Wal-Mart Pushing Suppliers For RFID

Weather Storm brings us an InformationWeek article about Wal-Mart's push for suppliers to RFID tag their product shipments. Wal-Mart seems to have lost patience in waiting for its suppliers to adopt the inventory tracking initiative. From InformationWeek: "The retailer says that beginning Jan. 30, it will charge suppliers a $2 fee for each pallet they ship to its Sam's Club distribution center in Texas that doesn't have an RFID tag. The charge is to cover Sam's Club's cost to affix tags on each pallet, says a Wal-Mart spokesman. The retailer hasn't taken such a strong-arm approach yet with the more than 15,000 suppliers that still haven't complied with its request to tag pallets and cases headed for its Wal-Mart stores. Instead, it seems focused on turning its 700-store Sam's Club warehouse-outlet division into an example of RFID supply chain technology in action, down to requiring item-level RFID in 22 distribution centers by 2010."

Re:Can you charge a supplier $2?

[kenh]

No, Wal-Mart is charging for a required service the Mfg./Supplier isn't complying with. Two dollars per Pallet is a fair price (IMHO) as they have to tag, inventory, and verify each non-RFID pallet that enters this one facility. That is an important point, BTW - this only impacts one Sam's Club distribution center. This is a reasonable business decision, much more reasonable than their previous position that untagged pallets wouldn't be allowed in their facility after a certain date (with no accommodation like the one reported being made).

IMHO, this will cause many smaller suppliers to simply abandon their RFID efforts and pay the $2/pallet fee - it will be much cheaper than an in-house effort.

And finally, let me be the first to link to proof, I say PROOF, that RFID is evil and will bring about the end of western civilization: Spy Chips, the book [spychips.com] - seen to be a major motion picture from Tin Foil Hat Productions! Check out their other titles and press reports here [spychips.com].

Does this really help?

[vodevil]

Does this really help with controlling inventory? The RFID is not on the product, but on the pallet. So, they're going to be able to track how many wooden pallets they have, but not the product that is sitting on top. Until it's implemented in the product, I don't see how this will help them.

Re:demanding free service

[Casualposter]

"walmart isn't incentivising this."

Exactly. For some operations, RFID makes sense, but there isn't just ONE RFID system installed. Most of these companies also supply other big chain stores who may have other requirements. This was the whole reason for going with Barcodes. Barcodes are standardized. RFID systems are not, as far as I know. Walmart hammers it suppliers for price decreases, while the shipping costs rise due to higher petroleum. The supplier has a choice: make money or go out of business. Walmart can use its huge purchasing power to drive companies out of business, so perhaps the company looks at it business and says: losing a dime on ten million units is much worse than making 50 cents on a hundred thousand, and just decides to pass on the Walmart supply agreement. That might be why the selection has been diminishing in Walmart to the point that if I want to buy everything on my list, I have to go to other stores. The only reason that Walmart has been able to bully any suppliers is that the cost of the bullying is significantly less than the cost of the delivered product. Once that changes and the supplier is forced to improvise, the Walmart account might become a liability rather than a profit center.

It's probably been in their Ts & Cs for years

[originalhack]

They've probably had this in their terms and conditions on their purchase agreements for years.

Imagine you run a monster distribution center. You order from a zillion vendors and pallets of merchandise appear. Some pallets have a nice list attached to them describing what is in them so you can route them to the store without unpacking them. Others just show up with a pile of boxes and you have to, at least partially, unpack and re-wrap them to confirm the contents.

1. Your next version of your terms and conditions require a packing list.

Then, you find that most of the lists have the PO number on them and list the items by part number, but a few just say something like "Here's 10 cases of green shirts." Most have the packing list printed on a label on the side of the wrapped pallet. Some have it inaccessible from the outside.

2. Your next revision of your terms and conditions require the list to be on the outside and dictate the format.

After a few rounds, you realize that these lists are very expensive to produce and to read and all of your suppliers have (or should have) computers anyway, so you have them electronically send you the packing list and specify a shipment number. That number goes on a bar-code label at a specific place on the shipment. On your receiving dock, you have someone dance around each pallet to scan it and then it disappears into your warehouse.

3. Your next Ts and Cs require the bar-code

You find that the bar-code requires stopping the flow of items in all sorts of places. You invest in RFID readers for your whole distribution line. You tag all the incoming shipments as they arrive, and you find that it works.

4. Your next Ts and Cs require RFID labels.

A grace period comes and goes. Tagged shipments fly right through your distribution center smoothly, but you have some suppliers who still don't comply with your agreements with them and you have to stop each of those shipments on your dock and slap an RFID label on them yourself. The industry gets to the point where labels with tags are down to 40 cents in tiny quantities and the equipment to program them is down to under a thousand. There are also companies that will sell tags preprogrammed for a dollar or two. Still, some of your suppliers who were eager to sell to you and signed the Ts and Cs the day they took the order, fail to follow through.

5. You start to either refuse to accept shipments that don't comply with the contract or you charge a fee to fix the sloppy shipments.

Now, a legitimate issue is where the power in the relationship is. WM is well known for holding all the power and that really can be viewed as being all about price and accepting the Ts and Cs in the first place. That's an issue that comes up anytime they meet with a supplier. If your Verizon service stinks, you cannot do anything about it because, when you "negotiated" your contract, you could either sign THEIR terms or you could go to one of a tiny number of serious competitors who seem to have conspired to have equally onerous terms. (This is exactly why legislators keep looking at things like "customer bill of rights" legislation... the individual customer doesn't have the ability to choose a better contract).

Re:Can you charge a supplier $2?

[that this is not und]

And somebody needs to investigate how well Snapper is doing as a result of that move. You never hear a follow-up.

Here locally, I can tell you that the small mom & pop hardware store, the kind of place Snapper wants to sell through (higher markup, more money per unit sold for Snapper) is now out of business and the building is in the process of being converted into a strip mall.

So let's see some links to a follow-up story, not that same tired old link. How is Snapper doing a year or so later?

Re:Can you charge a supplier $2?

[Bhalash]

Inventorying an incoming pallet simply isn't as easy as reading the manifest. You have to physically check that the contents of the pallet match what is on the manifest or you will have stock loss (and lost money!). One major area of stock loss for many companies is transit. Either the company who shipped the goods didn't manifest them correctly, or they accidentally shipped the wrong goods, or stock was misplaced or stolen while in transit. When you receive an order you need to count what is actually on the pallet against what is on the manifest and then have another person verify this. Depending on the goods, this can take time. Big jugs of milk - easy. Clothing, small domestic appliances - not so easy. Items like small TVs, mobile phones, laptops, game consoles, MP3 players and cameras are all high-value, low-profile, and easy steal goods that need to be physically counted at easy stage of transit. After this you still need to have someone (usually a clerk dedicated to this task) add the goods to the electronic inventory of the receiving company, raise discrepancy issues, etc. I've spent ten years working in inventory, and I'm currently the inventory specialist for a national company. RFID tagging is an excellent idea for tracking stock movement and Wal-mart's initiative into this is ahead of it's time. RFID will be way that all stock control will go in the next decade, but it will never replace the need to physically inventory goods. Their charge for the both tag and labour on Wal-mart's part is actually pretty reasonable, but it only tracks pallets and not the goods on them, which is what is important for companies.

Re:Isn't this a good use for RFID?

[Anonymous Coward]

Absolutely, the criminals in the UK have already used it to identify the most valuable cargoes and steal them (So much more efficient to steal a lorry load of Plasma and LCD televisions than a lot of nappies.) Shouldn't the US Homeland Security people get involved now, think of the potential damage to the economy!

Here a couple of activities for disaffected staff/loonies...

a) Scatter millions of cheap RFID chips over the depot. Watch as staff load pallets with Deodorant thinking it's soft drink..

b) Hit a Walmart depot with a zapper that kills all the RFID chips.. Remember loonies (or even disaffected staff they layoff) don't have to reprogram the chips, just wipe them out and cause chaos. No physical presence is required and nothing is left behind to track the perpetrator.

Putting it simply, you need to make sure that the "improvements" don't have a downside for everyone that's bigger than the upside for Walmart.