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1. HOW IS RFID TECHNOLOGY RELATED TO WAL MART BUSINESS MODEL?HOW DOES IT BENEFIT SUPPLIERS?
Wal-Mart has required its top suppliers
to use passive RFID tags on cases and pallets shipped to its stores to
help it track and record information flow. Suppliers have been proceeding slowly because of difficulties in RFID implementation.
2. WHAT MANAGEMENT + ORGANIZATION + TECHNOLOGY FACTOR FOR WAL-WAR SUPPLIER TO USE RFID.
Wal-Mart is the largest retailer on Earth. Their business model is centered on using a
low-cost leadership strategy in order to achieve the lowest operational
costs and services at a lower price than competitors while enhancing
quality and level of service. Wal-Mart have been able to follow their
strategy of keeping prices low and shelves well stocked by using a
legendary inventory replenishment system (Real Link). Through Real Link,
Wal-Mart’s has a continuous replenishment system that sends orders for
new merchandise directly to suppliers as soon as customers pay for their
purchases at the cash register. At Wal-Mart’s headquarters, the central
computer collects the orders from all Wal-Mart stores and transmits
them to suppliers. The objective was to reduce out-of-stock items by
tracking item location more precisely as they moved from the receiving
dock to store shelves.Suppliers can also access Wal-Mart’s sales and inventory data using Web technology.
Wal-Mart
wanted suppliers to use of RFID technology in order to assist the
suppliers in shipping products more accurately and faster. RFID
technology offers other benefits to suppliers. RFID
technology is tied directly to Wal-Mart’s Real Link system. As soon as a
customer purchases an item at a Wal-Mart store, the supplier monitoring
the item knows to ship a replacement to the shelf. Suppliers are able
to obtain real-time access to customer demand, track shipments, and
improve inventory control. Using these technologies, suppliers are
better informed of product demand, and given this information they can
use it to predict their own manufacturing, production, and shipping logistics.
3.WHAT WOULD MAKE ADOPTING RFID MORE FAVORABLE FOR SUPPLIERS? CONDITION TO USE RFID.
Not
all suppliers could comply with Wal-Mart’s demand for attaching RFID
tags to all of their products. Only a limited number of suppliers could
afford to make the major technology and business process changes
required to integrate RFID into their IT infrastructure and information
systems. RFID technology is still viewed as being in its infancy and the
benefits are not fully understood or even measurable. On top of that,
this technology is still very expensive and pricing of the tags
themselves make it impossible for the majority of suppliers to do it.
Wal-Mart
must assist suppliers in making the required changes to their systems
so that the can actually use the data generated by RFID to track their
product movement and inventory. Through education, the suppliers would
be better equipped to understand how they can benefit from RFID.
In
February, 2005 Wal-Mart ordered its top suppliers to place RFID tags on
all products shipped to specific distribution centers. The objective
was to reduce out-of-stock items by tracking item location more
precisely as they moved from the receiving dock to store shelves. The
information captured through the use of RFID tags would held Wal-Mart
reduce out-of-stock items, increase sales, and further reduce its costs.
However, suppliers are not totally convinced of the benefits that they
would reap from such an expensive undertaking.
Wal-Mart
has the power to exercise muscle in the supply chain. However, Wal-Mart
must streamline their demands in requiring suppliers to attach RFID
tags to all items. From the supplier side, this top-down mandate from
Wal-Mart was simply not economically feasible. The technology itself is
still very expensive and suppliers simply could not state a good
business case to support such expenditures.
Major
retailing and manufacturing companies will no doubt switch to RFID
technology as its costs fall, and its applications increase. Whether or
not all major retailing and manufacturing companies should switch to
RFID is a matter of choice. They will no doubt go this way in the near
future. By doing so, they will increase operational efficiencies,
increase profits margins, and gain a competitive advantage by lowering
overall costs to consumers.
