Wal-Mart was the company to usher in the barcode. Now they are ushering in a new technology: RFID (Radio Frequency IDentification); according to Fortune.
The picture:
Imagine strolling into Wal-Mart to buy the new DVD of The Matrix. As you take it off the shelf, a radio signal alerts an employee to restock, telling him where in the backroom to find The Matrix and giving a warning ping if he mistakenly slides it onto the Legally Blonde shelf. Meanwhile, forget going through the the checkout line: An electronic reader scans the items in your cart and automatically charges your debit card.
Stock management, reduced labour costs, increased efficiency and decreased transaction times all equal roughly 7-9B$ in savings for Wal-Mart.
Wal-Mart’s suppliers, though, seem less than thrilled by the retailing giant’s ‘be compliant by 2005′ declaration:
Though few suppliers will say so publicly, many are less than thrilled with the RFID mandate–they see costs, not benefits.
While I can see the point of what suppliers are saying, I believe it is incredibly short-sighted. After all, they are being given a kick in the butt to save money. Contrary to what these suppliers (some of the world’s largest consumer product companies) are saying, this is to me a godsend for them.
After all, if Wal-Mart can realise an increase in efficiency of 5-10% and a decrease in labour of 3-8%, why can’t the suppliers do the same?
The barcode did this. Suppliers complained at first, but then used the barcodes in their internal systems to save money for them as well. Do it for your distributor, let it benefit you.
If companies can do this with RFID they could simplify their stock, improve their stock management and have a much tighter level of control (down to the individual item) over their inventory.
Silver lining on a black cloud, wishful thinking or just out of the box? I really have no idea, makes sense to me though.
October 28th, 2003 at 8:23 pm
I agree that, in the end, efficiencies are there to be had by everyone, not least the consumer, especially given the evolution of new technologies. The real reason suppliers whine when these things happen is they feel bullied by an already all-powerful customer, one who may or may not know how to demonstrate the inherent benefits accross the whole supply chain. People and entities who have dispraportionate levels of power do not always use power equitably.
I am just launching a Blog and make reference to a business dliemma arising from a retailer’s increase in leverage–albeit at a much smaller scale and under different circumstances (in ‘the conception of Proserv section in Background, if you are interested). Fortunately, that dynamic lead me through a process which eventually ended in my founding a food service distribution company.