WAREHOUSING & DISTRIBUTION 2006 - RFID benefits emerging

By: | at 08:00 PM | Channel(s): Logistics  

Study shows Wal-Mart reduced out of stocks by 30%By Peter A. Buxbaum, AJOTA study conducted at the University of Arkansas revealed that the use of RFID technology reduced out-of-stock products by 30% at a sampling of Wal-Mart stores. These results, announced in April, involved a re-examination of data from a 2005 study that showed out-of-stock reductions of 16% at the retailing giant, thanks to the implementation of radio frequency identification technology.
The study, conducted by research faculty at UA’s Sam M. Walton College of Business from Feb. to Sept. 2005, examined twenty-four Dallas-area stores, half of which were RFID-enabled and the other half of which served as control stores. In November, the research center announced preliminary results that showed the use of RFID technology reduced out of stocks by 16% when compared to control stores. Those results also demonstrated that test stores outperformed control stores by 63%, and that RFID-tagged items within the test stores outperformed non-tagged items within those same stores by 300%.
Radio frequency identification, or RFID, is a wireless data collection technology that uses electronic tags for storing data and identify items. Unlike bar codes, which must be brought close to the scanner for reading, RFID tags are read when they are within the proximity of a transmitted radio signal. According to the University of Arkansas report, RFID holds a number of advantages over barcode technology: it does not require line of sight for the data to be read; RFID allows hundreds of tags to be identified per second; RFID tags can store more data; and the data on RFID tags can be manipulated.
In June 2003, Wal-Mart requested that its top 100 suppliers place RFID tags on pallets and cases shipped to stores in the Dallas region. Wal-Mart mandated that is top 200 suppliers start using RFID as of January 2006. Wal-Mart’s move to RFID galvanized others to do the same, including the US Department of Defense, as well as other retailers, such as Target, Albertson’s, and Best Buy.
“The preliminary results released late last year were conservative by design,” said Bill Hardgrave, founder and director of the RFID Research Center, a subunit of the Information Technology Research Institute in the Walton College of Business at the University of Arkansas. “We did not want to overestimate RFID’s impact. Since the release of the first series of data, we have been diligently examining the data, trying to isolate the effect of RFID on out of stocks.”
According to Hardgrave, the study identifies the effect of RFID as it relates to sales volume. “Across a broad spectrum of sales quantities, we found that RFID, when controlling for such things as case pack size and shelf quantity, actually reduced out of stocks by about 30%,” he said. “This number, rather than the original estimate of 16%, is a much better estimate of RFID’s true benefit.” The results were generated by examining average weekly out of stocks at the twenty-four stores for over 4,500 different products.
The study demonstrated how data from an RFID-enabled environment can help improve processes and reduce out of stocks by automating the creation and execution of picklists. According to the study, Wal-Mart now uses two basic methods to replenish stock on the shelves: stocking shelves directly from delivery trucks and creating a picklist of inventory on-hand that can be taken to the sales floor. Picklists are created by visually inspecting the shelves for out of stock items and using a handheld scanner to add the item to a picklist if the system shows product availability in the store.
Reading RFID data at key points in the distribution process can show how any single case of product progressed from its arrival at the distribution center to its being disposed of for crushing. In the interim, the system shows when it was loaded on the conveyor system, when it departed the distribution center, when it arrived in the store, when it was placed in the backroom, when it was delivered

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American Journal of Transportation

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Peter Buxbaum has been writing about international trade and transportation, as well as security, defense, technology, and foreign policy, for over 20 years. Besides contributing to the AJOT, Buxbaum's work has appeared in such leading publications as [em]Fortune, Forbes, Chief Executive, Computerworld, and Jane's Defence Weekly[/em]. He was educated at Columbia University.