Best Buy Joins RFID Party

Sep 01, 2004
George Anderson

By George Anderson

Don’t look now, but the prices of those tags are bound to start coming down.

One of the biggest “objections” voiced about the use of radio frequency identification (RFID) technology is the cost of the tags to track product. But with more retailers getting on the RFID bandwagon, the most recent being Best Buy, it is just a matter of time before the cost issue goes away.

In a press release issued yesterday, the consumer electronics chain said it will require its top 90 vendors to have tags in place on pallets and product cases by the beginning of 2006 and all others suppliers will need to be in compliance by May 2007.

Paul Freeman, RFID program director for Best Buy, told RFID Journal, “We’ll be having kick-off meetings with all the vendors involved. We looked at it and felt that a fair amount of time for any company to start with RFID is about 12 months. Some might need a little more time, but we’ve built in a buffer to give them time to get up to speed.”

Bob Willett, executive vice president of operations for Best Buy said in a released statement, “Our goal is to create a flexible, high-velocity supply chain operating with better product availability for customers at a lower total cost for the company. We believe RFID technology can transform the way products are produced, distributed and merchandised. Our own operations, customers and suppliers can share in the benefits.”

According to Best Buy’s Freeman, information sharing will be one of the biggest benefits manufacturers will derive from the technology’s implementation.

“We addressed data sharing in the document we sent to our suppliers. We’re going to work with them to see what data is valuable. They’ve given us some criteria, and we’ll work with them to determine what data makes sense to share for their benefit and ours.”

Moderator’s Comment: What will the adoption of RFID technology mean for Best Buy’s business and that of its vendors? Where should Best Buy be concentrating
its testing efforts to make sure it gets the return on investment it is looking for when the chain eventually rolls out RFID across its entire operation?

Interestingly, the cost of RFID tags is not the issue for Best Buy and its vendors that it is for the mass merchants and grocery chains looking to implement
the technology.

Paul Freeman told RFID Journal, “We have found with our suppliers that the tag cost is not nearly the deal breaker that it is for consumer product
goods manufacturing,” he says. “And a lot of our cases have a single item, so we can get some traction on item-level.”

Best Buy intends to test several applications of the technology in stores and distribution centers to determine those best suited to helping the chain achieve
its goals.

George Anderson – Moderator

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