Get Ready to Negotiate: Wal-Mart May Be Flexible, Says Study

Public reporting on the status of Wal-Mart’s RFID efforts has been highly misleading, according to an RFID Deployment Best Practices study conducted by the ARC Advisory Group (Dedham, MA). ARC talked to 24 companies that were actively investing in EPC RFID (Electronic Product Code Radio Frequency Identification), to comply with Wal-Mart’s mandate that by January 2005, its top 100 suppliers must apply passive RFID tags based on EPC-global standards to cases and pallets headed toward three specific distribution centers (DCs) in Texas. According to Steve Banker, ARC’s service director for supply chain management, “The impression conveyed to the public by many pundits is that all Wal-Mart SKUs bound for [the three Texas DCs] from the top 100 suppliers will be RFID tagged starting January 1st. This is incorrect. In fact, there were a set of negotiations between Wal-Mart’s top 100 suppliers and the retail behemoth, [in which] Wal-Mart has shown more flexibility than many anticipated.”

According to the ARC study, different suppliers negotiated a wide range of agreements. One large supplier will be shipping over 700 SKUs starting on January 1st. But many other companies, including very large ones, will be shipping less than a dozen. Further, January 1st is not always the deadline; Wal-Mart has granted deferments based on extenuating circumstances. ARC’s Banker says, “The focus right now is on Wal-Mart and the question people are asking is ‘What is the status of your effort?’ The more interesting questions should be directed at Wal-Mart’s suppliers. Those questions are, ‘How successful were you in your negotiations with Wal-Mart? What does it take to do well in those negotiations?’ ” The commitments most suppliers are meeting, says Banker, are usually far less than applying RFID tags to all SKUs they ship to Wal-Mart’s three Texas DCs.

ARC Advisory Group is now selling “RFID Deployment Best Practices.” The study includes information on the status of the Wal-Mart mandate and advice on how to prepare for mandate meetings with retailers, as well as analyses of process changes, reliability of RFID technology, costs, benefits, and recommendations that could potentially save companies thousands of dollars. Additional information on the study can be found at http://www.arcweb.com/res/epc-rfid.

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