Has Wal-Mart's experiment with RFID technology reduced out-of-stocks at retail stores? We'll have a better idea later this month when the RFID Research Center at the University of Arkansas releases the findings from its first research project. Researchers at the $2 million center have been busy compiling data to determine if out-of-stocks have dropped since Wal-Mart began receiving products carrying RFID tags nine months ago.
Any evidence suggesting that RFID can reduce stockouts would go a long way toward bolstering the business case for the technology. At the RFID Research Center's grand opening in June, Kerry Pauling, vice president of information services for Wal-Mart, admitted that at a typical Wal-Mart store, only one of 12 out-of- stocks are replenished from the back room on a busy Saturday. "We need to improve on that," said Pauling, who added that he expected RFID to help by boosting product visibility. In his address, Pauling also challenged other companies to take on RFID projects. "You should start small and start with real-world challenges," he urged, "but get started today."
Manufacturers are evidently taking Pauling's advice to heart. Since the Research Center opened for business, it's had a steady flow of visitors anxious to learn how RFID can improve their distribution operations. Bill Hardgrave, a professor at the University of Arkansas and the Research Center's executive director, says that representatives from three to five companies have been touring the facility each week—mostly from Wal-Mart's second tier of suppliers, which are due to start tagging products this January.
In the meantime, Hardgrave says he's starting to see Gen 2 equipment like tags and readers trickle into the Research Center, which he believes will spark more companies' interest in touring the site. "My guess is that in ... September the demand for these services will escalate," he says, "and that we'll see a lot of suppliers realizing that they only have four months left [to meet Wal-Mart's mandate] and that they had better get busy. And as Gen 2 equipment comes out, we'll also see an increase of interest among companies that have been sitting on the sidelines."
The research center itself is located a few miles off campus in a 7,800-square-foot corner of Hanna's Candle Co.'s warehouse, a large DC adjacent to the company's manufacturing facility in Fayetteville. The lab, which is outfitted with conveyors, antennas, readers, and other equipment from multiple suppliers, is designed to emulate most steps in the shipping process, from origin DC to the back room of a retail store. Based in a working DC, the test center is subject to all the potential interference conditions any DC might experience. Sponsors of the center include technology providers, businesses that are engaged in integrating RFID into their operations, and suppliers of component technologies.
The latest threat to U.S. currency comes not from the yuan, the yen or the euro, but from something else familiar to DC VELOCITY's readers: RFID. The greenback, which has been steadily losing ground to the nearly ubiquitous debit card, now faces a new threat in the form of RFID-based contactless payment systems. These RFID payment systems allow customers to simply wave a small object such as a mobile phone, a credit card or key chain near a reader terminal at the checkout counter. ABI Research predicts a sharp increase in the use of contactless payment services over the rest of 2005. "As consumers continue to use card-based transactions for smaller, traditionally cash-based purchases, contactless payment capabilities make more sense, especially for card issuers looking to increase customer loyalty and convenience," says Erik Michielsen, director of RFID and ubiquitous wireless research at ABI Research.
Michielsen says the expansion of contactless payments from closed systems to open systems tied to bank accounts and major credit card issuers will lift the services to the next level. The McDonald's restaurant chain, which already functions in a "fast" environment, has plans to deploy contactless systems in nearly all of its North American locations this year.