Speaking as a former pallet jack jockey, night stocker (a great term), warehouse inventory taker and vermin-finder, forklift driver and highlift rider, and frozen turkey bowler, I get giddy at the mention of Gen 2 RFID tags. Finally, a technological breakthrough that will make those jobs easier and more efficient. It’s a Howard Dean Scream Moment! Yeah!!

Yeah? What happened to the Gen 1 tags you told warehouse workers were the end-all, be-all? Does Gen 3 happen tomorrow? Are you paying or training them enough to adjust?

The message to the folks who are responsible for making RFID happen is, “Change is here to stay.” (This is such a Yogi Berra moment, I can’t believe I wrote that.) The truth is that one of the major objectives of RFID is to weed out employees and their salaries. They’re not stupid, nor are their unions. Why would they help RFID initiatives succeed? Inquiring minds want to know.

The right answer is I don’t know and neither does he. Gen 2 tags offer the potential to store much more information than their predecessors, but until we have a complete supply chain model fully up and running on a day-to-day basis, we won’t know what RFID’s full potential is or isn’t.

There are lots of newly-minted, dubiously-credentialed, so-called “RFID-experts” running around today making all kinds of claims and counter-claims, but the truth is nobody can know the full potential of a still largely untested technology. We don’t know, for example, what the lifecycle of chips in a real world model will be. We don’t know if it all stops with Gen 2 chip or if we’ll see Gen 3, 4, 5 chips and beyond. We need to test the chips in a variety of climates and environments. We don’t know what kind of breakthroughs we’ll see in terms of readers. And…and this is the big issue…we don’t know that a superior technology might not emerge that leapfrogs over RFID.

This program has been a long-time coming. RFID should assist in inventory control, reducing shrinkage and a knowledge of where a product is at all times. Theoretically, this should transfer into savings for the consumer as the cost of handling products and tracking their movement decreases.

Thanks for the “low slow one across the middle,” George. There are a million answers to this question, but if you take a perspective of the four major retail levers – Inventory Turns, GP Dollars, Labor Cost, and Shrink – you can see how RFID impacts them all. Here are just a few: Inventory turns in the store are most impacted by the presentation stock. Presentation stock is primarily influenced by case pack, but another big factor is dealing with the backroom replenishment cycle. If the selling area is only replenished overnight, then a larger presentation area is needed than would be required if selling floor out of stocks could be addressed in real time. This would be especially helpful for promoted items whose demand is temporarily increased. Backroom inventories should be reduced by fewer lost cases in inventory. GP Dollars may not be directly affected unless the manufacturer is able to experience savings through lower damage allowances and reduced markdown funding. Menu costing procedures may allow the manufacturer to offer Wal-Mart some savings in… Read more »

RFID has tremendous potential and Wal-Mart has been leading the charge. However, if, even in this big initiative Wal-Mart will only have 25% of its stores equipped to use RFID and not all of the distribution centers. What’s the payoff for suppliers? There needs to be a critical mass of distribution centers and stores using RFID for a supplier to fully invest. Wal-Mart is pushing the investment but 25% of stores is not a critical mass. Both sides have to win to make this work.

One important lesson I learned from reading Donald Trump’s “The Art of the Deal,” years ago, was that real wealth lies in seeing value where others do not. If Wal-Mart is bent on “fact based retailing,” which I believe they are, having accurate and timely information about the supply chain will catapult them to new levels of productivity, and customer responsiveness. That productivity and customer responsiveness MUST and will move onto the selling room floor. But it is much easier to keep track of (and model) pallets and cases, than individual packages and shoppers. However, it WILL get there, and you WILL see a merging of online and offline retail research and management because of the similarities and relationships between the clickstream (online) and the “brickstream” (offline.) Although RFID has the leading role in the supply chain, it is likely to be supplanted by other tracking technologies on the retail floor, and possibly in the supply chain, too. This could be a case of “the early bird (RFID) gets the worm,” but “the second mouse… Read more »

Wal-Mart has for many years been working to narrow or eliminate the “blind spots” in its supply chain. Case-level RFID may indeed help with distribution and shrinkage up to the back door of the store, but only item-level RFID can potentially bring in-store conditions on-line in real time – for now, a matter for the “tomorrow file.”

Wal-Mart’s present test is another logical step toward proving the value of RFID technology in distribution to the store. Controlled testing (“new way” measured against “old way”) will reveal the benefits and flaws.

25% is a big number because Wal-Mart is big. It’s an odd number, because if the financial payback was clear, the number would be 100%. Wal-Mart’s RFID pride investment is huge. And since they’re so big, and they’re publicly held, everyone in retailing will know if the RFID investment actually starts to be profitable. For many technologies, it pays to be a fast follower, not a bleeding edge leader.

Furthermore, since Wal-Mart’s labor and merchandise costs are relatively low, the financial hurdle rate for RFID is high. Wal-Mart’s hourly unit labor costs are low, so hourly unit labor savings aren’t worth much, compared to Germany or a union supermarket, where hourly unit labor costs are double or triple Wal-Mart’s. And it’s easier to prove RFID financial payback on a carton of shoes worth $1,200 than a carton worth $40. Wal-Mart’s average carton value is much lower than many other retailers.

I had a conversation about this with a friend who is leading the RFID charge at a top 25 supplier to Wal-Mart last night. His company has made a huge investment to meet Wal-Mart’s requirements, even developing new systems to integrate the tag into the case itself. Still, he says, they are losing money on every shipment and haven’t found a way to recoup the loss through better use of the data that is made available through Retail Link. All of this is a long way to say at some point there are going to have to be benefits for the suppliers or there is going to be serious pushback.