Issue #133 | Feb. 8, 2008 | by Jeff Schaengold

The last four years have been a roller coaster pattern for Wal-Mart traceability.

Wal-Mart should be given proper credit for executing a strategy that had a mix of champions and opponents within the ranks of Wal-Mart suppliers. There is little doubt that Wal-Mart's traceability initiative did bear fruit for Wal-Mart and many of their suppliers.

For one, the traceability initiative identified operational pain points at the back of the Wal-Mart's stores compared to Target. At the same time, it improved supply chain visibility for Wal-Mart suppliers and achieved positive results. Also, limited serialization of promotion items is proving to be of appreciable value, according to some top tier Wal-Mart suppliers.

Recently Wal-Mart announced that it will chargeback $2 a pallet/skid to any supplier that does not apply an RFID label on the pallet level to the Sam's Clubs’ Distribution Centers.

Wal-Mart's $2-per-pallet assessment does not appear to be a charge for non-compliance that will be of detrimental financial impact to the Wal-Mart suppliers. Most truck trailers contain 22-44 pallets. The cost per trailer is anywhere from $44 – $88 for non-conformance. If a supplier ships one trailer per day, this is an annual cost of $12,000.

If we use the average value of a Sam's trailer load at $60,000, Wal-Mart is betting that $44 is an acceptable financial cost considering the average cost of transport is $800 to a W-M distribution center.

At least the Wal-Mart supplier has a choice. A choice that's affordable.

While in most cases Sam's Club lends itself to a full pallet cross-dock supply chain for pallet tagging, the same can be applied to Wal-Mart stores on a case level. Even if Wal-Mart gets down to the case level, at $0.10 a case, it may not be such a burdensome charge for suppliers.

I've often attempted to communicate to Wal-Mart management over the past five years to take a page out of EDI and UPC history. Similar to Wal-Mart's RFID initiative, in the late 80's and early 90's, the majority of the big box retailers adopted a similar strategy of adopting UPC and SKU barcode on the pallet and carton level, also to improve supply chain efficiency. Retailers and wholesalers in great numbers developed applications at the Distribution Center level to print and apply carton and pallet labels that contained internal PO numbers, internal SKU identifier, batch information, vendor invoice, UPC, stock keeping location, etc.

The cost was relatively minimal. In many cases the simple process of applying the label added an audit function that in many cases avoided downstream errors.

A call to Wal-Mart management: Now that you have a proven track for a successful roll out, I'd like to once again suggest that Wal-Mart continue to take a page out of former implementations:

• We skipped a basic step in the RFID initiative. We attempted to transition from product level ID (UPC and SKU) to the data carrier (RFID), and thought that serialization can just be included.

Please take a step back. Please focus on unique identification of pallets and cases. It doesn't matter if a supplier uses RFID, 2D datamatrix, RSS, or even just a human readable serial number. Please go back and focus on unique identification of each and every case and pallet. To inkjet a unique identifier or apply a label is less than a penny a case to a Wal-Mart supplier.

• Simply having a unique identifier on each case and pallet, will provide you with 80% of the visibility improvement you're seeking from RFID, at a fraction of the cost to Wal-Mart, suppliers and customers. By emphasizing a unique identifier, Wal-Mart will be eliminating the nagging discussion over RFID tag costs. Unique serialization is not a "cost" concern.
  
  
• In the scheme of all costs, it's less costly for Wal-Mart, and many of the Wal-Mart suppliers, to apply a unique identifier (RFID) at the Wal-Mart DC dock door. If Wal-Mart will invest in the appropriate systems to serialize product at the DC receiving dock door, the cost to Wal-Mart, suppliers and customers will be dramatically lower than thousands of suppliers individually attempting to replicate each other without an economy of scale. Why not $0.05/case for unique identifier in machine code (bar code, RSS or 2D), or $0.10/case for RFID, chargeback?
  
  
• $2/pallet is affordable and it will achieve the desired results, but imagine how much more efficient it will be if the supplier affixes a serial number to each pallet so the serial number will simply be encoded on an RFID label at the Wal-Mart DC? This is very achievable without a loss of productivity.

As to RFID and $2/pallet, for one, I am glad to see Wal-Mart return to a proven process of paradigm change, "Less stick and more carrot."

Jeff Schaengold has extensive experience in the development of RFID in Pharmaceuticals, Pedigree, Serialization, Automation, Supply Chain, and Packaging.

Jeff's blog is: http://www2.sea.siemens.com/news/blogs.htm