Wal-Mart Case Study – RFID and Supply Chain Management

FINAL PAPER

By Group 2

Group Members: Angrish, Sangita Chivukula, Venkata S. DeWitt, Brendon Patel, Raxesh Shamsi, Shazeb Yellapragada, Ramachandra

Date: November 30, 2005

.........................................18 LIMITATIONS AND CHALLENGES OF RFID......................................................................................................................................15 Kraft Foods..................................................................................................10 Market Strategy of Wal-Mart..16 Volkswagen..17 I..............................................................................................................................................................5 INTRODUCTION TO SUPPLY CHAIN MANAGEMENT..........................................................................................................................................................................15 RFID IN MILITARY.....................................................................15 CURRENT USAGE OF RFID........................................................................12 RFID IN WAL-MART...............................................................................11 Logistics Management..............................................................................................................................................................................................15 Gillette...................17 EPC global Network.........................................................................................................................................10 Competitive Advantage..................................................................10 Organizational Development......................................................4 WHY RFID OVER BAR-CODE?.............11 Procurement and Distribution.............................11 SUPPLY CHAIN MANAGEMENT AT WAL-MART........................... Expands Efforts to Promote Radio Tags to Track Goods.........................................11 Market Opportunity...............................................................................................................15 Kimberly-Clark ....................................................................................................................................................................................................................................................16 SUCCESSFUL RFID IMPLEMENTATION IN DIFFERENT INDUSTRIES.............................................................................................................................14 WAL-MART SUPPLIERS...............................7 WAL-MART INTRODUCTION AND ITS BUSINESS PROCESSES........................................................................................................................4 RFID INFRASTRUCTURE.............................B.........................................................................................................................................................................................................................13 EFFICIENCY IN SUPPLY CHAIN WITH RFID...............17 Supermarket tries out smart tagging.............................18 FUTURE OF RFID....................................................................................................................................................................................17 Texas Instruments.........................................................................................................................................................................................................................................................................................................................20 FUTURE APPLICATIONS.......................M..............................................................12 Inventory Management..................9 BUSINESS MODEL..............................................................................................................................................................................................................................20 REFERENCES:........................................9 OPERATIONS......................................................................................................17 Sun Microsystems sets up RFID test centre in Scotland...................................................................................................................................................Table of Contents INTRODUCTION..................................................................................................................................................................................................................................22 ......................................................................................................................................................................................................................................

we can understand how diversified Wal-Mart is and the volume of cargo it needs to handle for each of its business’s. A Case Study Fall 2005 Introduction Technology is inevitable in every sphere of life today. Roy Want. using an electromagnetic challenge/response exchange. RFID uses a serialized numbering scheme such as EPC (Electronic Product Code). transient effects etc. The challenging part of implementing RFID is that tagged items should not be missed by the reader due to interference. Fig 1: RFID Devices [Source: The Magic of RFID. RFID is low cost Radio Frequency Identification system which requires minimum human intervention to carry out tasks ranging from billing to materials tracking and supply chain management. where many expenses could be saved was in inventory management and logistics. October 2004 ] Why RFID over Bar-Code? The ability to read without line-of-sight is the best advantage of RFID over bar-code systems. Serial number Page 4 of 23 . It is a small wireless device which can store good amount of data and can virtually be tagged to anything. This enables automation. This gives a picture as to how technology plays a vital role in today’s’ businesses. multipath fading. it had started with computerization of individual stores with small billing machines and had then led to centralized billing for record keeping. place. Powerful computers networked with high performance clusters maintain and store this data.Wal-Mart RFID. But due to the limitations of barcodes. technology has been upgraded in billing systems and for storage purposes. INTEL RESEARCH. Missed reads are an unfortunate reality with RFID systems. The technology has grown by leaps and bounds and has become increasingly challenging to maintain large databases of information and maintain records. A new area where technology could be applied to. Wal-Mart being so huge. a new emerging technology called RFID has been identified to meet the demands. Traditionally. RFID readers can sense items even when the tagged items are hidden behind other tagged items. or person to be automatically identified at a distance without a direct line-ofsight. it has always made things easier. Wal-Mart works on the same strategy. from the above description. Each tag has a unique serial number. Traditionally. RFID is an electronic tagging technology as shown in figure 1 that allows an object. needed to keep track of men and material sent across different countries and had to maintain hundreds of warehouses across the world. Bar-codes have been initially identified as a suitable technology to meet the purpose.

For example if number of items reached at the retailer’s outlet is less than that was departed from supplier’s location. it can be easily tracked for.56 megahertz. This is important because if the reader cannot read certain tags due to interference of certain objects. For example. Hence items can be reached the right place at the right time. Scientific and medical) bands at 13. The problem in synchronizing RFID systems to software system can be best described as the problem in synchronizing a speaker to a hi-fi amplifier. RFID Infrastructure Many software systems used in enterprise systems today are not designed to handle serial numbers as required by the RFID systems. Japan has very different bandwidth standard than U. RFID systems have stronger sensor networking system or monitoring system than bar code systems. Because implementing RFID is an extensive ubiquitous task. This can be achieved by setting some time threshold levels. Security intrusion is also an issue in RFID deployment because RFID readers operate automatically unlike bar code scanners which are operated by humans. Page 5 of 23 . 915 megahertz and 2. Serial numbers have many advantages such as food freshness/expiration. Data management layer provides some functionality of filtering of data due to intermittent appearances and disappearances. If the hi-fi amplifier is not synchronized to speaker there will be distortion in sound signal. In all these ways. RFID readers operate in ISM (Industrial. Device management is one of the most challenging part of RFID implementation.45 megahertz. A solution to this problem is to introduce a layer between RFID readers and the application software commonly known as RFID middleware. It has two levels of functionality: a lower level device and data management and a higher level interpretation level. RFID readers interact with other devices such as motion sensors. This mechanism would reduce false reads. This can tell how for how long an item has been in the supply chain where as such information is not captured in bar code system. Furthermore RFID implementation monitors theft too.A. the software should not conclude that the tagged item is being sold or stolen. there is a complication of different bandwidth standards around the world.Wal-Mart RFID. A Case Study Fall 2005 information is extremely powerful in understanding and controlling the supply chain and provides much more detailed behavior of the supply chain than can nonserialized bar codes such as UPC (Universal Product Codes) and EAN (European Article Numbering).S. Like wise there will be mismatch in capabilities and requirements if RFID system is not synchronized with enterprise software properly. programmable logic arrays and human interfaces. For example you could tell the software to record tags as missing only after they have not been seen for a certain number of seconds.

the data interpretation layer must extract inference from such data and forward it to the applications that deploy RFID. Oatsystems and MIT. Oatsystems and MIT. October 2004] After the data management layer yields data. The architecture for such a system can be shown as in figure 2.Wal-Mart RFID. Integrating RFID into the enterprise is one task but extracting value for the enterprise at the systemic level is another challenging task which requires lot of control and effort. October 2004] The EPC visibility layer keeps track of RFID data in many level of detail. Sanjay Sarma. Tags can be associated with each other when they are assembled. The enterprise system can keep a true and multi resolution record of all EPC data permitting different applications to Page 6 of 23 . Fig 3: Architecture with Independent EPC Visibility Layer [Source: Integrating RFID. For example if a tagged pallet carrying tagged items out of the door should not be confused with the one that just passes by the door and does not go outside it. This inference mechanism is a very sophisticated task. This high level of reasoning involves a lot of inferences and associations.The enterprise EPC systems can then be a single source of all EPC data. Sanjay Sarma. A Case Study Fall 2005 Fig 2: Two Levels of Functionality [Source: Integrating RFID.

[Source: AutoID: Managing Anything. and marketing organizations that normally do not work together to achieve a common goal. and distribution of the products to customers. for middleware of the edge. sourcing. These include planning. EPCglobal also sell EPC codes to users who want to place EPC tags on their products. delivering. They also built a prototype of the ONS. distribution.Wal-Mart RFID. Introduction to Supply Chain Management Supply chain management (SCM) is the coordination of a network of facilities and distribution options that performs procurement of materials. SCM is seen as involving five core processes. SCM is used as a means to integrate planning. The EPCglobal system includes a number of standards for communicating with readers. A typical supply chain consists of many interactions between suppliers. Each works toward goals specific to their own organization that accomplish narrow objectives. making. This emergence of EPCglobal system has changed the way supply chain is operated today. Anytime in the Supply Chain. purchasing. A Case Study Fall 2005 access EPC data at the appropriate resolution. with the ultimate goal of providing either a service or a product to customers. and returning. Bose and Pal. Anywhere. distributors. processing the materials into finished products. EPCglobal run a number of hardware and software modules of the EPC system. The Auto-ID center has developed a software called savant which serves as the edge and the enterprise software. ACM August 2005] SCM exists in both service and manufacturing environments. retailers. Fig 4: Typical supply chain showing interrelations between all involved parties. EPCglobal operates ONS. and for the edge and enterprise EPC systems. This also works in reverse with the customer at the head of the process when returning a product. manufacturers. SCM is a way of integrating these varying functions so that they work together to maximize the benefits for all involved. manufacturing. Page 7 of 23 .

and operational. new products. production. where these products (which locations) will be manufactured is very important to SCM. and monitoring. Bose and Pal. the supply chain should be efficient and successful. tactical. Strategic decisions are made over longer periods of time and linked to a corporation’s strategy. Some inventories are necessary to hedge against uncertainty. Operational SCM involves the majority of the operations. scheduling. Decisions on what products to be produced have to be made wisely and strategically. Operational decisions are more short term and look at day to day activities. capacity issues. and transportation. A geographically strategic placement of the production facilities is key to creating a successful supply chain. and supply planning. Anytime in the Supply Chain. Anywhere. If the above decisions are made with careful and strategic thought as well as with concern for integration. Tactical SCM involves a shorter planning cycle. A Case Study Fall 2005 There are three levels of SCM: strategic. Other modes of transportation may be cheaper. transport. but fast and reliable. The include decisions on location. Managing these inventories efficiently will be of benefit to the corporation. It is more concerned demand planning. There are many decisions that are made when looking at SCM. The overall goal of SCM is to optimize supply chains in an attempt to provide more accurate and time sensitive information that can be used to improve process times and cut costs. Air transportation is costly. The newest opportunity for improvement is the introduction of radio Page 8 of 23 . It includes demand fulfillment. They follow the above categories. but this comes with a cost. Also. Fig 5: Three Levels of SCM [Source: Auto-ID: Managing Anything. This is determined at a less senior level than Strategic SCM. This planning is addressing issues that may be factors several years out. Transportation decisions include cost versus benefit. Operational SCM is current planning activities measured in at most weeks. inventory. Four major decisions are considered. but the sacrifice is having to hold inventories due to delays that may occur.Wal-Mart RFID. Supply chains have been around for decades and a constantly being improved. inventory planning. and technology changes. Inventory decisions and management is critical. This is accomplished at the executive management level. ACM August 2005] Strategic SCM deals with future planning than in looking at market evaluation. production.

The shelves are monitored in real time via satellite links that send inventory messages whenever Proctor & Gamble products are scanned at a register. This system would then monitor supply levels and when products run low. This allows Proctor & Gamble to be fully aware of up to the minute product inventories at the actual store locations and ship additional products as necessary. These two built a software system that hooked Proctor & Gamble up to Wal-Mart’s distribution centers. This includes the following sections: • Super-centers. maximizing sales and profits Wal-Mart has been leading the charge with RFID technology. Wal-Mart Introduction and its Business Processes Wal-Mart is one of the largest Fortune 500 companies. RFID will help retailers provide the right products at the right places at the right times. One example of what Wal-Mart has done with SCM and its suppliers is that of its relationship with Proctor & Gamble. This concept is a huge step in making SCM as efficient as it can be. Ultimately. which is spread across the globe. which accounted for approximately 67. RFID technology will provide real-time information that will allow manufacturers to get better readings of customers and markets thus further improving supply chains. Wal-Mart Stores segment is the largest segment. Having the largest retailer adopt and begin to use RFID technology has given strong backing to the technology and will only further and quicken the expansion of RFID. Wal-Mart has taken this as far as going to the individual store locations. Page 9 of 23 . automatic alerts are sent out to require the shipment of more products to that distribution center.3% of their 2005 fiscal sales.Wal-Mart RFID. They have begun requiring all their major suppliers to implement RFID technology on all products supplied to Wal-Mart. WalMart is probably the only largest fortune 500 corporations in the world. Simply put. which directly services the common man. it leads the fortune 500 companies like GE and Microsoft. it has everything a homemaker can ever think of. Operations Wal Mart operations are comprised of three business segments: Wal-Mart Stores SAM’S CLUB Wal-Mart International. In terms of the revenue generated. A Case Study Fall 2005 frequency identification (RFID) tags. It is an arguably the largest retail chain which deals with everything from food to consumer electronics. all of which are located in the United States.000 square feet in size and offer a wide variety of products and a full-line supermarket. which average approximately 187. This segment consists of three different retail formats. Affordable price range coupled with aggressive online and market strategy has lead to wide acceptance for Wal-Mart in towns and cities alike.

Puerto Rico and the United Kingdom. 2005. and • Neighborhood Markets. This segment generated approximately 19. Though Wal-Mart has not advertised in Advertising. as many of its competitors do. which average approximately 43.000 square feet in size and offer a full-line supermarket and a limited variety of general merchandise. in which they price items at a low price every day that builds & maintains customers trust in their pricing. Business Model A Business model is central to any successful business. Wal-mart has always been innovating and improving its business model to suite its organizational goals and also meet customer requirements. and so has managed to stay on top year after year. Wal-Mart topped $10 billion in net income for the first time in their history and added almost $29 billion in sales.000 square feet in size and offer a wide variety of products and a limited stock of food products.000 square feet in size.0% of 2005 fiscal sales. Here. A Case Study Fall 2005 • Discount Stores. the trust people have built on the Wal-Mart brand has taken them far from their competitors. Wal-Mart International operations are located in Argentina.Wal-Mart RFID.7% of 2005 fiscal sales. it operates several different formats of retail stores and restaurants. To understand the Business models used by Wal-Mart.Wal-Mart Optical its business into two parts to handle specific Page 10 of 23 . consumers get to choose their products either the traditional way or online anytime of the day. Wal-mart has employed a mixed-business model for its business for the same. Wal-mart is no exception. which average approximately 100. SAM’S CLUBs in the United States average approximately 128. Germany. the operations of joint ventures in China and operations of majority-owned subsidiaries in Brazil and Mexico. Organizational Development Wal-Mart has restructured organizational needs. SAM’S CLUB segment consists of membership warehouse clubs in the United States which accounted for approximately 13. Since they employ both the “clicks and bricks” and “bricks and mortar” methods to market their products. including Super-centers. Specialty Division . Market Strategy of Wal-Mart Wal-Mart stresses mainly on their Everyday Low prices (“EDLP”) pricing philosophy.Tire & Lube Express . South Korea. first it is important to know the factors. which go in defining those models. Discount Stores and SAM’S CLUBs. Canada. and how does it relate to Wal-Mart specifically. For the fiscal year ending January 31.

Procurement and Distribution Wal-Mart’s process of procurement involves reducing its purchasing costs as far as possible so that it can offer best price to its customers. It has always given a “price match guarantee”. Its main focus in this segment is to create its own network of trusted partners to coordinate supply chains and provide exceptional value on brand-name merchandise at “Members Only” prices. the difference of price if any.International walmart. Market Opportunity Wal-Mart employs a combination of two Business Models viz.Neighborhood Market . The company procures goods directly from the manufacturers. and has challenged other stores to offer lesser prices and has agrees to reimburse the difference.Super centers . B2C E-Tailer Business Model – Wal-Mart uses “clicks and bricks” methodology to provide millions of its customers online version of its retail store. Wal-Mart employs Sales revenue model as it is mainly involved in sale of goods and services. where customers can shop at any hour of the day or night without leaving their home or office.Wal-Mart RFID. bypassing all intermediaries.com Competitive Advantage Wal-Mart has been an undisputed leader in offering the markets lowest prices to consumers.SAM'S CLUBS .Wal-Mart Stores . A Case Study Fall 2005 - Wal-Mart Pharmacy Wal-Mart Vacations Wal-Mart's Used Fixture Auctions Wal-Mart Alaska Bush Shopper Retail Division . Supply Chain Management at Wal-Mart Supply chain management at Wal-Mart can be described in 3 sections. No other store could meet this and Wal-Mart has been leading the pack for years. Page 11 of 23 . These two models help Wal-Mart in achieving its business perspectives related to its firms organizational needs and the second helps in its interaction with the customer and manages goods and services offered by Wal-Mart to the end users. B2B Single firm network Business Model – SAM’S CLUB segment of Wal-Mart supports small businesses.

These dedicated truck fleets enables shipping of goods from distribution centers to the stores within 2 days and replenish the store shelves twice a week. instead of retailers ‘pushing’ the products into the system. along with the general code of conduct. which updates the information on the main central server. Managing the center is economical with the large-scale use of sophisticated technology such as Bar code. The distribution centers ensured steady flow & consistent flow of products. The quantity of the product required from the center is entered in the hand held computer. shelves & bins in the center.one for identifying the pallet. packaging & shipping. This allowed the management to monitor each and every activity going on in a particular store at any point of the day and analyze the course of action taken depending on how the things went. The drivers hired are all very experienced & their activities are tracked regularly through “Private Fleet Driver handbook”. A Case Study Fall 2005 Wal-Mart has distribution centers in different geographical places in US. about once every week for most of the items. In this system. For more efficiency. Wal-Mart’s own warehouses supplies about 80% of the inventory. finished goods are directly picked up from the manufacturing site of supplier.Wal-Mart RFID. hand held computer systems (Magic Wand) and now. Page 12 of 23 . The inventory turnover rate is very high. They make 2 scans. when & where they required. For this. Wal-Mart uses a logistics technique called “Cross Docking”. More than 7000 company owned trucks services the distribution centers. The computers also enabled the packaging department to get accurate information such as storage. The hand held computers guide employee to the location of the specific product. sorted out and directly supplied to the customers. virtually eliminating role of distribution centers & stores. This enables Wal-Mart to satisfy customer needs quickly & improve level of efficiency of distribution center management operations. Logistics Management This involves fast & responsive transportation system. RFID. It also enables supervisors to monitor their employees closely in order to guide them & give directions. Every employee has access to the required information regarding the inventory levels of all the products in the center. Each distribution centre is divided in different groups depending on the quantity of goods received. Bar codes & RFID are used to label different products. The goods to be used internally in US arrive in pallets & imported goods arrive in reusable boxes. thus saving time in unnecessary paperwork. and other to identify the location from where the stock had to be picked up. Because of “cross-docking” the system shifted from “supply chain” to “demand chain” which meant. Inventory Management Considering the rapid expansion of Wal-Mart stores. This system reduces handling & storage of finished goods. This allows the drivers to be aware of the terms & conditions for safe exchange of Wal-Mart property. Wal-Mart set up its own satellite communication system in 1983. it was essential to have a very good communication system. the customers could ‘pull’ the products.

The order management and store replenishment of goods is entirely executed with the help of computers through Point of Sale (POS) system. thereby reducing pack sizes across many categories and timely price markdowns. receiving & proper inventory control of the products along with easy packing and counting of the inventories was ensured. Wal-Mart also makes use of sophisticated algorithm to forecast the quantities of each item to be delivered. deliveries and backup merchandise in stock at the distribution centers. RFID in Wal-Mart Wal-Mart had initiated its plan to employ RFID technology in its supply chain in June 2003. For emergency backup. By making use of Bar-coding & RFID technologies. different processes like efficient picking. Subsequently Wal-Mart reinforced its plans and actively asserted on defining the RFID standards it will be implementing. which is linked to in-store terminals through a Radio frequency network. that will allow the suppliers to write serial numbers to the tags while being applied to the products. A Case Study Fall 2005 Wal-Mart ensures that unproductive inventory is as less as possible.Wal-Mart RFID. EPC –compliant tags in UHF band consists of two main parts: EPC data format on the chip Class0 or Class1 communication protocol Class0 is a factory programmable tag Class1 provides the capability to the end users to write serial number on it Wal-Mart planned to implement Class1 Version2. the inventory system is immediately updated. while reducing overall inventory. A Centralized inventory database allows the personnel at the store to find out the level of inventories and location of each product at a given time. it has an extensive contingency plan in place as well. When the goods are unloaded at the store. a globally accepted protocol that incorporates both specification of Class0 and Class1. Page 13 of 23 . by allowing the stores to manage their own stocks. to keep track of the inventory in stores. Wal-Mart makes full use of its IT infrastructure to make more inventories available in case of items that customers wanted most. It also shows the location of the product like distribution center or transit on the truck. Wal-Mart owns the “Massively Parallel Processor (MPP)”. Wal-Mart specified the RFID requirements to its suppliers that they should comply with: EPC: 96-bit with a Global Trade Identification number TAGS: Should operate in UHF spectrum (868 MHz to 956 MHz) The TAG will carry the 96-bit serial number and will be field-programmable. The specification of the following RFID components was laid out in November 2003. EPC (Electronic Product Code) specification Type of Chip that would be installed The Distribution centers that will accept RFID tagged products After the defining phase. largest & the most sophisticated computer system in private sector. Employees use “Magic Wand”. based on inventories in the store. which enables it to easily track movement of goods & stock levels across all distribution centers and stores.

and that information is compiled in an enterprise planning software system. "It's like knowing there are 1.com. it believes in “no-compromise” on implementing an innovative IT infrastructure and strong communication system as they are they the important links in the chain for a smooth functioning of the complete system. Usage of RFID has reduced out-ofstock merchandise by 16% at the stores that have implemented RFID tags for more than a year. “Wal-Mart has been able to restock RFID-tagged items three times as fast as non-tagged items. lot number. According to Venture Development Corporation." says Cohen. A Case Study Fall 2005 In addition. Logistics and Inventory Management. you may know there are 10 items on the shelf. and expiration date and warehouse origin. “In current systems. Since the core of Wal-Mart business is perpetual improvement in its Supply Chain implementation. Wal-Mart tapped RFID technology with an aim to increase the efficiency of its supply chain." From the above studies it indicates that employing RFID technology will help in implementing a seamless supply chain and hence yield profits.” In addition to improving the availability of in-stock merchandise. The increase in their efficiency is evident from the news article at Breitbart. With RFID. The CIO at Wal-Mart stated that. a study by Cohen at Wharton chalks out the difference between the existing inventory management and the RFID enabled supply chain. Wal-Mart is planning to enhance mobility to its existing RFID tag readers by implementing RFID-enabled forklift. Distribution.000 people in a city. “With Wal-Mart selling over $245 billion worth of goods in fiscal year 2003. These readers will have the capability to read the tags on the pallets and transmit data through the RFID network. This is because RFID implementation will enhance transparency of their supply chain and hence will help them minimize cost and labor and will strengthen inventory control. Wal-Mart aims to reduce the practice of manually placing the order and has achieved 10% reduction in the case.” In addition.Wal-Mart RFID. which would help the users to be better informed about the supply-chain data. you know their names. you know there are 10 items. Page 14 of 23 . their age. a 1% improvement in the out-of-stock issue could generate nearly $2. Efficiency in Supply Chain with RFID The various components of Supply Chain are: Procurement. where it states that implementation of RFID tags in Wal-Mart’s inventory has helped boost sales by keeping shelves better stocked.5 billion in very profitable sales. "With RFID.

Wal-Mart aims to mandate RFID implementation for all its suppliers. Kraft Foods Kraft Foods. Wal-Mart expects to increase RFID implementation by adding another 200 suppliers that are projected to supply to another 1000 stores. the largest food company employs RFID system to improve handling of its bulk containers. Gillette has ordered half a billion tags to track razors. In a trial at Tesco's new market Road branch in Cambridge.4 million tags. The key Page 15 of 23 . Wal-Mart is working on the data collected by RFID to analyze the consumer behavior. These include Regional Distribution Centers. In April 2004. by 2006. Kimberly Clark tagged its Scott paper towels shipment with RFID tags to be shipped to Sanger. And. Wal-Mart Suppliers Some of the major suppliers of Wal-Mart are: Gillette. the largest retailer is also looking into different dimensions where RFID can be helpful. As a pilot test. providing solutions to a wide array of problems. Kraft Foods. In addition to strengthening the Supply Chain. Procter & Gamble and Unilever. Current Usage of RFID RFID technology is rapidly evolving and growing. Kraft has outsourced its RFID system to TrenStar to handle the complete supply chain. Johnson & Johnson. the major implementation milestones of RFID at Wal-Mart are to expand Regional and domestic implementation of RFID throughout 2005. the packaging of Gillette Mach3 razor blades has been fitted with tiny chips. Kimberly-Clark.Wal-Mart RFID. Many companies are finding value in implementing RFID systems today especially when it is applied to solve more realistic supply chain problems. Wal-Mart is at a nascent state of implementing RFID. Nestle. Purina PetCare Company. The Gillette Company uses RFID for both pallet and case applications. A Case Study Fall 2005 The recent studies show that 130 major suppliers ship merchandise to Wal-Mart distribution centers with about 5. Kimberly-Clark Kimberly Clark is a manufacturer of paper goods products that include Kleenex. Gillette Smart razor blades have been introduced to the supermarkets. At present. According to Venture Development Corporation. Texas. Grocery Distribution Centers and Sam’s Club Distribution Centers in Texas. Huggies and Depend. All the cases in a pallet are scanned with RFID readers as they move along the conveyor belt. Hewlett-Packard.

and customers. SCM will be successful and the company will likely receive the rewards by way of increased profitability. This lends to the belief that proper SCM is beneficial to a company’s bottom line. military has also been heavily involved in SCM. transportation and manufacturing costs. asset visibility. item management. transportation. We also plan to require RFID tags on key high-value items. Our policy will require suppliers to put passive RFID tags on lowest possible piece part/case/pallet packaging by January 2005. According to a benchmark initiative by Deloitte & Touche.Wal-Mart RFID. is determined by considering the following key factors: Basic asset and inventory visibility needs. This is quite different from most businesses that often lose sight of the end customer in the process. The military focuses on mission requirements as opposed to profit and loss statements. is to understand the capabilities of RFID and evaluate how it can be useful to our operations today. procurement. Though RFID deployment is still not full fledged. In a memo issued back in 2003 by the Acting Under Secretary of Defense that said. Anticipatory logistics is quite similar to the corporate world’s SCM. information systems. The DOD has done a good job at meeting this goal. Anticipatory logistics is in an attempt to use technologies. which is the most important metric for a RFID application. The Army has experimented with a concept called anticipatory logistics. They continue to be on the cutting edge in advances in military logistics using RFID and SCM. warehousing. manufacturing. The value. The military approach to SCM is only slightly different than that of the commercial industry. and maintenance. The military’s main focus is on getting equipment and necessities to the servicemen and servicewomen who are on the battlefield. The interesting fact is these companies are seventy three percent more profitable than other manufacturers. These are suppliers. order management. If this is done properly. Efficient SCM is difficult to implement and is being widely studied. and procedures to predict and prioritize needs and provide supplies in a timely manner. Successful RFID Implementation in different Industries Page 16 of 23 .S. A Case Study Fall 2005 factor. which are what drives a corporation. Speed. Companies must find the right balance between inventory. it is clear that its deployment is an attainable future goal. They both consist of seven main components. “The Department of Defense will be an early adopter of innovative RFID technologies that leverages the Electronic Product Code (EPC) and compatible tags. range and reliability needed to track the target product ROI (Return On Investment) in the context of scope for improvements RFID in Military The U.” The goal of the military is to improve data quality. as with any new technology. only seven percent of companies are effectively managing their supply chains.

After the production line. Supermarket tries out smart tagging The electronic radio tags will allow staff and customers to keep track of the goods in the store. They will also help prevent shoplifting. An Intelligent Long Range (ILR) -enabled van with an RFID reader identifies the targeted vehicle when approaching the car. The system is used to quickly locate a car in the holding lot. British supermarket chain Tesco has started to install ‘smart shelves’ that can track items as they are placed or removed. The vehicle is then delivered to the holding lot. from resourcing and manufacturing to inventory and distribution. Page 17 of 23 . RFID creates real time information links that speed production.B. TIRFID technology connects all phases of the supply chain. Expands Efforts to Promote Radio Tags to Track Goods IBM’s move into the RFID tag printer business with an RFID-capable printer designed to help customer reduce costs and improve operational efficiencies. consultants began selling advice on consumer privacy issues related to the use of radio identification tagging of consumer goods.000 automobiles. If the product goes through the door without being paid for an alarm is set off. Sun Microsystems sets up RFID test centre in Scotland Sun maintains that RFID tags have the potential to cut huge costs from the supply chain of retailers and manufacturers and said the European centre will help firms with the tagging of products. the status is written to the active tag.B. an active tag that contains a unique identification number and pre-delivery tasks.M. and to track the vehicles' progress through a predelivery system.M. integrating the information into back-end systems and sharing it with their supply chain partners. tracking the items from the shelf to the till and out of the door. Volkswagen claims to have witnessed the benefit of significant reduction of the vehicle delivery time and productivity has been improved by as much as four times. Europe's largest automaker and the fourth largest auto manufacturer in the world are deploying RFID technology to speed up vehicle pickup and improve customer service. improve quality and streamline delivery. and automatic status update. which has over 10. Also I. electronic work-in-process tracking. I. The solution also provides additional benefits such as improving quality control.Wal-Mart RFID. A Case Study Fall 2005 Volkswagen Volkswagen. After deploying active RFID solution. Texas Instruments Texas Instruments deploy RFID in the field of logistics/supply chain management. After the pre-delivery tasks are completed. every vehicle is equipped with an i-Q8 tag.

• Technology problems: Problems such as signal distortion. Physical Markup Language (PML) is an XML-based language that is used to define data on objects. each tag communicates to an RFID reader its EPC. reader accuracy and speed. Each silicon chip of each RFID tag is encoded with a unique EPC that identifies the product. whether that is an individual product or a case. this number can reveal a lot of information. A Case Study Fall 2005 EPC global Network The EPC global Network uses RFID to enable true visibility of objects in the supply chain. making it readily available on a worldwide level. standards for RFID will probably vary between many regions of the world. Like barcodes. of many products being shipped. Some of the major technical limitations are: 1. Page 18 of 23 . However. The ONS resides on a computer or local application system. Limitations and Challenges of RFID Many issues still exist about the implementation of RFID that even Wal-Mart may have trouble addressing despite their decision to move forward with the new technology. This means that the data associated with that number is theoretically unlimited. Current challenges in RFID implementation are: • Global standards: A single global RFID standard is highly unlikely to evolve. The silicon chip is wired to an antenna. which is generally used as a reference number that corresponds to information contained on one or more Internetconnected databases. Read-range distances are not sufficient to allow for consumer surveillance: Most of the RFID tags currently in use have read ranges of fewer than 5 feet. Savant is the middleware technology that coordinates the movement of information over the computer systems. The Object Name Service (ONS) collects the EPC that is passed on from the reader. 2. and tag transmission capabilities persist making RFID still not practical for widespread use. The network has five fundamental elements: The Electronic Product Code (EPC) is a unique number that identifies an item in the supply chain. using radio frequency identification technology. or pallet. and. The read range of the RFID tags depends on the antenna size.Wal-Mart RFID. and whether they are passive or active. This information will typically reside on the Internet. Multinationals like Wal-Mart may need to implement a variety of RFID standards and technologies across their global organizations. Limited information contained on tags : Although some researchers on RFID support this aspect of the technology by pointing out that the tags associated with most consumer products will contain only a serial number. transmission frequency. and can be augmented as new information is collected. It tells the computer systems where to locate information on the network about the item who’s EPC it has just encountered.

Damaged RFID tags: Since tag reading happens automatically without line of sight and no human interaction. through clothing. Associated costs can approach the millions of dollars. or other items. either directly or indirectly. A Case Study Fall 2005 3.Wal-Mart RFID. RFID tags can be embedded into/onto objects and documents without the knowledge of the individual who obtains those items. RFID must not be used to track individuals absent informed and written consent of the data subject. this will drop to between one and five cents per tag once billions are being produced” . applied and verified individually. Privacy and civil liberties: One major confrontation for RFID technology would be to deal with the threats to consumer privacy and civil liberties. "relatively high reliability" is unacceptable if an RFID mandate calls for a 100% read rate. is making it difficult to realize the full potential of RFID in generating a wealth of information. Failure rates in early RFID pilots have been as high as 30%. For instance. The largest cost issues. • Data management: Lack of development of right information management tools to manage the data effectively. Human tracking is inappropriate. This becomes a serious issue for business applications built around RFID if 100% read rates are implicit as part of the core business application design. And depending on functionality. RFID should not be incorporated into currency. it can be difficult to know when certain tags are not read. “Companies planning to adopt RFID face technical concerns related to effective data capture (or reading). 4. “Individual tags cost about 30 cents each. particularly in light of potential job losses. their integration with a company’s current systems and the effective transmission of information. RFID should never be employed in a fashion to eliminate or reduce anonymity. and to data volume (in database management and transmission)”. tag readers can cost anywhere from several hundred to several hundred thousand dollars. Unfortunately. • • • • • RFID Practices that should be prohibited: • • • Merchants must not force their customers into accepting RFID tags in the products they buy. consumer goods. Industry Standards: Many privacy advocates are insisting the companies to state their intended use of the technology due to lack of industry standards regarding the use of personal information that could be encoded on the chips. but they are unavoidable if the full benefits of RFID are to be realized. however. reside in the required size of the databases. Cost: Any developing technology is associated with high costs and so is RFID. which is highly expensive to implement. A final barrier to implementation that may need managing is employee acceptance. Must be programmed. and data synchronization is usually required. What Should Wal-Mart Do? Page 19 of 23 . Defective and poorly performing RFID tags: RFID tag manufacturers continue to produce faulty tags.

What Should Suppliers Do? Suppliers should use their initial knowledge to shape mandates by Wal-Mart and other retailers. RFID tags on drug bottles are being used as anti-counterfeiting devices. 2005] Future Applications In the pharmaceutical industry. Future of RFID Fig 6: State of RFID technology deployment [Source: AMR Research. This also allows a librarian to easily locate a book misplaced on the wrong shelf. Pet owners have begun implanting their cats and dogs with RFID chips to locate them should they become lost. giving suppliers the collective power to cut tag costs” . suppliers should create an internal RFID lead position with direct access to the CEO”. and DVDs etc. It gives additional time for vendors and suppliers to perfect tag reliability for all products. apparel. A Case Study Fall 2005 Wal-Mart should redefine the scope of its RFID mandate by narrowing the scope of products to those with limited amounts of metal and liquid. “In addition to addressing the challenges they are facing in implementing RFID with Wal-Mart. Page 20 of 23 . Suppliers would not be affected with a narrower focus on high-priced products like prescription drugs. In libraries. books are being tagged for self-automated checkout. freeing up librarians to perform other tasks. “Forrester recommends that Wal-Mart use its influence to help create a buying consortium.Wal-Mart RFID.

in a Brave New World scenario. postal department and other scientific use but if consumers really don't like the idea – if it's too confusing for them. While we may talk of its existence and the amazing ways in which this technology can be put to use. it should have a firm understanding of the benefits that the technology can provide. What is most frightening. Page 21 of 23 . automotive. key retailers such as Tesco and. Secondly. in particular. The typical approach has been one of trial and error. for instance a pair of jeans or a set of automobile tires. such as tracking cases or pallets within warehouses. such as mad cow disease. healthcare. or acting as barcode replacements” 9. First off. the future of RFID is going to be determined more by the dominant applications rather than by the technology. For instance. making it easier to track diseases. establishing the base RFID infrastructure today is the key driver for total supply chain adoption and benefit realization tomorrow” 10. Researchers have concluded that organizations should keep initial RFID projects at a simpler scale. there has been no clear roadmap that a company can employ while evaluating RFID opportunities or mandates. too much technology or their privacy concerns are too strong – will the technology survive is the question to be answered. “This might include single stage implementation.Wal-Mart RFID. Industry analysts are unanimous on the view that RFID is going to dominate the industry soon. back to the originating farm. It has been acknowledged that RFID technology can be used for marketing purposes or even. It will be widely used in retail and consumer goods. it is possible to ubiquitously embed the chip within a product. RFID learning curve is a long process and starting with small projects and then establishing standards for efficient future product movement can effectively implement it. This level of understanding and experience will be necessary before moving to more complicated supply chain implementations in making RFID a big success. until there are more standards set within the industry and the cost of RFID technology comes down we won't see RFID systems reaching near their full potential anytime soon. or from warehouse to store. Many see RFID as a technology in its infancy with an untapped potential. “As the old saying goes. is the ability to implant an RFID chip under the human skin. military. So too is the US Department of Defense. government tracking of its citizens. Wal-Mart of the US are pushing ahead with the technology that will end up affecting thousands of suppliers. Before any organization can seriously contemplate using RFID to support its operations. "the early bird catches the worm. A Case Study Fall 2005 - - The USDA is pushing to give every cow in the United States its own unique identification number." Even if the true benefits will not be realized for several years. There has been a mixed reaction from the various suppliers and customers who already deployed RFID into their industry. Two things are clear when it comes to RFID. RFID technology will reach the zenith by the end of 2006 and from a retailers perspective the technology will bring a revolution. however. The future of RFID is uncertain.

mit.39020357.php http://www.com/wireless/rfid/walmart/rfid-future.784/www/BD%20Supplementals/Materials/Unit %20Two/Security%20Privacy%20Identity/IBM%20promotes%20radio%20tags %20NYT.edu http://www. Number 8. Retrieved from http://www.com/66090.html http://icmr.html http://www.com/ASP/viewarticle.army.com/rd/results/rdq_logistics_supply_chain/www.html http://knowledge.php? subdetail=Report&action=details&report_id=552 http://www.org/2005/09/rfid_and_walmar.com/news4530.shtml/searchemall_TI_RFid_(Texas_Instruments_Radi Page 22 of 23 .ameinfo.physorg.asp http://www. Auto-ID: Managing Anything.1612149. June 2004 http://www.00.stm http://news. Quieter. Military Edict: Use RFID by 2005. So What Else Is New?NetNews. Cheaper.csa.rfidgazette.htm http://web.tutorial-reports.00. Anytime in the Supply Chain.in/supply_chain_intro.do? catg=453&contId=5700 http://www.rfidjournal.com/article2/0.walmartstores.39118283.zdnet.bbc.asp?strarticleID=106246&page=1 Smaller.html http://www. Volume 48.rfidjournal.uk/1/hi/technology/2661825.Wal-Mart RFID.iisc.ernet.com/article/articleview/435/1/26/ http://www.searchemall. ACM Digital Library: Communications of the ACM.org/pdf/Operations%20Case%20Study%20-%20Wal-Marts %20Supply%20Chain%20Management%20Pr.1540. Anywhere.uk/hardware/emergingtech/0.com/details.baselinemag. August 2005.com/tiris /docs/solutions/supply/logsup.html http://news.icfai.pdf http://www.upenn.co.html http://www.com/GlobalWMStoresWeb/navigate.almc. A Case Study Fall 2005 REFERENCES: Bose & Pal.htm http://lcm.wharton. RFID Journal.mil/alog/issues/SepOct02/MS774.com/article/articleview/604/1/1/.com/article/05/08/09/33OPreality_1.ti. Faster.edu/21w. Pages 100106.logisticstoday.infoworld.co. http://www.morerfid.

internetnews.911.00.233.deloitte.html http://www.1769.rfidgazette.forrester.asp http://www.39024663.rfidgazette.233.00.net/ http://www.org/2004/06/rfid_101.com/lans/0.104/search? q=cache:AcAEmm5wU24J:networks.html http://www.com/27092005/221/rsi-aggressively-prices-rfid-labels.com/publications/competitive_edge/articles/02-04RFID_Pharma.rfidlowdown.10801.161. A Case Study Fall 2005 o_Frequency_Identification_Solutions)_offers_the_most_extensive_range_of_transp onder_reader_and_antenna_products_for_a_widewww_ti_com_tiris_docs_solutions_ supply_logsup.jhtml?articleID=53200075&pgno=2 http://64.html http://www.tompkinsinc.00.theautochannel.com/200504/vendorvoice02.com/ent-news/article.html http://www.104/search? q=cache:hajF6kp0mQIJ:www.html http://64.html http://www.com/DidYouKnow/Computer_Science/2005/rfid.html http://uk.shtml Page 23 of 23 .com/story/showArticle.com/2005/11/future_of_rfid.webopedia.Wal-Mart RFID.com/storage/0.infopeople.org/2004/06/rfid_101.com/dtt/article/0.html http://www.silicon.asp http://www.amrresearch.00.php/3425801 http://www.851 99.com/ER/Press/Release/0.com/mobiletopics/mobile/technology/story/0.org/ http://informationweek.39121091.networkmagazineindia.1002.com/news/2005/09/26/143922.39024649.00.sapinfo.yahoo.silicon.com/ http://www.htm +future+of+RFID&hl=en http://hardware.167.rfid-101.com/ http://www.org/resources/rfid_survey/ http://www.39120064.sid%253D24348%2526cid %253D36852.computerworld.news.html+ which+companies+are+implementing+RFID+technology&hl=en http://rfidanalysis.itrportal.htm http://www.com/ http://www.

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