New ARC Market Study Reviews the Status of Wal-Mart's RFID Efforts

[November 17, 2004]

New ARC Market Study Reviews the Status of Wal-Mart's RFID Efforts

DEDHAM, Mass. --(Business Wire)-- Nov. 17, 2004 -- The ARC Advisory Group conducted a RFID Deployment Best Practices study in which ARC talked to 24 companies that were actively investing in EPC RFID (Electronic Product Code Radio Frequency Identification). ARC discovered that public reporting on the status of Wal-Mart's RFID efforts has been highly misleading. According to Steve Banker, Service Director for Supply Chain Management at the ARC Advisory Group, "the impression conveyed to the public by many pundits is that all Wal-Mart SKUs bound for 3 of the retailer's Texas Distribution Centers from the top 100 suppliers will be RFID tagged starting January 1st. This is incorrect. In fact, there were a set of negotiations between Wal-Mart's top 100 suppliers and the retail behemoth. In these negotiations, Wal-Mart has shown more flexibility than many anticipated."

Background

Wal-Mart has mandated that by January 2005 its top 100 suppliers must apply passive RFID tags based on EPC-global standards to cases and pallets headed toward three specific Distribution Centers (DCs) in Texas. Virtually all manufacturers of consumer goods will eventually be impacted by this because Wal-Mart's moves in RFID are being copied by other retailers.

A Soft Mandate Based on Ongoing Negotiations

Different suppliers negotiated a wide range of agreements. One large supplier will be shipping over 700 Stock Keeping Units (SKUs) starting on Jan 1st. Many other companies, even very large companies, will be shipping less than a dozen. Further, January 1st is not always the deadline. There can be extenuating circumstances that have led Wal-Mart to grant a deferment. One company we talked to had a good reason for not starting on January 1st and so they will not start RFID tagging until mid 2005. The top 8 began shipping a limited number umber of SKUs to Wal-Mart in 2004. Once companies have begun, they are expected to keep shipping those SKUs. These early RFID shippers may begin shipping even more SKUs starting January 1st. Companies believe they will meet the commitments they made to Wal-Mart. In short, public discussion of the "status" of the Wal-Mart RFID project has been misleading. Companies believe they will meet their commitments. However, the commitments suppliers are meeting are usually far less than applying RFID tags to all SKUs that these suppliers ship to Wal-Mart's 3 RFID enabled Distribution Centers (DCs) in Texas. These meetings between suppliers and Wal-Mart will occur on an ongoing basis. Even if a supplier in initial negotiations was able to commit to only a small number of SKUs, that supplier knows that in upcoming meetings Wal-Mart will press for an expanded list of SKUs for tagging.

According to Mr. Banker, "The focus right now is on Wal-Mart and the question people are asking is 'What is the status of your effort?' The more interesting questions should be directed at Wal-Mart's suppliers. Those questions are, 'How successful were you in your negotiations with Wal-Mart? What does it take to do well in those negotiations?"

Emerging Practices in EPC RFID

ARC Advisory Group is now selling "RFID Deployment Best Practices." This study offers information on:

-- The status of the Wal-Mart mandate and advice on how to prepare for mandate meetings with retailers;

-- An analysis of how companies are changing their processes to meet these mandates and the strengths and weaknesses of the various process choices;

-- An analysis of the three critical inflection processes when it makes sense to move from handling RFID in a certain way to doing it differently;

-- An analysis of the reliability of RFID technology as well as companies' satisfaction with various RFID solution providers;

-- The costs of preparing the RFID infrastructure;

-- The benefits of RFID and what will be necessary to reap those benefits;

-- 13 key recommendations which can conservatively save your company hundreds of thousands of dollars if you must implement RFID to meet a mandate.

Additional information on this study can be found at: www.arcweb.com/res/epc-rfid

About the ARC Advisory Group

Founded in 1986, ARC Advisory Group has grown to become the Thought Leader in Supply Chain solutions. No matter how complex your business issues, our analysts have the expert industry knowledge and first-hand experience to help you find the best answer. We focus on simple yet critical goals: improving your return on assets, operational performance, total cost of ownership, project time-to-benefit, and shareholder value. Further in-formation can be obtained from ARC, Three Allied Drive, Dedham, MA 02026, 781-471-1000, Fax 781-471-1100, E-mail info@arcweb.com, Web www.ARCweb.com.

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