Wal-Mart: test of 'smart' tags has gone smoothly

CHICAGO (Dow Jones/AP) _ Wal-Mart Stores Inc. said a pilot program to introduce radio-frequency identification tags, a technology that's intended to replace bar codes, to its stores and distribution

Wednesday, May 19th 2004, 9:12 am

By: News On 6

CHICAGO (Dow Jones/AP) _ Wal-Mart Stores Inc. said a pilot program to introduce radio-frequency identification tags, a technology that's intended to replace bar codes, to its stores and distribution network has begun without a major hitch.

The Bentonville, Ark., retailer's launch of the tags began late last month with a small group of stores and distribution centers in the Dallas area.

RFID tags _ which can be read from a distance without a direct line of sight _ are expected to help manufacturers and retailers reduce theft, aid in product recalls and keep shelves better stocked.

``To date, no glitches _ only positive glimpses of what's to come,'' Wal-Mart Chief Information Officer Linda Dillman said Tuesday.

While the technology has sparked privacy concerns among some consumer advocates, retailers say the tags eventually will result in lower prices and better service.

Cases and pallets of 21 different products from 8 suppliers are now being shipped to Wal-Mart's Sanger, Texas, distribution center and then to 7 local supercenters.

The pilot program remains on schedule to include the participation of its 100 top suppliers by January, Michael Duke, chief executive of the company's Wal-Mart Stores division, told a retail technology conference in Chicago on Tuesday.

``We're really pleased with the progress and the movement of our suppliers in achieving this,'' Duke said.

Some industry observers say Wal-Mart appeared earlier this year to back off from an initial plan put forth in 2003 to roll RFID technology out to its entire distribution system by 2005, having realized that the cost and difficulty would be too much for some of its suppliers.

But Duke said Tuesday that ``we're not slowing down the deployment _ we're full speed ahead.''

Since Wal-Mart announced the pilot program's January deadline for its top 100 suppliers, an additional 37 suppliers volunteered to meet the deadline, Duke said.

Wal-Mart aims to be using the technology with all of its domestic suppliers by 2006. International rollout will begin sometime next year, Duke said.

For now, Wal-Mart has no plans to use the technology at cash registers, nor will the company have readers in place at all of its distribution centers by January, Duke said.

As others adopt the technology, the cost of the chips will decrease steadily. According to the research of one unnamed supplier, Duke said, prices of 30 cents per chip will fall to 5 cents by the fourth quarter of 2006.

``We think that this cost reduction can happen even quicker,'' he said.

Since Wal-Mart announced its RFID ambitions last June, numerous large retailers, including Target Corp., Germany's Metro AG and Tesco PLC of the United Kingdom have announced similar trials.