Wal-Mart seeks to speed up RFID:Three studios join standards-setting group

 

Jul. 2, 2007 (Video Business) —

LOS ANGELES–Wal-Mart Stores and some of its vendors demonstrated the ability of radio frequency identification (RFID) to boost product sales in presentations at the 2nd annual Entertainment Supply Chain Academy conference here last week. The information served as both an update on Wal-Mart’s (NYSE:WMT) progress with RFID and a pitch for the studios in attendance to help push the technology forward.

At this point, Wal-Mart has implemented RFID in 1,000 of its 6,500 stores and clubs, covering 200,000 items, manufactured by about 600 participating suppliers, said Myron Burke, strategy manager of Wal-Mart’s store innovations and operations group in a keynote speech at the event.

Most products are tagged with RFID markers on case boxes and pallets that carry such information as warehouse arrival time and location, among other things. But the chain wants to expand its RFID item tracking out from just its warehouses and onto the sales floor, both on displays and eventually, on individual items.

“We need efficient delivery of merchandise for that last 100 feet to the shelf,” said Burke. “That is a critical part of the supply chain. [Previously], stores have been dumping grounds. That can affect the way your brands are perceived.”

Many studios have already invested significantly on installing vendor managed inventory systems, which track DVD sales. Although studios recognize that RFID can improve inventory tracking, they are reluctant to invest more resources, conference participants said.

However, Sony (NYSE:SNE) Pictures Home Entertainment, Paramount Home Entertainment and 20th Century Fox Home Entertainment have become subscribers to RFID advocacy organization EPCGlobal, which helps its retailer and supplier members develop standards for using the technology, including advancing to item-level tagging. EPCGlobal retail members include Best Buy, Target and Wal-Mart.

“This is a milestone year,” said Mike MacDonald (TSX:MDA) , executive director of operations production services at Sony Pictures Home Entertainment. “We are mobilizing activity on something that really makes sense for the retail environment. … Past tests have demonstrated that item RFID can generate higher sales between 15% and 18%.”

Starting with its first meeting in January, members of the EPC Media and Entertainment Interest Group are focusing on deciding three standards for RFID: how to apply the tag, how to read the tag and how to analyze the tag data.

“We are now testing locations of the tag outside [DVD] packages,” said MacDonald, after it was decided that it was too tricky to insert a tag inside the disc. “In analyzing data, we are looking at how long RFID-tagged corrugate DVD displays actually stay on the floor. We pay a lot of money for those things.”

Today, store staffers discover out-of-stock product hours after the last item disappears, said Wal-Mart’s Burke, and they can waste three of four hours hunting for the right surplus product that needs to be slimmed from shelves.

“With RFID, there is complete supply chain transparency, where you can report info on [tagged] items every 30 minutes,” he said. “There is an overall opportunity to apply a tag at the point of its manufacturing and see that product until it leaves the store.”

At supermarkets, the average out-of-stock rate for promoted in-store products is 8.3% to 17.1%, according to Grocer Manufacturers Assn. research. This means that one out of every 10 grocery consumers can’t find an item they want.

All together, the $33 billion DVD and videogame industry is losing 1% in annual sales to out-of-stocks, or $330 million, according to a study by the Sam Walton College of Business.

Burke admitted that during one visit to a Wal-Mart equipped with on-floor RFID tagging, out-of-stock signs were discovered in 66 of about 200 total product categories within its electronics section. With RFID, Wal-Mart management can now alert those store associates to fix the problem spots.

With RFID-tagging, hygiene product giant and Wal-Mart vendor Kimberly-Clark (NYSE:KMB) studied how often its store employees neglected to move promotional displays for an adult care product from their back rooms to front sales floors. It’s key to time displays with the products’ accompanying media advertising.

“It turned out that 56% of stores executed on time, and the late stores showed a lower sales lift,” said Phil Therrien, EPC manager, customer supply chain strategy and development at Kimberly-Clark. “We discovered with RFID that we needed to close that gap. [Since that study], Kimberly-Clark has driven execution to 75%.”

Burke said Wal-Mart is willing to wait for other suppliers to adopt RFID and realizes there are significant costs involved.

“We are just at the beginning of RFID,” he said.

Newstex ID: RBI-0086-17874630Originally published in the July 2, 2007 version of Video Business.

Copyright (c) 2007, Video Business, a division of Reed Elsevier Inc. All Rights Reserved.

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