Will Wal-Mart Get RFID Right this Time - Essay Example

?RFID Essay [Word Count] of Introduction Long queues are perhaps the major challenge for both retail stores and their customers. Fortunately, long queues could be a thing of the past if retail shops deploy a technology referred to as Radio Frequency Identification (RFID) tags to replace the Universal Product Code (UPC) system currently used on consumer products. By incorporating several technologies, RFID uses intelligent bar codes to communicate with network of systems that track the items a shopper places in his/her cart. In other words, a shopper does not have to queue and wait for an attendant to ring each item bought while totaling the cost. Instead, each item put in a cart is communicated to an electronic reader and rung instantly. Once the reader receives the communication about the items picked it connects to a larger network then sends the same information to the retailers and the manufacturers of the items picked. After being notified, the manufacturers and retailers inform the shopper’s bank and the cost of the goods bought are deducted from the shopper’s account. Although initially majorly used to track cattle, RFID is today used to track consumer products from the moment they are manufactured to the time they reach the shopping cart. The other uses to which the RFID technology is put include tracking airline passengers, vehicles, pets and Alzheimer's patients. Its advantages notwithstanding, RFID technologies have been criticized by privacy watchers as it may be exploited by individuals and agencies to infringe on the privacy of the public by tracking peoples’ preferences and tastes. Worth noting is that research has shown that more than 60 percent of businesses have not yet started on RFID tagging technologies. In addition, research reports indicate that even the businesses that have implemented RFID have only done so to satisfy customer compliance demands. That is, these businesss have not rolled out their RFID programs to enhance warehouse and logistics operations. Wal-Mart is one of the consumer products outlets that have previously trial to roll out a RFID program to avoid the hustling resulting from queues and other disadvantages of the Universal Product Code. This paper explores the reasons that hinder RFID deployment in Wal-Mart and the differences between the firm’s attempts to deploy the program. Wal-Mart-Case Study Wal-Mart is among the first retail outlets to try implementing RFID on its consumer goods as early as 2003. However, the plan to implement the ambitious RFID plan targeting the firm’s clothing goods would later be rolled out in 2005. First to be tagged with the Electronic Product Code (EPC) in the form of RFID in 2003 were the firm’s 3 Wal-Mart distribution centers in Texas1. Unfortunately, these plans rapidly fizzled, forcing Wal-Mart to look to other suppliers for the right value proposition. On realizing that they were absorbing the extra tagging costs, the suppliers of WalMart’s RFID tagging pushed back. Since the RFID tagging initiative by the firm seemed lacking and faced myriad challenges, it shifted its focus on other priorities such as sustainability and changes in the management of its inventory. Later, the firm would start a small scale RFID tagging at its Sam’s Club warehouse club chain where it started by tagging only at the pallet level and charged back the suppliers who did not RFID-compliance. Unfortunately, this program also flopped in early 2009. The failure of this program frustrated not only Wal-Mart but also other top level consumer goods outlets such as Procter & Gamble and Kimberly-Clark as the end-to-end supply chain visibility benefits offered by using RFID were stopped. Similarly affected were the manufacturers of RFID Tags and software firms that had rather high expectations of the Wal-Mart rollout program. Current RFID Tagging Programme There seems to be another gold-rush opportunity for these supply chain stakeholders affected by the stalling of the earlier rollout plans by Wal-Mart. The current tagging of clothing items at the retail store will definitely require hundreds of millions of tags annually to be implemented as vendors hope all WalMart’s items will eventually be RFID-tagged if the current program becomes successful. Hopefully, other clothing vendors would be propelled to initiate their own RFID programs in response to WalMart’s success. The success of the current program could be pegged on the likelihood that Wal-Mart learned a few tips from the previous failed programs. In fact, three major differences outstand between the current and past tagging programs. First, unlike in the past, it is currently easier to propose the value and ROI for item-level tagging of clothing. Researches and other clothing retailers such as the American Apparel concur that there are strong indications of great benefits from item-level RFID-tagging of apparel. The benefits are realized in the areas of inventory accuracy and labor cost reduction. The second difference between the earlier programs and the current one at Wal-Mart is that the chain store will pick up the costs that suppliers used to bear for RFID tagging “inlays” and the packaging materials2. Thus, the vendor push backs will be reduced by improved inventory visibility and reduced store-level stock outs. Third, only clothing items with strong value proposition will be RFID-tagged. Notably, this approach was missing in the previous programs in which a one-size-fits-all approach was used. The management of the firm’s RFID programs has also changed. In the current case, Myron Burke, the store innovation director will lead the initiative in the US. This is unlike the earlier programs in which Simon Langford, WalMart’s manager of global RFID strategy, oversaw the RFID rollout programs. This latest rollout program has buoyed the suppliers and vendors of RFID systems with the hope of the re-energizing RFID usage on the consumer retail sector. Nonetheless, people continue to wonder on the possible impacts of the program on consumers and whether the firm will finally have it right on this time round3. In this third trial, the tagging program first targets men's jeans and other basics apparels such as socks, undershirts, and underwear. However, there are certain concerns and reservations by privacy watchers on the possible use of the program to track what specific consumers buy and thus what they have at their homes. Generally, there are myriad challenges, which have hindered the successful rollout of RFID programs not only by the Wal-Mart but also by other major corporations and multinational such as the Amazon. Reasons for Reluctance to Deploy RFID The first reason major world corporations have not implemented RFID program is data flooding. Data flooding refers to a situation in which a lot of useful data are read from tags. That is, not all data that is observed from a tag serves business purposes. In fact, effective inventory management does not require all the data that tag observation may yield. Businesses are thus forced to employ additional resources to filter these unnecessary data for the depiction of meaningful and purposeful information about the movement of goods in a store. For example, extra software may be required for the purposes of filtering raw data to separate and process raw data into redundant and useful data. The second inconvenience that has hindered organizations from using RFID is the apparent lack of global standardization. This is particularly serious since quite a number of businesses are currently global or have partners in other countries and regions. For instance, lack of compatibility between RFID frequencies in the USA and Europe or Japan greatly hinders the implementation of RFID by firms with stores in these regions. Additionally, unlike the case of the barcode, RFID does not have a universal standard to make the tag operational within all the international frequency domains. The third challenge to RFID implementation is security. Wal-Mart, like the other businesses that already use the RFID technology also uses it to detect and prevent cases of theft and shoplifting by employees and customers. What is more, if one passes the exit of Wal-Mart with an active RFID tag, the alarm rings and the security personnel are even informed of the product to look for in the affected shopper’s cart. Further, world-readable RFID tags pose risks to peoples’ location privacy and corporate security, more so for military personnel and groups such as the United States’ Department of Defense, which recently started using RFID tags for its supply chain management. Conclusion RFID refers to an electronic system by which consumer products are tracked from the moment they are produced to the time they are carted away from a shop. Wal-Mart is one of the retail stores that have deployed RFID technology to avoid queues and other inconveniences of the UPC commonly used in shops. Although in their third attempt at RFID, the chain store and its suppliers hope that the program will work out this time despite the many hindrances such as security and privacy issues. Nonetheless, security and privacy issues are some of the reasons for which a cross section of the public rejects the RFID technology. In fact, some retail chains such as the Amazon have not deployed RFID for the same reasons while some have adopted the system so that they remain compliant with changes in consumer tastes and preferences. Reference RFID News., Will Wal-Mart get RFID Right this Time? Supply Chain Digest, (2010). Retrieved on August 14, 2012 from http://www.scdigest.com/assets/On_Target/10-07-28-1.php?cid=3609 Read More