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Wal-Mart Pushing Suppliers For RFID
Weather Storm brings us an InformationWeek article about Wal-Mart's push for suppliers to RFID tag their product shipments. Wal-Mart seems to have lost patience in waiting for its suppliers to adopt the inventory tracking initiative. From InformationWeek:
"The retailer says that beginning Jan. 30, it will charge suppliers a $2 fee for each pallet they ship to its Sam's Club distribution center in Texas that doesn't have an RFID tag. The charge is to cover Sam's Club's cost to affix tags on each pallet, says a Wal-Mart spokesman. The retailer hasn't taken such a strong-arm approach yet with the more than 15,000 suppliers that still haven't complied with its request to tag pallets and cases headed for its Wal-Mart stores. Instead, it seems focused on turning its 700-store Sam's Club warehouse-outlet division into an example of RFID supply chain technology in action, down to requiring item-level RFID in 22 distribution centers by 2010."
It would have if you were responsible for a large fraction of global celluar activity.
Love em or hate em, Walmart has the clout to do so.
I am very small, utmostly microscopic.
It's not being implanted in anyone, it's not being used to track personal information, it's just for inventory control. Maybe I'm missing something here, but this seems like the kind of application we should be supporting. Complaining about it seems almost as bad as the people who fought against barcodes because they contain the "mark of the Beast".
I have come here to chew memory and kick ass... and malloc() is returning a null pointer.
Walmart wants the RFID b/c it will lower their operational costs. RFID has one advantage over barcodes; they can be read and counted at a distance and ignore dirt. If a sticker gets dirty, the barcode is unreadable, while if the pallet invoice is facing the wall it's inaccessible. RFID will still work.
But this has a non-trivial adoption cost to the manufacturers. Walmart isn't incentivising this; no offers of cost sharing. Just a flat demand. It's not illegal AFAIK but it is abusive.
I've been on slashdot so long I'm starting to get out of touch with the cool stuff if it ain't on slashdot.
Let's say a warehouse employee makes $18/hr. (They make less, I'm sure, but it makes the math easy.) $.20 goes to the cost of the tag, and $1.80 goes to the cost of putting the tag on. This means that it takes 6 minutes (1/10th of an hour) to tag a pallet? If it took 3 minutes, I'd be very surprised. That employee should be able to tag 1 pallet per minute, easily. Remember, he doesn't have to actually COUNT the product, since even the tagged ones still need to be counted. He just needs to read the manifest and enter it into the computer, and slap the RFID tag on.
Cost of employee to tag at 1 per min= $0.30
Cost of labour training=0
Cost of payroll tax, HR management=0
Cost of chip = $0.20
Cost of ordering the chips = 0
Cost of receiving the chips = 0
Cost of storage of the chips = 0
Cost of restocking the chips = 0
Cost of quality control = 0
Cost of equipment to affix the chip=0
Cost of insurance=0
Cost of billing the suppliers and paperwork involved =0
Interest on capital employed for the above=0
Yep, your math works out. You should start your own business instead of posting here on slashdot.
Imagine you were, well you, and you were standing under King Kong's foot. If he steps on you, the obvious happens. Kong demands "a $2 discount" from you, even though you are his banana supplier. The question of the day is, does Kong get his bananas for $2 less? For extra credit, can you explain why reverse would not be true, if you attempted to demand a $2 on Kong's security services he's providing you?
Qualifying questions:
If I give Kong a discount, am I still going to be able to eat? Or am I going to die slow? Can I feed my bananas to another monkey and have them grow while Kong shrinks? Do I enjoy my life enough that I wouldn't just tell Kong to fuck off out of spite?
Wal-Mart are a short ways from collapse at all times, it's a consequence of their "Keep no back stock" policy. They run everything at the edge, and at some point, it's going to bite them hard.
In the end, didn't King Kong get killed when everyone united against them?
-1 Uncomfortable Truth
Your analogy is asinine - let me explain...
Wal-Mart has set the bar and said that they require RFID tags by some day in the future to do business with Wal-Mart - suppliers that do not meet that requirement will not be able to sell their goods to Wal-Mart. Wal-Mart is offering an accomodation to suppliers that want to sell at Wal-Mart but either can not or will not be able to include RFID tags on their pallets to this one distribution center (and yes, it will creep into their entire supply chain).
To build an analogy for your cell phone purchase, you would have to communicate to the Cell Phone stores in your area that you were interested in getting a cell phone and offer them the chance to bid on your business. You would also have to explain to them before they reply to your RFP that your purchase is contingent on have the phone unwrapped and ready for use immediately upon delivery. Then, when none of the local stores respond to your RFP, you can tell them that if the "ready to use" requirement was too onerous, you would be willing to take a packaged, not ready for use cell phone, but you would charge them some few dollars to accommodate your effort. Then, when they agree to offer you a phone you can act accordingly. That is what Wal-Mart is doing.
Ken
If I give Kong a discount, am I still going to be able to eat? Or am I going to die slow? There's a web full of anti wal-mart sites out there that can show you just how many companies (Levi Jeans, Master Locks, Huffy Bikes, etc.) this has happened to.
So your first question is unfortunately irrelevant. Your second, is however, as the only winning move in this situation is not to play with King Kong at all, and attack him instead of yourselves as he demand. How to get that to happen is a topic for another day, under another revolution thread; as the Kong you'd have to defeat here has help this time.
~Rebecca
If they charged their cost, then the supplier could, in effect, "hire" the Walmart guy to put the tags on. It's much simpler - no need to buy the tags or equipment, and no chance of error. Walmart's aim is not to get the $2, it's to get the supplier to put the tags on.
Even if you did calculate that, most of which will be pennies because we're talking about millions of pallets, not just hundreds, they're still way over-charging.
You're suggesting that Wal-Mart is charging a premium to tag pallets of deliveries that they want to have tagged by the supplier rather than tagging it themselves?
Shocking. If only there were a way for suppliers to tag their own pallets for less...
No, the difference should be obvious. You're not buying thousands of cell phones. Wal-Mart is buying thousands of items from whoever they buy from.
It's a volume thing. When you buy in bulk, you pay a different price. Wal-Mart buys enough bulk merchandise to be able to demand special terms.
- Give a man a fire and he's warm for a day, but set him on fire and he's warm for the rest of his life.
When a retailer is able to charge/coerce the people it buys its merchandise from, that retailer is a monopsony. (I'm by far not the first to label Wal-Mart as such)
- RG>
Hey pal, this isn't a pleasantforest, so don't waste my time with pleasantries!
"So you think it's fair to charge $2 to slap a $.20 RFID tag on a pallet? As far as I can tell, this is not 1 RFID per item, it's 1 per pallet. It is -only- used to track shipments, not individual products."
I suppose we can add channel management, supply chain management and logistics to the areas of knowledge that Slashdotters know everything about.
Distribution centers have rules about receiving products. These rules are necessary to keep the inventory flowing and to keep costs down. Retail DCs (owned by Best Buy, Target and the like) have them, as do distributors, like Ingram and D&H.
The missing RFID tag is a McGuffin -- it could be anything. Missing RFID? Low pallet count? High pallet count? Pallet packed with unexpected dimensions? Unannounced change in the case pack quantity or outer box pack quantity? The product doesn't conform, so it needs to be segregated to another part of the warehouse, and people need to be assigned to rework the product. In the meantime, it's dead inventory that can't be sold.
As has already been mentioned, your estimate of the rework cost is low, but that's not the point -- Wal-Mart, Best Buy, Ingram et al aren't trying to build a profit center out of RFID tag reworks or any sort of rework! They pass the cost of the rework along to the supplier, and the goal is to have it not happen again. Product that's delayed in the warehouse or the DC means missed sales, and if it's a load-in for a holiday weekend or a scheduled promotion, lots of money is lost.
Sitting in my day care, the art is decopainted.
Good points. I can add:
I think more Slashdotters should go into the retail business. God knows we have the music business already figured out. Too bad we're all too busy playing WoW to change the world.
Sitting in my day care, the art is decopainted.
That, right there, is damn near the DEFINITION of a free market.
Modding Trolls +1 inciteful since 1999