CHICAGO — Mike Duke, president and chief executive officer of Wal-Mart Stores, on Tuesday spelled out a more detailed time frame for the retailer’s radio frequency identification program, emphasized it is not slowing down the effort and said Wal-Mart is implementing the technology to reduce out of stocks and increase sales.
Duke was the keynote speaker at the Retail Systems conference here. Standing behind the podium and wearing a brown suit and a persimmon tie, the Wal-Mart executive admitted it was unusual for him to accept such speaking invitations. In his remarks, Duke said he majored in engineering at Georgia Tech and added, “I have just enough background in technology to be dangerous.”
Detailing Wal-Mart’s RFID time line, Duke said the retailer installed the technology in one pharmacy distribution warehouse in November 2003, as well as a retail distribution center and seven stores in the Dallas area, which occurred earlier this month.
Through the remainder of this year, Wal-Mart will implement RFID pilots in a grocery distribution center and in a Sam’s Club distribution center in the Dallas area. By the middle of this year, Duke said, Wal-Mart will communicate to its vendors details of its RFID expansion plans beyond 2005.
Those plans include the implementation of RFID by Wal-Mart’s 100 top vendors and 37 volunteers by January 2005. The technology will be installed in cases and pallets in the Dallas area at Wal-Mart and Sam’s Club warehouses, Duke said. “That’s what the plan we laid out last year was, and we’re on plan and moving full speed ahead,” he added.
During the rest of 2005, Wal-Mart will continue with its domestic implementation of RFID and, in 2006, it will work to have the technology implemented by suppliers. Beyond 2005, Duke said, Wal-Mart will begin to roll out RFID in its international operations.
Duke showed a slide of Wal-Mart’s estimates of what RFID chips would cost over the next few years, which appeared to indicate that, by the end of the fourth quarter of 2006, it expects the tags to cost about 5 cents each. The current high cost of the tags has been one stumbling block pointed to by vendors and retailers to implementing RFID.
“Increasing sales is the greatest reason I am passionate about RFID,” Duke said. “Like any technology we’re working on, we always have to consider it in the context of our own customer relationships. The customer is the reason we’re working on RFID. We’re not doing it for ego reasons and we’re not doing it for the technology.”
Duke didn’t answer any questions after his presentation.
A Wal-Mart spokesman said the percentage increase in sales Wal-Mart expects from implementing RFID is proprietary information.
“Retail Link [Wal-Mart’s existing computer link with its suppliers] is not sufficient,” the spokesman said. “RFID gives us far greater information about what’s actually available in the stockroom. Ultimately, it will help us in shrinkage by allowing us to know when a product exits or enters a showroom.”