Wal-Mart Stores Inc. is working with its top 100 suppliers to deploy new radio frequency identification (RFID) tags for tracking crates and pallets in its supply chain beginning January 2005.
The company announced its plans yesterday at the Retail Systems 2003/VICS Collaborative Commerce conference here.
RFID uses low-powered radio transmitters to read data stored in tags, at distances ranging from 1 inch to 100 feet. The tags are used instead of bar codes and can contain a lot more data, allowing manufacturers, suppliers and retailers to track and manage assets more efficiently.
Wal-Mart's decision to ask its suppliers to support RFID tags could lead to a faster adoption of the technology and a common standard around it, according to Kevin Ashton, executive director of MIT's Auto-ID Center in Cambridge, Mass.
The Auto-ID Center is working with the Uniform Code Council to develop a standard Electronic Product Code (EPC) for carrying information on RFID tags. The center's sponsors include companies such as Wal-Mart, The Gillette Co. and Procter & Gamble Co.
"Everybody is looking for clarity on this technology and its future," Ashton said. "The fact that the largest (retail) company in the world is publicly adopting EPC open standards should give companies confidence that the day of a single, interoperable RFID system is close at hand," he said.
By asking its top 100 suppliers to support RFID technology, Wal-Mart hopes to improve inventory management and gain better visibility into the supply chain, said Pam Kohn, vice president of the company's global supply chain operations. Though RFID tags can be used to gather and track a variety of product-related data, Wal-Mart's initial effort will be narrow, focusing mainly on better inventory management.
Deploying RFID tags at the pallet and crate level with its top 100 suppliers will involve about 1 billion tags, she said.
Scaling up to meet Wal-Mart's RFID requirements will prove a "major challenge" for the RFID industry, according to Bill Allen, marketing communications director for the RFID division of Texas Instruments Inc. "These are the numbers that boggle the mind," Allen said, pointing out that TI has to date shipped 200 million RFID tags.
Meeting Wal-Mart's price of 5 cents per tag could be another hurdle, Allen said, since they now sell in the range of 30 cents to 50 cents. Allen said only economies of scale could drive the price down further, and Wal-Mart's plans certainly meet the volume requirements.
But neither TI nor the Philips semiconductor division of Philips Electronics NV in Amsterdam, the other large RFID chip manufacturer, has the capacity right now to meet Walmart's requirements -- let alone the needs of other retailers who may jump on the RFID bandwagon following Wal-Mart's pioneering move.