Wal-Mart to charge suppliers for not using new tracking technology
Posted by: in Companies Competitive StrategyFiled under: Competitive strategy, Wal-Mart (WMT)
Wal-Mart Stores, Inc. (NYSE: WMT) was an early proponent of the tracking technology known as RFID years ago, but seems to have lost patience with vendors that are taking too long to equip their merchandise pallets with the inventory tracking and shrinkage tags. As opposed to bar codes, a reader can track a package or pallet with an RFID chip without scanning anything; a two-way radio chip is used instead.
2008 is now here, and the world’s largest retailer has apparently grown quite frustrated with the slowness some vendors have displayed in adopting the new technology. It will, as such, be charging suppliers $2.00 for each pallet that does not contain an RFID tag as of yesterday. This only applies (so far) to its Sam’s Warehouse distribution center in Texas.
Wal-Mart is making it clear that the $2.00 surcharge some suppliers will see is quite a bit more than the estimated $0.20 per RFID tag per pallet. With an estimated 15,000 suppliers still not complying with Wal-Mart’s three year-old RFID mandate, company will probably be forcing the hand of slow-to-adopt vendors and suppliers this year as it ramps up to have all products tagged with RFID in all 22 nationwide distribution centers in the U.S. by 2010. Until then, it can make a nice side of change with these non-compliance fines. Perhaps an analyst will ask how much the company has made on the next Wal-Mart quarterly results conference call.
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