Wal-Mart begins using smart label technology to track inventory

Monday, May 3rd 2004, 12:00 am

By: News On 6

Wal-Mart Stores Inc. and a number of its suppliers are using a Dallas distribution center as the starting point for a technology that's targeted to one day replace the bar code and help companies improve inventory efficiency and reduce theft.

The radio frequency information (RFID) tags provide automatic tracking of pallets and cases of goods. Eight suppliers began using the tags Friday to track 21 products. Wal-Mart said it will have more than 100 suppliers using the tags by January.

Wal-Mart chief information officer Linda Dillman would not say how much the Bentonville-based company is spending but said the tags are on the top line of Wal-Mart's technology budget.

The RFID tags contain a chip that holds the details of what is in a case or on a pallet of goods. Rather than have a worker with a handheld scanner logging in barcodes, the system will let a computer system use a radio signal to log the goods as they arrive at the loading dock.

The tags can also be used in the manufacturing process, which Dillman said can help suppliers become more efficient, and the tags will help companies on both ends know where their products are at all times.

Wal-Mart says the tags will help reduce theft and counterfeiting, the latter particularly affecting prescription medicines.

Steve David, chief information officer for Proctor & Gamble Co., said counterfeiting costs industry $500 billion worldwide and backshop theft costs companies $50 billion per year.

Ian Robertson, director of Hewlett Packard's RFID program, said HP has put the technology in place in some of its production facilities.

``We felt that the best thing to do was get on the ground and try it,'' he said at a demonstration with Wal-Mart on Thursday in Dallas. Robertson said the company found it could better track its materials and could read the RFID tags where it was impractical to have a human standing by to scan barcodes.

Dave Hogan, chief information officer for the National Retail Federation said the RFID tags could gain an important place rather quickly. He said barcodes will likely be around for quite a while and that he expects them to be used in concert with RFID tags even when the new technology moves to store shelves.

``This is all about the distribution center and the supply chain, case and pallet. That's the big win,'' Hogan said.

P&G's David said one of the objectives of having the tags in distribution is to help ensure that store shelves stay stocked. By extension, tagging individual items will help that goal.

Target Corp. and Albertsons Inc. are also experimenting with the technology, Hogan said, but Wal-Mart is pushing it most aggressively to its suppliers. Wal-Mart says the technology will help it keep costs low, which it can pass on to its shoppers.

David said the hope is that RFID tags will catch on more quickly than the dozen or so years it took barcodes to become common.

``It's really about getting to this critical mass juncture so we can learn and roll faster,'' David said.