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Tue, Dec 28, 2004 - Page 12 News List

Radio-tag adoption slower than expected at Wal-Mart


A year and a half ago, Wal-Mart served notice that it expected its top 100 suppliers to be shipping goods to it with new radio tagging technology by Jan. 1, 2005.

While it may still be true, as the saying goes, that the best way to predict the future is to create it, Wal-Mart's experience so far has served as a reminder that creating the future is not all that easy.

With Jan. 1 just days away, the technology is not yet ready to meet the needs of either Wal-Mart or its suppliers. The tags, which are typically about the size of a credit card and contain an antenna and microchip encased in plastic, receive query signals from scanning devices called readers. Using the energy captured from those signals, they broadcast a snippet of code identifying the goods to which they are attached.

To date, most of Wal-Mart's suppliers have not figured out inexpensive ways to automate the printing and application of the tags. Although read rates are improving, no one who uses the technology has systems that can reliably read the information 100 percent of the time in factories, warehouses and stores; Wal-Mart said the rate was about 60 percent in its stores.

Nor is the data currently integrated well enough with other technology to initiate changes in manufacturing or shipping sched-ules that could actually save the large sums of money that would make the investment worthwhile.

"The progress has been much slower than many people anticipated, and in some cases it's stalled," said Andrew Macey, vice president of the Sapient Corp, a technology consulting firm in Cambridge, Massachusetts.

Wal-Mart's official position is that it is working closely with suppliers, meeting its goals and learning valuable lessons that will pay off as the technology continues to roll out. But analysts who regularly survey major consumer goods companies said that most participants were cooperating with Wal-Mart out of fear of offending the retailer and were, as much as possible, putting off investments in the technology.

"The big manufacturing companies have advocates for the technology who are very positive, but the people on the floor who are implementing it are much more negative," Kara Romanow, an analyst at AMR Research, said.

Wal-Mart's goal was to wring billions of dollars from the supply chain by using the tags to keep shelves filled with whatever consumers were buying, cut back on shipments of other goods and combat theft.

The mandate was soon defined in narrower, more practical terms as supplying tagged cartons and pallets, not individual items, to a limited number of stores through just three Texas distribution centers by the Jan. 1 deadline.

Wal-Mart said recently that more than 100 suppliers would be tagging bulk shipments to the three Texas centers next month. But only 40 will be tagging everything they send. Of the remainder, two have been so tied up in a complete overhaul of their entire information technology infrastructure that they have put off attempting to introduce radio tagging. Some suppliers will be tagging as little as 2 percent of the goods going to the centers.

"We think the average supplier will be tagging about 65 percent of the volume they ship to the three centers," Linda Dillman, the chief information officer of Wal-Mart, said.

Although the progress toward adoption has been slow, it has an air of inevitability.

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