17/10/05 UA Says RFID Working For Wal-Mart (By Shea Van Hoy)

A University of Arkansas study released Friday shows Wal-Mart shoppers are finding less out-of-stock items thanks to technology new to retailing.

Researchers at the UA found Wal-Mart 12 stores with electronic product codes using radio frequency identification, or RFID, technology had a 16 percent reduction in out-of-stock items as compared to 12 non-RFID equipped locations.

RFID uses a system of tags which emit radio frequency signals scanned by readers. Data collected can be fed into a computer and used by Wal-Mart Stores Inc. or other retailers to track products from a supplier to the warehouse to the store.

The findings of the research prove the validity of RFID's retail applications, the UA's Bill Hardgrave said in a release. Hardgrave oversaw the study and is the director of the RFID Research Center at the UA. The center had a grand opening in June and counts Wal-Mart, Tyson Foods Inc. and Microsoft Corp. as sponsors.

"Our analysis consistently found -- throughout the test period -- that the RFID-enabled pilot stores statistically outperformed the control stores without RFID technology in terms of providing improved on-shelf availability of items for customers," Hardgrave said in a release.

The metrics of the study appear solid, said Mark Roberti, editor of RFID Journal, a Melville, N.Y.-based publication which covers the industry.

"My take on this is the results aren't stunning in terms of numbers, but it shows at an early stage RFID is able to reduce out-of-stocks," he said. "On the other hand, the study didn't quantify if that led to an improvement in sales or not."

Still, Roberti said the findings were significant.

"This is the first time we've proven that RFID can deliver benefits to retailers. Up until now, it's all been theory," Roberti said.

Wal-Mart uses RFID almost exclusively on the case and pallet level rather than on individual items such as a can of coffee. This is an impediment to its feasibility, according to a report on AMR Research's Web site.

AMR Research provides independent analysis and advice to more than 5,000 supply chain and technology executives, according to the Web site.

"For fast-moving consumer goods retailers, an enterprise-wide investment in RFID technology based on case and pallet tagging won't generate enough revenue to significantly add to the bottom line," a report from Scott Langdoc and Kara Romanow says.

Wal-Mart of Bentonville is trying to increase the value of RFID in a number of ways, including through employee training, Roberti said.

"The store associates have to trust the RFID data," he said.

The world's largest retailer is using the technology to save as much in logistics costs as possible, Executive Vice President for logistics Rollin Ford said in the release.

"We are also using the technology to reduce our inventory in the whole supply chain," Ford said. "Manual (non-RFID) orders placed by stores were reduced by approximately 10 percent."

The company is touting coming improvements via the implementation of Generation 2 electronic product code tags.

The tags are basically a souped-up version of the current technology, Roberti said. They use less power, can be read from a longer distance, can be read more quickly and have a better accuracy rate, he said. Generation 2 tags should be available in large quantities by the end of the year or start of next year, and Wal-Mart said costs will be less than with Generation 1 technology.

Wal-Mart will begin accepting Generation 2 tags in January at RFID-networked stores and distribution centers, the company said. That month, the company plans to add 200 more suppliers shipping products with RFID tags to its current roster of 100.

The company will have more than 500 stores and clubs and five distribution centers using RFID by the end of the month. The company plans to have more than 1,000 locations live with RFID by January 2007.