RFID update from Wal-Mart | IDTechEx Research Article
Improving on-shelf availability - Wal-Mart see a 16% reduction in out-of-stocks using RFID. University of Arkansas study quantifies RFID-initiated improvements.
Oct 17, 2005
Using RFID to increase sales works
Wal-Mart has issued a press release on their results using RFID to monitor stock levels, based on initial findings of an independent study from the University of Arkansas.
Researchers at the University of Arkansas found a 16 percent reduction in out-of-stocks. Additionally, the study also showed that out-of-stock items with EPC (Electronic Product Code) tags were replenished three times faster than comparable items using standard barcode technology. Equally important, Wal-Mart experienced a meaningful reduction in manual orders resulting in a reduction of excess inventory.
"This is no longer a take-it-on-faith initiative," said Linda Dillman, executive vice president and CIO for Wal-Mart. "This study provides conclusive evidence that EPCs increase how often we put products in the hands of customers who want to buy them, making it a win for shoppers, suppliers and retailers."
The 29-week study analyzed out-of-stock merchandise at 12 pilot stores equipped with RFID technology and 12 control stores without the technology. All Wal-Mart formats - Supercenters, Discount Stores and Neighborhood Markets - were included in the study.
While Wal-Mart commissioned the study, it was conducted independently
by the University of Arkansas. Specific items were selected to be analyzed at the beginning of the study and these items remained constant throughout the entire process to ensure data consistency.
To both establish a pre-study baseline and to measure the impact of RFID, out-of-stock items were scanned every day throughout the study period, at the 24 stores.
The study design allowed the researchers to examine differences between the 12 control stores and the 12 RFID-enabled stores. It also provided the ability to compare performance in the same stores through analysis of the baseline data and the data collected during the use of RFID.
"The study showed RFID-enabled stores were 63 percent more effective in replenishing out-of-stocks than the control stores," Dillman said. "The Wal-Mart RFID team knew that this technology would have a huge impact on out-of-stocks. Now we have an independent study that confirms RFID has a significant impact in retailing," Dillman continued. "However, we are not stopping there. This is only one of many changes that RFID will bring. We are already working on initiatives and enhancements that will build on this success."
IDTechEx note that others have found stock replenishment a fertile area for RFID. For example, Tesco have used RFID to monitor stock of DVDs in some stores. They chose DVDs because they tend to put few out, due to their value and therefore loose sales if they are not replenished fast enough. Tesco reported a 4% increase in sales as a result of using RFID to monitor stock outs. The Gap also reported similar improvements in their RFID trials several years ago.
What's next for Wal-Mart
As Wal-Mart announced earlier this year, it is currently more than tripling the number of stores where RFID has been installed. By the end of October, Wal-Mart will have more than 500 stores and clubs and five distribution centers live with RFID.
During January 2006, Wal-Mart's next top 200 suppliers will be live, shipping EPC-tagged cases and pallets. As with its top 100 suppliers, Wal-Mart has collaborated with these next top 200 suppliers, hosting a number of briefings and seminars to share knowledge back and forth. A number of the suppliers who went live in January 2005 also participated with the next 200, passing on their learnings and areas of benefit within their organizations.
In addition to the store and distribution center expansion this year, Wal-Mart will continue its rollout during 2006 and double the number of stores that are enabled, along with distribution centers that service the enabled stores. By the end of 2006, more than 1,000 stores, clubs and distribution centers will be using RFID to deliver improved service to customers.
For 2007, Wal-Mart expects the next wave of 300 suppliers to start shipping tagged cases and pallets by January 2007. Combining the 100 suppliers from 2005 with the 200 suppliers during 2006, this will bring the total number of suppliers live in early 2007 to over 600.
Wal-Mart will be ready to accept Gen2 tags during January 2006,
enabling its next wave of suppliers to start with Gen2 tags from the start. As Wal-Mart increases its enabled facilities and as costs continue to fall, Wal-Mart expects its suppliers to tag more volume.