By  on May 26, 2006

CHICAGO — Wal-Mart reduced out-of-stocks by 62 percent in some product categories through the use of radio frequency identification technology, according to Randy Salley, vice president, supply chain.

Salley gave a peek into new research findings during a sparsely attended session at the Retail Systems conference here Wednesday. The study, results of which are due out in the next two weeks, examined RFID's ability to reduce out-of-stocks on products that sell at different rates of speed. Initial test results released in October 2005 estimated RFID could reduce out-of-stocks by 16 percent on average, a figure Wal-Mart and the researchers are now calling conservative.

RFID tracking technology has virtually no impact on in-stock levels for products selling at a rate of more than 15 items daily, because store associates already monitor those fast sellers and replenish shelves as needed, Salley said. Low-velocity merchandise — items selling at a rate of one unit every three days, for example — also are not affected much by RFID, because there's no major out-of-stock problem there.

However, for items selling at a rate of seven to 15 units daily, RFID reduced out-of-stocks by 62 percent, William Hardgrave, executive director of the Information Technology Research Institute at the Sam M. Walton College of Business, University of Arkansas, told WWD. Hardgrave supervised the research, commissioned by Wal-Mart, which was based on a 29-week study of 12 Wal-Mart test stores equipped with RFID for tracking merchandise movement and 12 Wal-Mart "control" stores not using RFID.

Salley said the latest study results are important because they identify specific opportunities to combat the out-of-stock problem. He also noted that the 300 Wal-Mart suppliers already tagging cases and pallets are expected to begin using the new type of RFID tags, called Generation 2, by the end of June.

Wal-Mart receives about 3 million RFID-tagged cases each week, "and that number keeps growing week by week," Salley said. "This is no longer a pilot," he added. "We are in active rollout." Salley noted that the company will double the number of Wal-Mart stores and distribution centers using RFID — from the current 500 to 1,000 — by the end of this year. In January 2007, another 300 suppliers will be expected to apply RFID tags to their shipments, he said.

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