Walmart expands RFID tag system

Use set in more goods categories

Walmart Inc. is requiring suppliers in more product categories to attach RFID tags to their items, which helps the retailer ensure proper stock levels in stores.

Suppliers have until Sept. 2 to comply with the new mandate, the company said. Walmart's move was first reported by RFID Journal on Jan. 28.

Walmart has used radio-frequency identification, or RFID, tags to track apparel items since 2020.

Since then, "we've seen dramatic results in our ability to ensure product is available for our customers, leading to improved online order fulfillment and customer satisfaction," said Shelly McDougal, Walmart's senior director of merchandising.

Expanding the technology into more categories will "further improve inventory accuracy across the business, provide a better in-store shopping experience for customers and drive more online and pickup-in-store capabilities," McDougal said.

Donnie Williams, executive director of the University of Arkansas' Supply Chain Management Research Center in Fayetteville, said that in basic terms, RFID uses radio-frequency wireless technology to identify items.

RFID tags that are applied to products have tiny chips containing numeric identifiers for each specific item, Williams said. The tag also has a thin antenna embedded in it so it can share that information with an RFID reader, he said.

Unlike barcodes, which have to be scanned one at a time, up to a thousand RFID tags can be read at once, without direct line of sight and at a distance of up to 30 feet, Williams said.

Justin Patton, director of the RFID Lab at Auburn University and former managing director of the University of Arkansas' RFID Lab, said RFID is used in many everyday items, such as hotel room keys, pet tags, keyless entry for cars and mobile payment systems.

But for retailers, the technology "greatly improves inventory accuracy," Patton said.

"It allows us to trace items through the full supply chain, increases efficiency, reduces waste and emissions, helps with recycling sorting, increases sustainability, enables faster and safer product recalls, and allows us to authenticate products to prevent counterfeiting or even theft," Patton said.

Williams said this enhanced ability to pinpoint an item's exact location in the supply chain and ultimately within the store "has become more important than ever in the world of omnichannel shopping, where customers may buy online and pick up in store.

"Without real-time visibility of total inventory, it's impossible to succeed at e-commerce," Williams said. And "ship from store and pick up in store are essential for making e-commerce profitable."

Because products in a store are constantly moving, though, it's hard to keep accurate information on inventory, Williams said. RFID provides that level of accuracy, he said.

Williams, who is also a clinical associate professor in the university's Walton College of Business, noted that Walmart has been experimenting and testing RFID since 2004.

McKinsey & Co. has found demonstrated benefits of the technology that includes more than 25% improvement in inventory accuracy and 10% to 15% reduction in inventory-related labor hours.

The research firm also found that the price of RFID tags has dropped about 80% in the past 10 years, making the technology more attractive to retailers and other industries.

Walmart's expanded mandate, though, "will certainly come at a cost to suppliers," Williams said. But he doesn't think any of them are surprised by the move.

Target and other retailers have used RFID for several years, Williams said

"In fact, they are in many ways ahead of Walmart in RFID adoption," he said. "However, because of the size and influence of Walmart, this could be an even bigger game changer across the retail landscape."

Williams said an Accenture study released in 2020 showed that in North America, 47% of retailers had fully adopted RFID and 45% said they are "source tagging." That means the retailers are engaging with their suppliers to execute the RFID tagging, he said.

"The question has always been whether or not the business case and return-on-investment made sense," Williams said. "In today's omnichannel world, I think it does, and I believe the suppliers recognize this as well."

"At the end of the day, I believe it will benefit suppliers in providing real-time visibility," Williams said. "In the retail world where [on time and in full] metrics rule, I would think the strong suppliers could use the visibility to demonstrate where their products are located and use that information for their advantage."

"This may reduce penalties for not meeting the metrics," Williams said, "while also supplying data to support their performance."

Patton said the Sept. 2 deadline may be challenging for some suppliers to get up to speed that quickly, "they're all going to be going there for all of their retail customers soon anyway."

Most retail RFID programs have about a six-month lead time for tagging, Patton said. And fall "is usually a good 'go live' date for retail RFID tagging."

"It comes just before the holiday rush, and gives suppliers the majority of the calendar year to get up to speed and get going," he said.