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Why Wal-Mart's suppliers won't make the Jan. 1 deadline for RFID tagging

By Thomas Wailgum
Mon, November 15, 2004

CIO — The deadline is still six weeks away. But on most days, the head of the supply chain for one of Wal-Mart's top suppliers wishes it was two years away.

His company is one of the largest consumer goods manufacturers in the world, and by Jan. 1, 2005, he is supposed to have a system in place for attaching radio frequency identification (RFID) tags to a portion of products destined for Wal-Mart stores. But this particular IT executive already knows he isn't going to make that deadline.

Sure, he'll stick RFID tags onto just enough pallets to satisfy the folks in Wal-Mart's Bentonville, Ark., headquarters, but he's not certain those tags will even be functional upon arrival because of technical problems. And that means the efficiencies that Wal-Mart has been dreaming of achieving—the RFID-enabled transparent supply chain—may not happen anytime soon.

"We don't have a business case for RFID," says the supply chain executive, who insisted on anonymity. "Because the standards are not complete, the equipment isn't developed. And because the equipment isn't developed, I can't fulfill Wal-Mart's demand."

This executive is far from alone. Even though no suppliers will admit publicly that they may not meet the deadline, privately some say that meeting Wal-Mart's expectations is just not possible—at least by the deadline the retail giant has set. And the mission itself has become a moving target. Originally, Wal-Mart insisted that its top suppliers put RFID tags on all of the products shipped to specific distribution centers in Texas. Now, Wal-Mart is saying it expects its suppliers to attach tags to only 65 percent of their products (on average). However, several suppliers have told CIO that the percentage of their products tagged would be much less than 65 percent—somewhere on the order of 10 percent to 15 percent.

"Many of these consumer packaged goods companies are really struggling with the business case," says Christine Overby, an RFID analyst at Forrester Research. "These are very costly projects, and they're hard to do with a technology that's a moving target."

Patrick Sweeney, CEO of ODIN Technologies, an RFID infrastructure software and integration company that works with several of the top 100 suppliers, says Wal-Mart's suppliers are split into two camps: About 30 percent of them are going the whole nine yards and integrating RFID into their infrastructures now. The rest are emulating the supply chain head quoted above and practicing a method known as slap and ship.

Essentially, what these suppliers will be doing on Jan. 1 is sticking an RFID tag on only a certain percentage of cases and pallets in warehouses that are closest to Wal-Mart's Texas distribution centers. Slap and ship involves minimal data integration and leaves the retail supply chain still blind to product movement. And it will apply to only a small percentage of the products shipped to Texas.

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