Reference no: EM132169647

RFID: The Wave of the Future

Wal-Mart stores, Inc., the world’s number one retailer has more than 6700 stores, including discount stores, supercenters, Sam’s Club’s, neighborhood markets, and nearly 2800 international units. With fiscal 2007 sales of $345 billion, Wal-Mart is able to exert tremendous pressure on its suppliers. So when Wal-Mart announced in April 2004 that it was beginning a pilot program to test radio frequency identification (RFID) technology to improve its inventory and supply-chain management, suppliers and competitors alike set up and took notice.

One of the first companies to introduce barcodes in the early 1980s, Wal-Mart planned to require its top 100 suppliers to put RFID tax on shipping crates and palettes by January 2005, with the next 200 largest suppliers using the technology by January 2006. As of February 2007, Wal-Mart officials said that 600 of its suppliers were RFID-enabled. The ultimate Wal-Mart goal is to have all of its 86,000 plus suppliers on board using electronic product codes (EPC) with RFID technology.

The major issue with our RFID tags is per-chip cost. In 2004, when Wal-Mart announced its intent to use RFID tags, they sold for 30-to-50 cents each. Wal-Mart requested price of five cents per tag, expecting increased demand and economies of scale to push the price down to make them more competitive with inexpensive bar codes.  

Increased demand has brought the price of current-generation RFID tags to about $.15 apiece, but barcode’s only caused a fraction of a cent. Barcodes help track inventory and can match a product with price, but they lack the electronic tags ability to store more detailed information, such as the serial number of a product, the location of the factory that made it, when it was made, and when was sold.

In their inventory-control capacity, passive RFID chips with small antenna are attached to cases and palates. A reader activates the chip into its unique product identifier code is transmitted back to an inventory control system. Wal-Mart expects the RFID technology to improve its inventory management. One of the company’s measures of efficiency is inventory growth at a race of less than half of sales growth. For 2003, Wal-Mart’s inventories grew at 9.1% while sales increased 11.6%. For fiscal 2007, inventories were up 5.6% over fiscal 2006 inventory levels while sales rose 11.7% for the year.

What problem might occur with a full implementation of our FIT technology in retail industries? Specifically, consider the amount of data that might be collected.