By Andy Kowl, Editor RFID Operations
When Wal-Mart announced on Jan. 11 at ProMat in Chicago that 57 suppliers were then shipping RFID-tagged cases and pallets, eyebrows were raised. The retailer has been under increasing scrutiny by the growing RFID industry and the business press, with rumors of poor compliance, low read-rates and broken machines.
Wal-Mart considers the first two months of RFID deployment a success; and Simon Langford, its manager of global RFID strategy, believes there is much misinformation surrounding one of the most watched technology deployments of this new century. “Everyone thought we told all suppliers they had to be ready Jan. 1,” Langford mused. “Nobody could do that—it’s a holiday!”
I spoke with Langford in one of the first seven Dallas-area Wal-Mart outlets involved in the initial phase. The back room steel shelving is piled high, a wall of brown kraft cartons. The sides facing out are well marked; but one can imagine them looking like so much wallpaper after a while. Conveyers extend through a dock door as a truck is unloaded. One or two trailers a day of general merchandise come in. A light on both RFID readers straddling the dock door occasionally blinks, indicating a tagged carton coming through. Most cartons slide by with no blinks.
What follows is Simon Langford’s own description and analysis. This is not a news article. After all the hype and numbers, I decided to let his words speak for himself–though direct quotations are only where marked. Behind it all is Langford’s vision of a new working paradigm. “I love change,” he proclaims.
“This is a partnership.”
After Wal-Mart announced plans to institute RFID, the process began when vendors were asked to recommend which SKUs made the most sense to begin with. The goal was to select products to be tagged at the case and pallet level for delivery to three distribution centers in the Dallas area. This was envisioned as the beginning of a process, never as a goal unto itself.
A review meeting was held where top vendors discussed what they thought was viable and how that fit Wal-Mart’s plans. Some vendor plans were considered too adventurous, with goals to tag too many products, so Wal-Mart told them to slow it down. A few offered too little and Wal-Mart discussed that, too.
Of the 137 mandated suppliers and volunteers, on average 65% of their SKUs are involved in this first stage. Some of the larger suppliers are as low as 2%-3%. The volunteers have some of the highest compliance rates, some at 100%. Not much data is being requested from vendors yet. So far, they are being asked just for G-10 information.
“We don’t want to change the business process for the associates. That would be a disaster.”
It was important to avoid creating a situation where Wal-Mart’s employees, called associates, had to change the way they worked. Retail managers were looking for the least impact possible on the day-to-day situation. Workers use the same procedures now as they did last year. No training has been needed.
“You know how frustrating it is looking for something for 15 minutes and then you see it’s right in front of you.”
Using the current scanner and PI (physical inventory) system, there are items in the store that are not on the shelf. With RFID you also eliminate the more mundane and unsatisfying tasks, like scanning for merchandise. Associates feel better about being more successful in their jobs. The time involved to scan the whole store using handhelds would be huge and, once RFID is up and running, less effective.
“The best stores, with the best availability, have the least stock in the back room. Stores with poor management, you can’t move in the back room.”
Wal-Mart also expects a reduction in false orders. Those are a result of a worker who decides to just order an extra case, rather than making the effort to look for missing cases. Langford is convinced you can learn about your staff from observing the backroom: who orders intelligently and who just orders to cut corners.
“Associates are also finding more and more ‘Aha!’ moments, as they notice new things. I want an associate to say, ‘Hey, cool!’ ”
One such moment led to designing extra logic into the picking list software, which will make its use more efficient.
Read rates and product visibility
“It does not matter if we miss a read. You could give handheld scanners to every worker, and you would still miss some.”
Some read percentages are in the high 90’s while some rates are dipping into the 60%-70% range. It is clear that as important as the technical details ultimately are to Wal-Mart, measuring statistics like read rates is simply part of the process. It is not being used as the scorecard.
“In practice, the combination of tag reads we make creates a ‘self-healing’ situation. You don’t need to read every case, at every read point, to start to take advantage of RFID data. In fact, it is the combination of multiple read points that really gives you the whole picture.”
All three dock doors have readers on both sides of them; the trash compactor also has two readers and there are two pairs of readers outside the door to the selling floor, so the direction cartons are moving can be tracked. A full stocking cart is read as it goes onto the floor, then tags on the empty boxes are recorded coming back.
By balancing enough reads throughout the stores’ internal supply chain, from the dock doors, the floor doors and even empty cartons going into the trash, a complete picture begins to emerge. With a unique serial number, the system knows if a case is unaccounted for.
More sales, satisfied customers
“90% is a lot better than zero. Associates can be out on the floor helping customers, rather than stuck in the back.”
Around the store there are numerous shelves with areas void of product. Here and there, empty rack slots are found among those with products. A handheld barcode scanner, connected wirelessly to the PI system, shows that for virtually every empty shelf and unused rack there is extra product in the back.
Most importantly, an operational RFID system will mean fewer lost sales and fewer disappointed customers. When a customer asks for a particular toy missing from the shelf, and the system says it is in stock, an associate scans the stockroom to find it. Meanwhile the associate is getting frustrated; the customer who was waiting 15 minutes has probably left and is unhappy; everybody loses.
“If I have 40 cases of beans, and can find only 20 cases of beans to put on the floor, at least I’ve got beans on the floor. We never need for something to be 100%. Our goal is not a certain read rate. It is less time searching and more time with a customer.”
An electronic picking list is used in the backroom. An associate walks around with it and scans each item he finds to update the PI database. With RFID, the handheld that Wal-Mart has being developed acts like a Geiger counter, beeping when the seeker is getting closer to a needed item. This device will guide the associate around from item to item on the list.
Keeping shelves and rack hangers from being empty serves the product’s manufacturer at least as much as it benefits Wal-Mart. In this one store, it is obvious at a glance that empty product slots could easily number in the hundreds.
Benefits to suppliers
“I’m all about real world.”
Last Thanksgiving there was a big Wal-Mart promotion, with lots of television advertising. In one day, after 10 cases of a featured item were quickly sold from their display on an endcap, stock ran out. Weeks later they found a pallet in the back that would have been sold during the sale weekend. Now it could take weeks to sell.
Some vendor benefits might be easy to miss, such as the repercussive effect out-of-stocks can have. Say a customer is looking for a particular brand of cheddar cheese. If that brand is missing from its shelf space, the customer is likely to buy another brand, so Wal-Mart does not lose the sale. If this goes unnoticed for a little while, especially if it happens in some other locations because of Brand A’s popularity, the computers start to see a rise in sales for Brand B, and Wal-Mart’s ordering patterns change. The suppliers now have false data, too.
“If we can only find 20 cases of 50 without RFID, and with RFID now we can find 30 or 40—it may not yet be 50—but we are way ahead.”
What at first may appear to be an innocuous situation can have a ripple effect; and manufacturers may find themselves increasing or decreasing capacity on false information. Using the cheese example, where perhaps Brand A is more requested due to more advertising, brand loyalty could shift. This is a long-term loss for a vendor that would be hard to even identify, no less to calculate.
“Vendors are learning how products really move.”
By using the Wal-Mart Retail Link system offered on-line, vendors can see within 30 minutes when a case has been put out on the selling floor. Likewise, they can see the goods they have shipped as they move through the giant retailer’s system. This newly available data has surprised some suppliers. For example, the dwell time—how much lag time there is between points in the system—has been longer by days than many thought.
What was the main problem vendors have had? Some vendors have not tried their initial RFID with real-world issues. They tested in a pristine environment. Wal-Mart is looking to make this work for the long haul, and retail back rooms such as this one have dirt, flaws and human components that must be factored in.
This issue originally appeared in the Premiere issue of RFID Operations.