Wal-Mart Begins Roll-Out Of Electronic Product Codes in Dallas/Fort Worth Area

April 30, 2004
Eight Manufacturers Participating in First Phase of Implementing Radio Frequency Identification (RFID) Technology at the Case and Pallet Level.

FOR IMMEDIATE RELEASE
Contacts:
Gus Whitcomb
Christi Gallagher
479.273.4314

BENTONVILLE, Ark., April 30, 2004 - A new era in supply-chain management begins this morning as Wal-Mart and eight product manufacturers begin testing electronic product codes, or EPCs, at select Supercenters and one regional distribution center in the Dallas/Fort Worth metroplex.

"This pilot is the next step in Wal-Mart’s addition of radio frequency identification, also known as RFID, to improve product availability for Wal-Mart customers. The real-world trial follows extensive testing at the company’s RFID lab and months of collaborative preparation by Wal-Mart and its suppliers. Field equipment testing has been underway in Texas since mid-month but nothing with an RFID tag was placed on store shelves.

"It is imperative that we have the merchandise the customer wants to buy when they want to buy it," said Linda Dillman, executive vice president and Chief Information Officer. "We believe RFID technology is going to help us do that more often and more efficiently. This will help us increase customer satisfaction in the near-term and ultimately play an important role in helping us control costs and continue offering low prices."

Wal-Mart has set a January 2005 target for its top 100 suppliers to be placing RFID tags on cases and pallets destined for Wal-Mart stores and SAM’S CLUB locations in the Dallas/Fort Worth metroplex area. Since announcing that initiative nearly a year ago, 37 additional suppliers have voluntarily chosen to meet that same milestone. The implementation beginning today will pave the way for achieving this goal.

Read some Frequently Asked Questions about RFID technology and Wal-Mart’s usage.

EPC vs. Bar Codes
While bar codes can tell a retailer that it has two boxes of product XYZ, EPCs help distinguish one box of product XYZ from the next. This allows retailers greater visibility in monitoring product inventory from supplier to distribution center to store.

RFID technology - which facilitates EPC - has been in use since the 1940s. Anyone using a toll tag or unlocking a car door using a keyless remote is already using RFID. In the supply chain application, passive RFID chips with small antennae are attached to cases and pallets. When passed near a "reader," the chip activates and its unique product identifier code is transmitted back to an inventory control system. Readers used by Wal-Mart have an average range of 15 feet.

"We can certainly understand and appreciate consumer concern about privacy," Dillman said. "That is why we want our customers to know that RFID tags will not contain nor collect any additional data about consumers. In fact, in the foreseeable future, there won’t even be any RFID readers on our stores’ main sales floors.

"However, down the road there are so many possibilities to improve the shopping experience that we hope customers will actually share our enthusiasm about EPCs," she continued. "As we look forward five, 10 years, we see the possibility of offering expedited returns, quicker warranty processing and other ways to minimize waiting in lines. There are also positive product recall implications and a critical ability to combat counterfeit pharmaceuticals.

"If you think about it, this is really repeating the steps we took in introducing bar codes into our stores back in the early ’80s. And we’re seeing much of the same consumer uncertainty that came with that technology," Dillman said. "We’re confident that EPCs will prove to be just as valuable to retailers and, more importantly, to their customers as the bar code."

Participating Suppliers
The eight manufacturers participating in the first phase of the trial are The Gillette Company (NYSE:G), HP (NYSE, NASDAQ:HPQ), Johnson & Johnson, Kimberly-Clark (NYSE:KMB), Kraft Foods (NYSE:KFT), Nestle Purina PetCare Company, The Procter & Gamble Company (NYSE:PG) and Unilever (NYSE: UN, UL).

"We are grateful to these companies for their commitment to improving the supply-chain process," Dillman said. "It isn’t easy being a pioneer. It takes time, it takes resources and it takes vision. But that’s how progress is made and these eight companies are at the forefront of revolutionizing the way we all do business.

"Our other partners are making progress as well," she continued. "We’ll be bringing additional suppliers into this trial in the weeks ahead. That’s possible because companies are seriously exploring what this technology can do for them above and beyond anything they are doing to address our goal - something we have advocated from the beginning."

"As an early adopter of RFID in our own operations, we can attest to the tremendous advantage it affords businesses and their customers," said Dick Lampman, HP senior vice president, Research and director, HP Labs. "We believe RFID will help retailers, manufacturers and others users reduce supply chain costs while speeding the flow of merchandise from the factory, through the distribution center and to the retail store, ultimately providing customers with better product availability."

Field Test Synopsis
Initially, a total of 21 products out of the more than 100,000 products carried in a typical Supercenter will be included in the trial. Cases and pallets containing these products will feature EPCs when delivered to Wal-Mart’s Sanger, Texas regional distribution center where RFID readers installed at dock doors will automatically let Wal-Mart’s operations and merchandising teams as well as suppliers know this exact shipment of products has arrived and is inside the building. Cases will then be removed from pallets and processed as usual through the distribution center.

Wal-Mart is targeting 100 percent readability of pallet tags through dock doors and 100 percent readability of case tags on distribution center conveyor belts.

At seven pilot stores in the Dallas/Fort Worth metroplex - specifically in the communities of The Colony, Decatur, Denton, Hickory Creek, Lewisville and Plano, RFID readers at dock doors will replicate the process from the distribution center by automatically confirming that this particular shipment is now in the store’s back room. Individual products will then be stocked as needed.

During the initial test, tagged cases and pallets may be distributed to stores throughout North Texas and South Central Oklahoma - the geographical area served by the Sanger, Texas distribution center. As suppliers expand their efforts to meet the requirements of multiple retailers, it is possible that tagged cases and pallets will arrive at Wal-Mart stores around the country. However, readers will not be installed in stores outside the Dallas/Fort Worth metroplex so those cases and pallets would be handled as usual.

Although Wal-Mart and its suppliers are focusing on case and pallet level tagging, there are instances where a case can also be a product’s individual consumer packaging. This is especially true for electronic items. In the test beginning today, three products - two HP Photosmart photo printers and an HP ScanJet scanner - may feature RFID tags on the outer packaging consumers see on store shelves. That outer packaging will be marked with an EPCglobal symbol.

EPCglobal
EPCglobal is a joint venture of EAN International and the Uniform Code Council. It is the organization chosen by industry to develop standards for RFID technology in the global supply chain based on user needs and business requirements. As a charter member of EPCglobal, Wal-Mart fully adheres to its core principles related to privacy issues, including consumer notice, consumer education and consumer choice. EPC education pamphlets will be available to interested parties at DFW-area stores. Consumers may choose to retain or remove RFID tags after purchasing the tagged HP products.

Wal-Mart’s Linda Dillman and HP’s Dick Lampman serve on the board of directors of EPCglobal.

Wal-Mart stores already feature signage notifying consumers that electronic tagging systems unrelated to EPC are in use for theft prevention measures. During the initial RFID test, Dallas/Fort Worth metroplex Wal-Mart pilot stores will feature supplemental signage to help customers further identify the tagged HP products. These signs, featuring an EPCglobal symbol, will be placed at relevant shelf and/or aisle locations.

The remaining 18 products that will be delivered to the store in tagged cases or pallets for the test but will not be tagged individually on the shelf include various brands of paper towels, lotion, cat food, shampoo, feminine hygiene products, laundry detergent, deodorant, shaving cream, soap, toothpaste and peanuts.

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.

In Texas alone, Wal-Mart Stores, Inc. employs more than 130,000 Associates and operates 92 Wal-Mart discount stores, 196 Supercenters, 26 Neighborhood Markets, 69 SAM’S CLUB locations and 12 distribution centers.