Wal-Mart Is Dead Serious About RFID

Just ask Sam's Club suppliers, who could face $2 to $3 fines for each pallet that arrives in a Sam's Club distribution center without RFID tags.

In case the world might have forgotten, Wal-Mart is still very serious about its radio frequency identification (RFID) plans.

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The world's biggest company by revenue ($351 billion) confirmed its commitment to RFID tags in its supply chain in mid-January when RFID Update reported that Sam's Club suppliers could face fines for not attaching RFID tags to its shipments to a Texas distribution center. Suppliers were informed of the possible fines, from $2 to $3 for each non-RFID-tagged pallet, in a Jan. 7, 2008, letter. (Wal-Mart owns Sam's Club.)

The deadline for the suppliers to comply with the RFID mandate is Jan. 31, and it applies only to those Sam's Club suppliers that ship into the DeSoto, Texas, distribution center, RFID Update reported. The significance of the letter cannot be underestimated. "This is believed to be the first time Wal-Mart...has announced specific penalties for suppliers who do not follow RFID tagging guidelines," according to article.

The significance of the amount is also noteworthy. RFID tags, such as the ones suppliers attach to pallets or individual items on pallets, can range from 10 cents to 25 cents, depending on how many tags suppliers purchase from tag makers.

Back in late 2004, when the first RFID mandate for Wal-Mart's top 100 suppliers was about to kick in, CIO published an article on the monumental and largely unsolved problems surrounding Wal-Mart's RFID project. At the time, Simon Langford, Wal-Mart's then manager of RFID strategy, was asked whether there would be monetary penalties for delinquent suppliers, as many industry observers were talking about at the time. Langford would not even speak of such penalties. "We will take each case on merit and discuss it with that supplier," he told CIO.

Apparently, several years' worth of lukewarm results on its RFID initiative, scaled-back expectations and other technology woes may have forced Wal-Mart's hand.

A spokesperson from the Bentonville, Ark.-based behemoth confirmed to RFID Update that "letters were recently sent to some suppliers," but did not provide details or answer questions about requirements, deadlines and fines.

The article reported that the RFID-tagging requirements would extend to other Sam's Club distribution centers in 2008. "The fees for non-tagging are said to start at $2," the article stated, "and escalate based on how long the supplier is out of compliance, capping at $3." In addition, the article stated that a source who had attended a Wal-Mart supplier summit in November 2007 said the retailer "discussed the possibility of allowing suppliers to raise prices to help offset tagging costs," but no allowances had been mentioned in the January requirements letter.

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