Though Wal-Mart Stores expects the number of its stores using radio frequency identification systems (RFID) to reach 1,000 in April, the retailer has come under fire for failing to meet its plan for installing the technology in its distribution centres.
A spokesman this week acknowledged that the company missed its goal of installing RFID technology in 12 of its 137 distribution centres by the end of 2006.
Simon Langford, director of RFID and transportation systems at Wal-Mart, said the missed goal reflects a change in course by the company to instead concentrate on RFID-enabling its retail stores.
Along with the US Department of Defence, Wal-Mart is widely seen as one of the world's top users of RFID technology.
Wal-Mart began its RFID journey when it mandated its 100 top suppliers start tagging all cases and pallets carrying merchandise by January 2005. Wal-Mart officials said 600 of its suppliers are currently RFID-enabled.
Despite the missed deadline for installing the technology in the distribution centers, Langford insisted that Wal-Mart's overall RFID effort is on track and has been successful so far. "We're accelerating [RFID adoption] and at a greater pace than last year," he said.
However, Michael Liard, an analyst at ABI Research, said the shift in strategy could slow Wal-Mart's effort to boost the visibility of its supply chain.
When deliveries sit in the non-RFID-enabled distribution centres, items are invisible, so Wal-Mart wouldn't get the full benefits of RFID technology in its supply chain. "For me, it presents a problem," Liard said.
Langford, however, argued that first installing RFID technology in its stores allows the retailer to better collaborate with suppliers that need to monitor the flow of inventory and respond to problems or spikes in demand.
Also, Langford said, store personnel can better use the technology to keep the shelves full of merchandise and reduce the number of products out of stock. Wal-Mart expects to have rolled out RFID to 1,000 stores by the end of April, up from 100 in January 2005.
"We're focused on the store level," said Langford. "If we focused internally [at the distribution centres], it would provide no value to our suppliers. When we set out on this journey, we really focused on the collaborative benefits; we wanted what was going to drive sales for our suppliers and to get product on the shelf, where it needs to be for our customers to buy."
Langford credited the use of RFID technology with cutting the incidence of out-of-stock products by 30% while improving the efficiency of moving products from backrooms to store shelves by 60%.
"RFID in our stores is going to drive the initial value," he said. "We see distribution centres as coming onstream a bit later.'