Success of RFID Technology in Wal-Mart - Essay Example

? Wal-mart announced in June 2003 that by 1st January 2005 it would implement RFID technology in its supply chain. The initial plan was to have 100 suppliers comply with the change but 129 suppliers responded as none wanted to be left behind. Wal-mart had made it very clear what the EPC (electronic product code) would be, the class of chips they would expect and it also named the distribution centers that would start accepting the RFID deliveries. In the initial stage, Wal-mart was only tracking pallets and cases coming to one distribution center but the plan was to expand to cover 100 suppliers across US by the end of 2006 (Tutorial-Reports, 2005). They would then roll out the technology internationally. The entire plan was based on achieving a completely error-free, fool-proof transparent supply chain. To achieve this, Wal-mart planned to install RFID readers at the distribution centers and stores, and buying equipment for printing tags. The plan envisaged was so intense that suppliers could not escape using this technology. Wal-mart also wanted to gradually work on tracking recalls. The idea behind the entire plan was to gain competitive advantage over others in the sector. Within two months of the deadline indicated by Wal-mart, RFID system was installed at 104 Wal-mart stores. Within 30 minutes the suppliers could obtain the data through its Retail Link extranet website. By the end of February 2005, Wal-mart stores using RFID had received 23,753 tagged pallets and 663,912 cases, and taken over 5 million tag reads (IDTechEx, 2005). However, about half of the top 100 suppliers felt that there was lack of knowledge of RFID integration and hence decided to set up the systems themselves. While it was possible to read the tags on cars and on conveyors in distribution centers, it was difficult to read the RFID tags on fully loaded pallets. Successful reads was only 63% which was not acceptable by Wal-mart. They wanted nothing less than hundred percent. By October 2005 Wal-mart had achieved success to the extent that they could monitor stock levels which resulted in 16% reduction in out-of-stock status. Moreover, the out-of-stock items that carried the EPC could be replenished there times faster than items that were still using the standard barcode technology. It was also possible to avoid excess inventory as manual orders reduced. Based on the initial success Wal-mart set further timelines that by the end of 2006 more than 1000 stores, clubs and distribution centers would be covered under the program. They would have more than 6090 suppliers participating by the end of 2007. They conducted briefings and seminars to share knowledge back and forth. The suppliers that had gone live in 2005 also shared their learning with other organizations. The success of the RFID technology depends upon collaboration with partners and suppliers. This is critical for time-sensitive goods (Songini, 2006). It can enable Wal-mart to look at the items store by store and evaluate the cause of low sales. This would further enable Wal-mart to sit down with the partners and determine how to enhance sales. The value of RFID technology also depends upon the type of product involved. It would help to know how long the perishable goods have been in the supply chain. It can also help tag the response to new products introduced while also preventing theft. However, all their efforts did not fetch the desired results as the public was wary of privacy concerns. Chances of abuse of information from tracking the product tags were high. While the Wal-mart stores could items in the stores in the US, they could not kill the tags at the checkout. What was essential was to have kill switches that would disable the chips at the checkout counters (Tutorial-Reports, 2005a). Wal-mart argues that if the kill switches are installed it could block the radio waves before reaching the RFID reader devices. Moreover, they insist that the RFID tags do not collect any additional information about the customer but the future of the RFID technology depends if the privacy concerns are addressed. RFID technology has other limitations. No standard has yet been set. The technology is yet to be perfected and hence almost 20% of the tags do not function properly (Tutorial-Reports, 2007). Besides, the price of installing the technology is high although demand should drive down the price. It is not possible to read the tags through liquids or metals and accurate read rates on some items remains low. The tag transmission can also be disrupted if the conveyor belts are made of nylon. Installing this technology means additional cost burden for the suppliers as they would have to equip their warehouses and their transport vehicles with readers. These readers would then have to be connected to computer networks to gather information. This in turn implies additional investment in hardware and in hiring technical consultants. To overcome the technical glitches, Wal-mart hired the services of IBM. IBM consultants found that there was interference from equipment such as hand held walkie-talkies, forklifts and other equipments that are typically found at warehouses. Unwanted radio waves also leak into the RFID readers if the cell phone towers are located nearby. Thus, while the technology may be capable and effective, its utilization by the government and the businesses is what matters (Piasecki, 2011). Wide-spared application can make the technology cost-effective and drive down costs but this still seems to be a far-fetched dream. As of now the success of RFID is limited to tracking the pallets and cases without infirming on the privacy concerns of the customers. Moreover, while as a technology RFID is superior to the barcode technology but the costs and investments in installation and application of RFID does not commensurate with the output. Unit level RFID is still way behind and unless this is implemented thefts and illegal products would be difficult to identify. The payoff in investment could be achieved if unit level tracking becomes possible. Until then the benefit from RFID remains limited. Works Cited IDTechEx. RFID progress at Wal-Mart. 2005. Web 4 July 2011. Piasecki, Dave. RFID Update: The Basics, The Wal-Mart Mandate, EPC, Privacy Concerns, and More. 2011, Web 4 July 2011. http://www.inventoryops.com/RFIDupdate.htm Songini, Marc L. Wal-Mart details its RFID journey. Computer World. March 2, 2006, Web 4 July 2011. . Tutorial-Reports. WalMart: Expectations and Plans. 2005. Web 4 July 2008. . Tutorial-Reports. WalMart and RFID: Looking Ahead. 2005a. Web 4 July 2008. . Tutorial-Reports. RFID Tags: Advantages and Limitations. 2007. . 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