Responding to Wal-Mart's RFID Mandate - ARC Advisory Group

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ARC Strategies • December 2003 What is your current activity with RFID? 9.5% 7.4% 34.7% 48.4% No activity Researching Piloting In production Source: Survey of 95 logistics executives at Global 1000 companies conducted by ARC Advisory Group and Richmond Events in May 2003. Almost 50 Percent of Companies Had No RFID Activity in May 2003 (Before Wal-Mart’s Announcement) When do you expect to begin testing RFID? 1.3% 11.8% 23.7% 25.0% Next 12 mos. 1-2 years 3-5 years 5+ years Never Source: 38.2% Survey of 76 logistics executives at Global 1000 companies conducted by ARC Advisory Group and Richmond Events in May 2003 Almost 40% of Respondents Didn’t Expect to Begin Testing RFID Until at Least 2006 2 • Copyright © ARC Advisory Group • ARCweb.com
ARC Strategies • December 2003 Executive Overview Wal-Mart has mandated that by January 2005 its top 100 suppliers must apply passive RFID tags to cases and pallets shipped to specific distribution centers. Any Wal-Mart mandate has power because of its massive size - Wal-Mart is the largest retailer in the world ($244 billion in RFID is a Global event: sales in the last fiscal year, $41 billion from abroad). They are For example, both Marks and the largest seller of many categories of consumer goods - from Spenser in the UK and Tesco CDs, to prescription glasses, to over the counter pharmaceuticals, and many other areas. Virtually all manufacturers of in Germany, have also conducted very interesting consumer goods will eventually be impacted by this, particularly because Wal-Mart’s moves in RFID are being copied by pilots run of RFID. the Department of Defense and will soon be copied by other large retailers. As a result, a technology that was really one of the lowest rated interest areas in ARC surveys before the Wal-Mart mandate, has suddenly bubbled to the top. For most manufacturers, complying with this mandate will reduce profit margins, at least in the short term. But considering Wal-Mart’s overall contribution to revenues and profitability, non-compliance is generally not an option. Therefore, manufacturers must determine the most economic way to comply with this edict. Designing and conducting Manufacturers must determine pilot tests is a critical part of this process. the most economic way to comply with Wal-Mart’s edict. Designing The information in this report is meant to assist companies in outlining RFID pilot tests and creating associated and conducting pilot tests is a critical part of this process. budgets. The following topics are discussed: • Overview Wal-Mart’s requirements (as disclosed to date); • Where and when to conduct pilot tests; • “Rules of thumb” for budget-related costs. This research was initiated in response to requests by members of ARC’s Logistics Executive Council (LEC). It complements other RFID reports produced by ARC and ARC will be conducting additional research on RFID throughout 2004. Stay tuned! Copyright © ARC Advisory Group • ARCweb.com • 3
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Responding to Wal-Mart's RFID Mandate - ARC Advisory Group

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