Wal-Mart Eyes $287M Benefit from RFID
The world's largest retailer, with $345 billion in sales last year, is gearing up to roll out the RFID gear.
IDG News Service (Taipei Bureau) — Wal-Mart Stores could increase sales by US$287 million by fixing just a small portion of its inventory problems using RFID (radio frequency identification) technology, and that could be just the start, an executive said Friday.
The world's largest retailer, with US$345 billion in sales last year, is gearing up to roll out the RFID gear to make that prediction a reality in its 4,068 North American stores. The key behind it all is making sure RFID tags are installed on all products, and using a forklift with RFID equipment installed to show the driver exactly where merchandise is inside store warehouses.
It's a big issue for Wal-Mart, said Ron Moser, RFID strategy leader at Wal-Mart, speaking at the Taiwan International RFID Applications Show in Taipei. The company is widely seen as one of the world's top drivers of RFID technology, but it has had some missteps. It missed a goal last year of installing RFID technology in 12 of 137 distribution centers, and an April target to have RFID technology in place at 1000 retail stores. So far, it has RFID installed in 975 stores.
Wal-Mart started working with RFID in 2003, and expects the first major roll-out of the technology, the RFID tags and forklifts at U.S. and Canadian retail stores, to solve inventory problems.
The inability to find certain merchandise when it is needed causes several headaches. For one, the sprawling store warehouses can take hours to search, and once an item is found, the customer may not be around waiting for it anymore, translating into a lost sale for the company.
Often, a pallet with the items being sought is tucked away in some remote corner of the storage area, but if it's missed, then not only is the sale lost, the searcher will normally order more of the product to avoid further lost sales. That's how unnecessary inventory builds, explained Moser.
By sticking RFID tags on products, the company is able to locate them wherever they are, and quickly. So far, RFID forklifts and tags are being used in 975 Wal-Mart stores in North America. Once the system is installed in every Wal-Mart in the U.S. and Canada, it could have a huge impact on ridding the company of lost sales.
Currently, around 2 percent of all lost sales are due to the simple fact a store has run out of an item, but 41 percent of lost sales are due to inventory problems, said Moser. If RFID can fix just 10 percent of that problem, then Wal-Mart will gain $287 million per year by avoiding lost sales, he said.
