:

Reducing out

O'Connor cited findings from a 2003 University of Arkansas 29
study that RFID enables a

32 per cent reduction in out

She said Wal
Mart's U.S. stores have validated this conclusion with their own internal tests that
show similar dramatic improvements in stocks through RFID.

This has a poweful and positive impact on sales, the Wal
Mart executive said.

She said studies show out
stocks result in a minimum two per cent loss in sales

a significant
number given the scope and breadth of Wal
Mart's operations. (Wal
Mart's annual sales
revenues are estimated at around US$350 billion))

"That is why we are focusing on out of stocks."

Promotional displays

Placing RFID tags on promotional displays and tracking and measuring
their effectiveness, is a second focus area at Wal
Mart Canada. O'Connor said there's a
significant "sales lift"

associated with placing a display on the sales floor on time.

"Through RFID, we can track the visibility to a display in the supply chain and through automated
tools we can determine whether the display is on the sales floor when it should be."

Speed to


This strategy is akin to promotional displays, the Wal
Mart exec said. "We have
lots of product launches at Wal
Mart, and the key is getting the new product on the shelf for the
effective start date."

Perpetual inventory

Greater control over or
der management is yet another focus area at Wal
Mart Canada stores. This involves better visibility into backroom inventory, O'Connor said.

"Ensuring we don't needlessly order, when we have inventory in the backroom increases our
inventory profitability,"

she said, adding that RFID supports this process.

The benefits of RFID in improving inventory awareness and reducing out
stocks have been
experienced by several Wal
Mart Canada vendor partners as well, the Wal
Mart Canada
executive said.

She showed a

video during her presentation that featured Mark Jamison, vice
president of supply
chain at Kimberly Clark, recounting these benefits.

Health and hygiene products vendor Kimberly
Clark, headquartered in Dallas, Texas, has used
RFID data to support its fo
recasting, replenishment and store operations processes.

The goal was to improve sales by reducing retail shelf out
stocks for the firm's global consumer
product brands (including Kleenex, Scott, Huggies, Pull
Ups and Kotex).

RFID data

processed by
a forecasting tool from TrueDemand Software Inc.

offered Kimberly
Clark greater insight into vital metrics including: perpetual inventory by retail store and selling
floor, a daily forecast by product and store, and out
stock root causes, and lost sal
es by
product and store and retail distribution centre.

"We have successfully confirmed that RFID data can give us visibility to shelf level out
and help us to understand [its] root cause," said Jamison. "This enables us to identify appropriate
corrective action."

Current status

As of now, O'Connor said, Wal
Mart's RFID initiatives are far more extensive south of the border.

In the U.S., she said, Wal
Mart "has 1,000 RFID
enabled stores, five Distribution Centres and 37
Sam's Club stores (a ch
ain of warehouse clubs that sells groceries and general merchandise,
often in large quantities).

"They are working with 600 vendors, top suppliers and volunteers and the whole focus is
business process improvement."

For instance, she said, at the Sam's C
lubs, RFID
enabled forklifts that track every pile of

with very practical benefits in terms of time savings.

There've been huge customer service improvements, O'Connor said.

"In tests where the customer's merchandize needs to be filled, the
y've actually been able to serve
customers in four minutes as opposed to the 20 minutes it used to take."

At Wal
Mart Canada stores, by contrast, the scale of the RFID implementations is much smaller.

"In Canada," O'Connor said, "we currently have four R
enabled stores, and will be rolling out
the technology in 20 stores by the year end."

She said the immediate goals at Wal
Mart's Canadian stores is to broaden the stakeholders
experience and knowledge of RFID. "We're not as seasoned as our US associat
es, who've been
working with the technology for many years."

Despite their relatively late forays into this field, she said Wal
Mart's Canadian stores can make a
distinctive contribution to the development of this technology.

For instance, she said, the
unique structure of several Wal
Mart stores here gives RFID tracking
a whole new meaning. "We have some stores that are two
levels, as opposed to the typical Wal
Mart U.S. stores that are one level. Tracking merchandize in a two
level store is far more

Likewise, she said, the weather in Canada is also unique

extremes of hot and cold

while most
of the stores in the U.S. are in southern states, with more uniform climes. The sharp contrasts in
climate here and this could have an interesting impa
ct on tracking as well.

Canadian stores are also experimenting with unique positioning of RFID readers, O'Connor said.

These include:

A dock floor installation

with two floor mounted portals on each side of the door, which leads
from the stock room in
to the sales floor area; and,

An over the door wall
mounted portal

"Canada is the first country to get this kind of reader

and we're looking to get more deployments," she said.