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All eyes were on Wal-Mart as the world talked about RFID.
It was and continues to be 'the' example of RFID at work, shaping up the
entire RFID landscape. As a result, the first conclusive RoI evidence coming
from the retail giant is a significant step towards breaking some ice in the
market with respect to the technology, and will help build a strong business
case for its deployment.
A recent study conducted by the University of Arkansas and
commissioned by Wal-Mart, evaluating the impact of RFID roll-out at its stores
(the study is the first to compare the impact of RFID on the merchandise
availability in the operating stores) indicates some clear benefits in terms of
RoI and operational efficiencies. Showcasing some clear, measurable, business
benefits, the study is one of the first conclusive assurances that RFID is not
all hype, after all.
 Considering the Wal-Mart mandate has been one of the
primary drivers for worldwide RFID adoption, these results are likely to have a
positive impact on the uptake of this technology among enterprises that are
waiting to see some clear business-benefit case studies. However, the question
is, does scale matter to make a success out of RFID implementations? Wal-Mart is
operating at a very large scale. Can the same success be replicated here as well
considering that many of the companies in India are operating at a much smaller
scale. The key for the enterprises will be to analyze how the Wal-Mart success
and learnings can be implemented at a smaller scale. According to Bimal Sareen,
founder and CEO, Avaana and founder-president of the RFID Association of India,
RFID can deliver value at smaller scale enterprises. It should just be targeted
at addressing specific issues: “Scale does help justify it. Larger scale
implementations are also more complex, and this has its commensurate cost, and
savings.” Ravi Tandon, president-IT, Abhishek Industries, which has undertook
one of the early RFID pilots, points out that the key is to identify the areas
where RFID can provide value addition rather than implementing RFID for RFID's
sake.
| Wal-Mart's
Numbers |
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RFID trial shows
16% reduction in product stock-outs
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RFID-equipped
stores were 63% more effective in replenishing out-of-stock
merchandise
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Out-of-stock items
can be replenished three times faster with RFID
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Manual orders
placed by stores were reduced by approximately 10%, which reduced the
cost of excess inventory
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Tangible Benefits
According to the study, conducted over several months, Wal-Mart's
customers are finding the items they want in stock, on shelves more often in
stores that are using RFID embedded electronic product codes as compared to
stores not equipped with it. For CIOs who are impressed with nothing less than
hard-core numbers, the results are not restricted to intangible benefits alone
(see box Wal-Mart's Numbers). Essentially, this meant fewer total out-of-stock
items and fewer occurrences of empty shelves when the merchandise was in the
backroom. Simon Langford, strategy manager for RFID at Wal-Mart was quoted as
saying that an RFID tagged item made it to the shelf three times quicker than a
non-tagged item, and these items were also identified as being in the back room
three times quicker .
Aggressive Roadmap
As part of its RFID expansion roadmap, in 2006 Wal-Mart is expected to
double the number RFID-enabled stores, along with distribution centers that
service the stores. By the end of the year more than 1,000 stores, clubs, and
distribution centers will be using RFID. In January 2007, Wal-Mart expects the
next wave of 300 suppliers to start shipping tagged cases and pallets, thereby
taking the total number of suppliers using RFID in early 2007 to over 600. This
is indicative of the ripple effect the expansion roadmap will have on the
technology's adoption at a wider scale globally, including the Indian
enterprises who will fall under the mandate's purview.
| A
CIO's Learnings from Wal-Mart |
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Companies willing to
test waters with the technology must emulate Walmart for their patience
and deep understanding of the technology. They looked at the constraints
of the technology and were willing to modify or change their
infrastructure and processes to accomodate the benefits associated with
this technology. They realized that the technology was an enabler and
worked around it to get full benefits, and persisted till the real value
was taken out.
One thing about what
Walmart did, which is not really spoken about is the changes incorporated
in their existing system to facilitate effective RFID inclusion. Wal-Mart
identified RFID as the next generation Auto ID technology, and conducted
the first set of trials, which resulted in just over 50% data accuracy.
They then worked backwards, analyzed what was essential to get to the 90%
mark, and then put in place everything to facilitate better functioning of
the system. Today, they boast of over 95% data accuracy and are already
starting to reap the cost benefits.
RFID, as a stand-alone
technology will never be able to deliver the goods. The big difference
will be visible only when it is collaborated with other technologies and
well integrated with existing processes.
-Pardhyumna T Venkat, head-RFID Solutions,
Gemini Communication |
| Methodology |
| For 29 weeks
researchers analyzed out-of-stock merchandise at 12 pilot stores equipped
with RFID and 12 stores without the technology. While Wal-Mart
commissioned the study, the University of Arkansas conducted it
independently. In order to ensure consistency of data, specific items were
selected at the beginning of the study, which remained constant throughout
the process. To establish a baseline prior to the study and to measure the
impact of RFID, out-of-stock items were scanned every day, throughout, for
29 weeks at all the 24 stores. |
Learnings for India
So, is Wal-Mart's preliminary success story rightly indicative of the
business benefits RFID technology can deliver, which can be replicated by other
enterprises. Or, is it the scale of operations alone that has warranted the
initial success results. According to Pradhyumna T Venkat, head-RFID Solutions,
Gemini Communication, what RFID brings in is visibility and this is the key
driving force for any organization, irrespective of size. “The time is ripe
for any Indian company with revenues above Rs 100 crore to look at RFID
seriously. End-users need to look at RFID as a 'good' substitute to existing
'bad' business practices and, more importantly, the prevalent Auto ID
technologies,” explains. Ravi Mathur, CEO, GS1 India. He further adds that
organizations can implement RFID in
highly diverse and customized ways. However, they have to pick the areas where
the technology can be used cost-effectively.
A key indication is that not just Wal-Mart but several of
its suppliers are successfully implementing it-who are much smaller in scale
and size. “It is important for customers to identify the areas for
improvement, and continuously monitor progress to assess the gains. These tenets
of adoption apply irrespective of the scale of the organization,” says Ananth
Arunachalam, sr director, Vertical Markets & RFID, BEA Systems.
According to experts, inspite of its scale, Wal-Mart can be
a learning ground for Indian enterprises considering RFID, as the fundamentals
behind the technology's adoption remain the same though the intensity may vary
with scale.
Shipra Arora
shipraa@cybermedia.co.in Page(s) 1
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