Wal-Mart emphasizes sustainability and RFID

Following reports in February that presented a somewhat dreary assessment of Wal-Mart's radio-frequency identification (RFID) rollout and its value for the company's suppliers, Wal-Mart's Rollin Ford, executive vp and chief information officer, discussed and countered the issue in his opening keynote speech at May's RFIDJournal Live! 2007 conference in Orlando. "Nothing could be further from the truth," he said in reference to the reports, as he showcased RFID's potential to improve the environment and the financial health of the retail giant and its suppliers as well as benefits to its customers. Ford, who assumed his role in 2006, succeeding Linda Dillman, told the audience that the company's goal is to deploy RFID at another 400 of its stores this year, along with the 1,000 stores already utilizing RFID to track cases and pallets of products. "We're not backing off or slowing down," he said. Rather, "Wal-Mart is continuing to roll out RFID to our stores at the same rate as we have in the last two years," he said, adding that Wal-Mart intends to use RFID technology to help increase store efficiency by about 20 percent within seven years.

Ford also talked about the company's focus on using RFID in a broader sense, to cope with issues of improving healthcare in the U.S., to address business improvements and to concentrate on sustainability. "Wal-Mart has been very public about its focus on sustainability," he told conference attendees. "But you have to understand RFID in a broader context than just in tracking [shipping] cases. Before we started this journey of sustainability within our company, we had no idea where we'd begin or certainly how we would end. We knew that technology such as RFID could be leveraged to have an even bigger and broader role than just what we were thinking about in today's terms. When you think about RFID enabling innovation, in a number of areas, by focusing on customer's profitability and supporting a healthy planet, we feel like we have a strong business model. For our customers, RFID can improve both the in-stocks and the quality and safety of the products we have. RFID enables efficiencies in the supply chain as well as other business processes. Our suppliers have reported sales lifts in the execution of promotions. But this is only the tip of the iceberg."

The company, he said, is also hoping to bring these approaches, as well as speed-to-shelf to the stores and to its Sam's Club business as well.

Ford also referenced greater supply-chain efficiencies and data accuracy as a result of the use of RFID technology and sustainability. "Certainly there are places within the supply chain where inventory becomes inaccurate," he said. "We can automatically and efficiently use RFID to locate errors, get down to the root cause and achieve accurate forecasts, and this goes back to our sustainability efforts." He explained that Wal-Mart uses RFID to help to track inventory more accurately, reduce unnecessary truck deliveries and eliminate customer trips to the store for items that were out of stock during their initial visit. "This not only leads to the product being on the shelves when the customer wants it, but also to more accurate forecasts," he said. "Accuracy leads to efficiency, and that leads to sustainability by ultimately reducing inventory and costs within the supply chain."

For Wal-Mart, out-of-stocks cost the company and its suppliers lost sales of about 2 percent of the retailer's entire sales, he said—about half of which is the result of inventory inaccuracies. "Assume RFID, in a very conservative way, could resolve about ten percent of that inaccuracy," Ford predicted. "We and our suppliers could gain over $250 million annually. That's real value right now, but so much more can be done inside the business. We're only scratching the surface."

Ford also shared with the audience RFID projects Wal-Mart suppliers are working on and cited examples from Kimberly-Clark, which is successfully using RFID data in monitoring promotional display execution, and taking corrective action regarding out-of-stocks in real time; Procter & Gamble's RFID efforts, which include electronic product codes (EPC), product tracking to improve in-stocks and RFID tagging of displays; and Hanna's Candle Co., which uses RFID with its promotional pallet displays to track products from distribution centers to the sales floor, increasing its sell-through.

"The bottom line is that we're going to continue to invest and innovate, and be sure that RFID is affordable and available to suppliers," he added. "We will continue to collaborate with our partners, providing value and education and sharing best practices, as well as providing improved visibility of data. We've been very open with what our efforts have been and will be."

He also said more than 24 million people shop Wal-Mart stores daily. "If only 100,000 extra trips to the stores could be avoided by having stock people need, the gas savings that could occur and the emissions saved would be a key benefit to the environment. With RFID, we can meet customer needs in a world that's changing fast, and do that in a sustainable way."