Wal-Mart EPC Pilot Begins Transition To Implementation

October 29, 2004
First SAM’S CLUB Location and Distribution Center to Come Online This Fall.
Contact: Gus Whitcomb 479.273.4314

BENTONVILLE Ark., Oct. 28, 2004 - Just five months into its electronic product code (EPC) pilot program, Wal-Mart is giving the "go ahead" to suppliers wishing to get a jumpstart on the January 2005 milestone.

"They’re ready; we’re ready; there is no need to wait," Carolyn Walton, Wal-Mart’s Information Systems Division vice president responsible for EPC implementation, said. "I sometimes get the feeling that people think we are going to flip some gigantic switch on January 1st and tagged cases and pallets will appear from more than 100 suppliers.

"Instead, as we anticipated, suppliers are coming to us and asking to get into the game before the milestone happens," she continued. "We welcome their enthusiasm and participation."

One of those companies is Beaver Street Fisheries, a seafood distributor and one of more than 30 suppliers that have stepped forward to voluntarily meet the January 2005 milestone.

"We’re on a quest to grow our business and we believe success lies in efficiency," said Howard Stockdale, chief information officer for the Jacksonville, Fla.-based company. "We believe RFID offers an opportunity to fine tune our processes and we’ve made a decision to aggressively pursue this technology. Participating in Wal-Mart’s initiative is part of this strategy."

Approximately a year ago, Beaver Street Fisheries started asking what potential radio frequency identification, or RFID, held for helping the company achieve its business goals. After doing its homework, Stockdale put together an RFID team and built a small lab. The team then created a three-step plan to incorporate the technology into the company’s processes.

"Beaver Street provides a textbook example of how to approach this technology," Walton said. "They got into the game early. They put together a team to see how RFID could benefit their own business. And, they developed an implementation plan that was aggressive but achievable. By doing all of this, participating in Wal-Mart’s January 2005 initiative actually became an efficient way to test their own program."

Stockdale says the company’s RFID program hasn’t been without challenges, especially since it imports products from more than 50 countries around the world. Still, he said embracing the technology has led to a re-engineering process that will make the company more competitive.

"We’re looking at the future and making the appropriate investments," he said. "We’re going to become an even bigger player in the market and RFID is going to help us achieve that. That’s part of the ROI that we know is coming."

Beaver Street Fisheries will begin shipping tagged cases and pallets to Wal-Mart the week of Nov. 1. Labels will be applied on an in-line conveyor system, which represents the successful achievement of phase two of the company’s three-phase RFID program.

Suppliers already shipping tagged cases and pallets to Wal-Mart or expected to start within the next two weeks include apparel, toy, bicycle and dairy product manufacturers.

Original Goals
Wal-Mart initially announced its EPC initiative in June 2003. At the time, the company stated that the first phase of implementation would involve its top 100 suppliers tagging cases and pallets of products headed to three Dallas/Fort Worth area distribution centers starting in January 2005.

Since then, more than 30 suppliers have voluntarily asked to meet that same milestone. The primary consumer benefit expected during initial EPC adoption is better merchandise availability. Wal-Mart expects to do a better job of having the right product in the right place at the right time, improving the customer shopping experience.

Wal-Mart launched an EPC pilot April 30 in the North Texas area. Cases and pallets of 21 products from eight suppliers are being shipped to Wal-Mart’s Sanger, Texas, distribution center and then onward to seven local Supercenters with RFID tags attached. This technology allows retailers greater inventory visibility from supplier to distribution center to a store’s backroom.

Moving Forward
As part of the initial implementation, by January, Wal-Mart will expand to three the number of EPC-equipped distribution centers in North Texas. At the same time, it will also increase the number of participating stores from seven to more than 130. Most of these will be located in North Texas. Others will be located in the south central Oklahoma region.

This fall, the first SAM’S CLUB location will feature EPC capabilities. The club, located at the southwest corner of Highway 121 and Ohio Drive in Plano, will be the company’s first retail facility outside its Wal-Mart Supercenters to use this revolutionary technology.

SAM’S CLUB will abide by the same EPCglobal consumer guidelines of consumer notification and choice. Price signs will include EPCglobal symbols when a tagged case or pallet is available. In the SAM’S CLUB merchandising model, it is more likely that an individual could select to purchase an entire case or pallet of product. Members who choose to purchase these products can keep the tag or remove it post-purchase.

Rewarding Progress
"We’ve seen tremendous progress in the EPC initiative around the globe," Walton said. "Tag prices have fallen dramatically since June of last year. They certainly need to fall further to allow RFID to achieve its maximum potential and we believe this will happen as more and more technology vendors enter the marketplace.

"We also see more retail pilots - and pilots in other industries - ready for launch," she continued. "Consumers, too, continue to demonstrate a common sense approach to the technology’s roll-out, something we believe comes from concerted efforts to educate customers on how EPCs will ultimately improve their shopping experience."

Still, Wal-Mart knows there are still non-believers who question the timing of its initiative and some organizations that claim that there is no long-term return-on-investment even if RFID tags were given away for free.

"We believe in this technology and we are extremely proud to be helping end the Ôchicken or egg’ cycle that it has been stuck in," Walton said. "We sincerely believe there is ROI for any company willing to approach this technology as a way to improve their own business and not just a way to meet our milestone. Beaver Street Fisheries is an excellent example of that. We remain committed to helping other suppliers wanting to find that same success."

"As time passes, we firmly believe that everyone will ultimately look back at January 2005 and agree that it was the right thing to do and the right time to do it," she said.

Walton said the company’s plans for calendar years 2005 and 2006 remain as previously announced. Wal-Mart continues to work with suppliers to determine how best to grow the initiative beyond that.

About Wal-Mart Stores, Inc.
Wal-Mart Stores, Inc. operates Wal-Mart Stores, Supercenters, Neighborhood Markets and SAM’S CLUB locations in the United States. Internationally, the company operates in Puerto Rico, Canada, China, Mexico, Brazil, Germany, United Kingdom, Argentina, and South Korea. The company’s securities are listed on the New York and Pacific stock exchanges under the symbol WMT.