NEW YORK — Wal-Mart wants to upgrade its merchandise tracking systems through new technology currently being tested, called radio frequency identification, and wants its 100 top vendors to comply within a few years.
“Our goal is that by 2005, we want to be at the pallet level [with RFID] for our distribution centers, with 100 top suppliers, and by 2005-2006, we would like to be at the pallet and case level with our top suppliers,” a Wal-Mart spokesman said Thursday.
The major issue for RFID is cost containment. Currently, producing the RFID chips is very expensive. But with Wal-Mart and other chains pushing for mass production of these chips, the costs might start to creep down.
The Voluntary Interindustry Commerce Standards organization, a forum for vendors and retailers known as VICS, also is working to develop the chip.
RFID is considered the next generation of the bar code, and a more powerful and easier way to capture information. RFID chips, also known as smart tags, store all kinds of information, which is transmitted via radio frequency. Affixed to products, they store stockkeeping unit information, including style, size and color. They also facilitate faster checkouts. A sales clerk would just wave a wand over all the products, rather than having to scan each product individually.
But for now, Wal-Mart’s focus is to have pallets and cases rigged with the new technology by 2005-2006. Tagging individual items with the RFID chips would take several more years.
“There is a lot of ‘gee whiz and blue sky’ on this technology, but the issue is we are not going to adopt this technology unless we can save money on our products,” the spokesman said. He added that Wal-Mart is part of a test program with the Massachusetts Institute of Technology and also operates a small RFID lab in Rogers, Ark.
Wal-Mart said RFID, aside from being a faster, more efficient way of tracking, counting and inspecting merchandise, could be particularly useful with food shipments that need to be refrigerated and distributed to stores as quickly as possible.
In all likelihood, suppliers would eat the costs of this new technology. Asked if that would be so, Williams said, “We can’t get into the definition of how that would unfold right now with RFID.”