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Walmart’s Implementation of Rfid Tags

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Running head: WALMART’s IMPLEMENTATION OF RFID TAGS 2 Abstract Walmart has expanded as the largest retailer since it opened doors over 50 years ago, incorporating various information technology systems into their supply chain and logistical operations. Walmart is known for being the first with new innovation by utilizing new information functions to increase profits. By implementing Radio Frequency Identification Data opens communication to retailers more effectively and efficiently.

This gives Walmart and suppliers accurate inventory levels, reduced cost, sales and competitive advantages.

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WALMART’s IMPLEMENTATION OF RFID TAGS 3 Background Information Walmart opened the first store on July 2, 1962 in Rogers, Arkansas by Sam Walton. The mission for Walmart is to provide lower prices so people could live better. In 2012, Walmart has over 2. 2 million associates worldwide and 200 million customers per week at more than 10,000 stores in 27 countries (“History Timeline”, 2013).

Effective and efficient supply chain management plays a key role to maintain everyday low prices, great customer service and quality merchandise that Walmart continues to dominant the market as the number one retailer in 2012.

Over the past years Walmart made improvements in technology by updating from cash registers in 1983 to computerized point-of-sales systems for faster and accurate checkout. Next, Walmart installed the largest satellite communication system, linking operations with voice, data and video communication (“History Timeline”, 2013).

Technology advancements with Walmart’s supply chain management can be attributed to high profits, repeat customers, product availability and offering everyday low prices. Walmart prides itself on innovation of information systems as the first retailer in using Radio Frequency Identification Data (RFID) to transfer logistics operations. RFID Technology According to Spychips. com, “RFID stands for Radio Frequency Identification, a technology that uses tiny computer chips smaller than a grain of sand to track items at a distance” (“ What is RFID,” 2013).

RFID tags have three main parts the tag, a reader and computer. WALMART’s IMPLEMENTATION OF RFID TAGS 4 Each tag can contain up to 2 kilobytes of information. Readers are attached to an antenna, transmitting data from RFID tags to computer processing. This gives Walmart immediate access to real time inventory levels, sales, pricing, expired produce and unique numerical identification codes that can be scanned from more than a 100 feet, to track merchandise traveling through their supply chains (“ RFID Basics”, 2013).

RFID tags come in two forms active and passive. “Active tags have a transmitter and their own power source (typically a battery). The power source is used to run the microchip’s circuitry and to broadcast a signal to a reader (the way a cell phone transmits signals to a base station). Passive tags have no battery. Instead, they draw power from the reader, which sends out electromagnetic waves that induce a current in the tag’s antenna” (“What’s the difference between passive and active tags? ” 2013).

Walmart is recognized for bringing the latest RFID technology systems to its logistics operations. The information technology strategy offers a centralized approach for worldwide operations as a one size fits all supply chain system to be utilized around the globe. The RFID technology is another critical asset to Walmart’s business plan from inventory control to suppliers and improved customer relationships is why Walmart is known as the leader retail. Walmart’s financial reports explained from Businessweek. com, “Year over year, Wal-Mart Stores Inc. as been able to grow revenues from $447. 0B USD to $469. 2B USD. Most impressively, the company has been able to reduce the percentage of sales devoted to selling, general and administrative costs from 19. 08% to 18. 94%. This was a driver that led to a bottom line growth from $15. 7B USD to $17. 0B USD” (“Wal-mart Stores Inc. ,” 2013). WALMART’s IMPLEMENTATION OF RFID TAGS 5 Another important fact is supplier involvement with RFID implementation. Walmart’s top 300 suppliers are required to put the tags on products, if they want to conduct business at Walmart.

The average cost per tag is less than 20 cents. Supplier’s using the tag’s benefit by communicating immediate information to the retailer and product manufactures giving Walmart the competitive leverage in retail industry by inventory control. RFID implementation benefits the entire logistics operation and supply chain management. Walmart IT Infrastructure As the dominant retailer with sales totaling $264 billion in 2012 with a 2. 2 % increase from the previous year Walmart has enhanced performance to align with customers’ demands by operating more efficient (“Walmart U.

S. ,” 2013). In order to sustain a high return on investment, Walmart has designed a unique information technology infrastructure consisting of network and software capabilities. Effective data management is “Administrative process by which the required data is acquired, validated, stored, protected, and processed, and by which its accessibility, reliability, and timeliness is ensured to satisfy the needs of the data users” (“ Data management,” 2013). Walmart’s data management is designed to achieve optimal logistics and operations management control.

The definition of data management reflects Walmarts successful outcome to customers by having excellent communications with suppliers, product managers and the best retail inventory link. This allows Walmart to achieve its’ optimal goal of everyday low prices. Device management also offers a positive outcome for Walmart. WALMART’s IMPLEMENTATION OF RFID TAGS 6 Device management refers to “Within the computer, activating and controlling the peripheral devices. In a desktop computer, the operating system interacts with the device drivers for peripheral control.

In very small embedded systems, the device management routines may be included within the OS. Configuring and deploying applications to the computing devices within an organization, such as desktop PCs, laptops and mobile devices” (“Device management,” 2013). Walmart keeps the promise of Sam Walton by providing customers lower prices. In 2002, Walmart goes global with suppliers, the same year they have recording breaking single- day sales of $1. 43 billion. Another significant technology milestone for Walmart was the inception of Radio Frequency Identification Data in 2005 (Wailgum, 2007).

Implementation of the RFID tags which are easier to read, unlike the Bar code scanner must have a direct line of signal to capture the data. Utilizing data gathered from RFID tags that store sales trends, inventory data, deliveries, product location, expired produce and the flow of information through the entire supply chain management system. Combining data and device management allows the information technology infrastructure to operate and transfer data at high speeds between store computers and central systems in order to maintain a real-time database.

The telecommunication is able to let Walmart know what’s required and ability to obtain products along with getting the merchandise to customers faster. Walmart’s advanced technology, has proven them to remain the number one ranking competitor explained by Stores. org . WALMART’s IMPLEMENTATION OF RFID TAGS 7 Company Headquarters Retail sales Growth USA sales USA % Stores Growth 1 | Wal-Mart | Bentonville, Ark. $316,083,000 | 2. 6% | $453,976,000 | 69. 6% | 4,423 | 1. 4% | 2 | Kroger | Cincinnati | $85,491,000 | 9. 1% | $85,491,000 | 100. 0% | 3,574 | -1. 0% | 3 | Target | Minneapolis | $68,466,000 | 4. 1% | $68,466,000 | 100. 0% | 1,763 | 0. 7% | 4 | Walgreen | Deerfield, Ill. | $66,330,000 | 8. 3% | $68,233,000 | 97. 2% | 7,651 | 2. 6% | 5 | Costco | Issaquah, Wash. | $64,221,000 | 8. 9% | $89,054,000 | 72. 1% | 425 | 3. 2% | 6 | The Home Depot | Atlanta | $62,075,000 | 3. 1% | $70,391,000 | 88. 2% | 1,963 | -0. 2% | 7 | CVS Caremark | Woonsocket, R. I. | $59,688,000 | 3. % | $59,786,000 | 99. 8% | 7,345 | 1. 8% | 8 | Lowe’s | Mooresville, N. C. | $49,282,000 | 2. 3% | $50,207,000 | 98. 2% | 1,712 | -0. 6% | 9 | Best Buy | Richfield, Minn. | $37,551,000 | 1. 2% | $50,705,000 | 74. 1% | 1,443 | 10. 0% | 10 | Safeway | Pleasanton, Calif. | $36,923,000 | 5. 6% | $41,884,000 | 88. 2% | 1,453 | -0. 7% | 11 | McDonald’s | Oak Brook, Ill. | $34,172,000 | 5. 5% | $85,941,000 | 39. 8% | 14,087 | 0. 5% | 12 | Sears Holdings | Hoffman Estates, Ill. | $33,837,000 | -4. 3% | $39,365,000 | 86. 0% | 3,489 | 0. 1% | 13 | SUPERVALU | Eden Prairie, Minn. $29,297,000 | -3. 6% | $29,297,000 | 100. 0% | 2,466 | 1. 6% | 14 | Publix | Lakeland, Fla. | $26,967,000 | 7. 6% | $26,967,000 | 100. 0% | 1,198 | -0. 9% | 15 | Amazon. com | Seattle | $26,397,000 | 42. 5% | $47,715,000 | 55. 3% | – | na | 16 | Macy’s | Cincinnati | $26,344,000 | 5. 7% | $26,405,000 | 99. 8% | 840 | -0. 8% | 17 | Rite Aid | Camp Hill, Pa. | $25,256,000 | 0. 6% | $25,256,000 | 100. 0% | 4,664 | -1. 1% | 18 | Ahold USA / Royal Ahold | Washington, D. C. | $25,074,000 | 6. 6% | $63,066,000 | 39. 8% | 756 | 0. 7% | 19 | Delhaize America | Salisbury, N.

C. | $19,230,000 | 2. 2% | $29,400,000 | 65. 4% | 1,650 | 1. 4% | 20 | Kohl’s | Menomonee Falls, Wis. | $18,804,000 | 2. 2% | $18,804,000 | 100. 0% | 1,127 | 4. 1% | 21 | Apple Stores / iTunes | Cupertino, Calif. | $17,825,000 | 36. 9% | $18,418,000 | 96. 8% | 245 | 5. 2% | 22 | TJX | Framingham, Mass. | $17,386,000 | 3. 8% | $23,267,000 | 74. 7% | 2,212 | 0. 3% | 23 | J. C. Penney | Plano, Texas | $17,146,000 | -2. 9% | $17,238,000 | 99. 5% | 1,105 | 0. 5% | 24 | True Value | Chicago | $17,135,000 | 2. 4% | $17,135,000 | 100. 0% | 4,650 | -1. 1% | 25 | YUM!

Brands | Louisville, Ky. | $17,100,000 | 0. 6% | $32,380,000 | 52. 8% | 18,050 | -1. 0% | WALMART’s IMPLEMENTATION OF RFID TAGS 8 RFID Challenges Walmart has one of the best supply chain management operations in retail industry. However, the RFID implementation has challenges to be addressed. Currently issues in RFID implementation are, privacy concerns, cost and technology. Consumers have no idea the tags are placed on products they purchase, because they are as tiny as a grain of rice.

Privacy concerns arise for consumers, when they swipe their credit cards to make the purchase and the personal information remains in the system for criminals to access. Author McCullagh (2003) states, “That raises the disquieting possibility of being tracked through our personal possessions. Imagine: The Gap links your sweater’s RFID tag with the credit card you used to buy it and recognizes you by name when you return”( McCullagh, 2003). RFID tags can also capture your spending habit, which is a good for the retailer, but bad for consumer.

The tags stay active after you make your purchase. It’s like the San Antonio student who refuse to wear her badge with the RFID tag installed, was an invasion of her privacy. Unless the tags can become inactive after you make your purchase, then no threat of privacy. Any new technology will have associated development cost. Depending on size, and data requirements. RFID manufactures list each cost below in the following chart(“ What do RFID tags cost”, 2013): Qty| Low| High| Average 2010| Average 2009| Trend| 10k| $0. 12| $0. 18| $0. 1488| $0. 1510| v 1. 46%| 00k| $0. 11| $0. 14| $0. 1235| $0. 1235| – No Change| WALMART’s IMPLEMENTATION OF RFID TAGS 9 (Kinesella , 2010) reports other factors that influence the pricing of RFID tags were the recession from 2008-2009 companies cut back on converting to RFID tags. After the economic downturn, demands increased and RFID tag request grew fast , manufactures were not able to keep up causing constraints on supply chain shipments. Demand growth for the tags were impacted by Walmart’s initiative on tagging apparel.

RFID industries increased by 3x and exceeded manufactures expectations . Based on the unexpected demand for RFID tags, vendors are experiencing bull whip effect, a drastic change in forecasting and inventory levels drop below demands. Another concern with RFID tags is technology problems. Generally, RFID tags are for tracking and maintaining accurate inventory levels for supply chain management. When too many tags are cluttered to gather like in pallets, sometimes tags will not respond to multiply signals causing bottlenecks with logistics operations.

RFID systems work like wireless connections, if the connection gets interrupted in stores like Walmart, this would cause longer wait times in line for customers by entering each product code. RFID tags lacks overall industry standards and policy. RFID in Supply Chain Management Management of material and information flow in a supply chain to provide the highest degree of customer satisfaction at the lowest possible cost. Supply chain management requires the commitment of supply chain partners to work closely to coordinate order generation, order taking, and order fulfillment.

They thereby create an extended enterprise spreading far beyond the producer’s location. WALMART’s IMPLEMENTATION OF RFID TAGS 10 Walmart is first class of retailers when incorporating new process systems and information technology advancements. RFID tags has benefited Walmarts supply chain and logistics operations in warehouse/distribution, inventory management and procurement. Inventory management is by far the most significant function to retailers. Inventory accuracy must be well organized at all times.

For example, when you enter a store hoping to purchase your favorite brand of food, clothes, shoes, household products etc. You ever wonder why, certain items are out of stock. The only reason would be inadequate management of inventory. Walmart implemented RFID tags as ways to have accurate inventory levels at all times and extensive collaboration with suppliers to deploy RFID technology to their process. This creates a win-win position for Walmart, suppliers and most important the customer. After all, if your particular product is not available, you are taking your business to another retailer.

It’s so disappointing when an sales associates tells you we don’t have the item in stock or any idea when the next shipment arrives, sometimes they want you to check back with them in couple of days. Walmart RFID tags gives managers the option to make selections for merchandise, forecasting and adjust inventory accordingly to each location. Walmart reaped the benefits of making smart decisions on using RFID tags in its inventory control by providing continuous service to customers, suppliers and investors. Aside from having an exceptional inventory management system, Walmart also goes the distance in logistical planning.

Warehousing and distribution centers supports low prices, product availability and customer loyalty as well. WALMART’s IMPLEMENTATION OF RFID TAGS 11 Again, Walmart has the largest distribution operation center in the world. They have a fleet of 6500 tractors, 55,000 trailers and 7000 drivers. Regional distribution centers have up to 12 miles of conveyor belts moving over thousands of cases through the facility each day. In case of natural disasters 9 centers are strategically placed along the country for rapid response to challenging communities.

Walmarts takes fleet management to the next level, they only hire the most dedicated and best drivers, it does really requires a lot of commitment to average 100,000 miles annually, that’s like traveling around the world 4 times! To make its distribution center much better suited for customer demands Walmart utilizes cross docking process. ” Cross docking is a distribution system where items received at the warehouse are not received into stock, but are prepared for shipment to another location or for retail stores. Cross docking can realize a cost reduction by skipping put away and retrieval steps. Cross docking reduces overhead cost on inventory, suppliers only have to scan pallets once since RFID tags are pre-loaded with specific shipping information makes turnaround time to Walmart much more convenient at distribution centers. Crossing docking along with RFID technology has pre-loaded data on tags. Pallets are scanned at docks and released without having to unpack or shelving. Instead pallets are directly routed to trucks for immediately delivery. If each pallet received were unloaded in traditional fashion. The risks are much higher if parts have to be restaged items get misplaced or increased carrying for inventory.

Walmart may not be the hold the title as the best in the business without the use of crossing docking and RFID technology. WALMART’s IMPLEMENTATION OF RFID TAGS 12 Conclusion In closing Walmart’s journey began 50 years ago, Sam Walton found of Walmart open his first store in Rogers, Arkansas. Sam’s key strategy for success is improving sales, logistics, lower cost and implementing information technology innovations. Since then Walmart has become a multi-billion dollar company, out winning its top five competitors Kroger’s, Target, Walgreens, Costco and Home Depot.

Walmart has been able to hold its leadership status in retail industry due to effective supply chain management. RFID technology plays a major impacting in moving the right parts to the right customer at the right time. As, previously mentioned RFID tags process real time data of inventory replenishments, sales, lower cost, forecasting and tracking goods. Cross docking systems delete the hassle of unloading and shelving. The results allows for accelerated turnaround time and reduce cost, so savings are passed on long to customers and higher rate of investments to stockholders.

Information technology infrastructure data establishes links to good inbound and outbound logistics. Information technology improves Walmart’s distribution of products to customers throughout a network of distributors and warehouses. Exchanging information among networks efficiently enables Walmart to stay ahead of its competition. Walmart’s role in transferring Radio Frequency Identification Data into their logistics operations systems has proven to be successful for the overall supply chain operations. WALMART’s IMPLEMENTATION OF RFID TAGS 13 References

Cite this Walmart’s Implementation of Rfid Tags

Walmart’s Implementation of Rfid Tags. (2016, Oct 29). Retrieved from https://graduateway.com/rfid-at-walmart/

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