RFID gains at Wal-Mart better than expected

For those impressed by the preliminary results of Wal-Mart's RFID pilot program, we have good news. The final results have turned out to be even better.

Early reports indicated that RFID had cut out-ofstocks by 16 percent in 12 Wal-Mart test stores. But in fact, RFID has resulted in a 30-percent reduction in out-of-stocks on average. And with items that sell at a rate of six to 15 units a day, RFID has cut out-of-stocks by a whopping 62 percent.

"The preliminary results released late last year were conservative by design in that we did not want to overestimate RFID's impact," says Bill Hardgrave, director of the RFID Research Center at the University of Arkansas. Hardgrave notes that results varied widely by item. For example, with extremely slow-moving items that sell one unit every 10 days, RFID made no difference. "Those items typically will not be out of stock," he says. "Similarly, RFID didn't make a difference for items selling greater than 15 units a day, since associates stay on top of those items" to make sure they're replenished.

The use of RFID technology at the retail level could help to solve a $69 billion headache for retailers. That's the dollar value of sales lost annually by the nation's top 100 retailers due to out-ofstocks, according to Kerry Pauling, Wal-Mart's vice president of information systems. "We really believe that RFID is a very viable solution," Pauling says, adding that studies show that out-of-stocks average 8.3 percent on a global basis.

More than 300 suppliers currently ship RFIDtagged products to Wal-Mart, which receives them at five distribution centers. Wal-Mart is scanning more than three million unique tagged items per week in its network. By the end of 2007, Wal-Mart will double the number of RFID-enabled stores to 1,000 and plans to involve more than 600 suppliers in the RFID initiative.

Though some retailers have begun tagging individual items, Pauling says he doesn't expect his company to get involved in item-level tagging any time soon, though he acknowledges that Wal-Mart does some item-level tagging by default with large items like HP printers. "We'll remain focused on tagging cases and pallets for the next few years," he says.