Starting in January 2005 Wal-Mart began an initiative to begin using Radio Frequency Identification (RFID) by requiring their top 100 suppliers to put RFID tags on all shipping crates and pallets. Since then Wal-Mart has used its bargaining power as a buyer to gain a competitive advantage over their competition. By implementing RFID technology Wal-Mart has been able to reduce labor costs and eliminate many errors by being able to automating the labor intensive operation of tracking shipments.
Value Chain, “a series of activities that include inbound logistics, warehouse and storage, production, finished product storage, outbound logistics, marketing and sales, and customer service”.
Every aspect of the Value Chain has been improved by using RFID technology. By requiring the suppliers to pick up the cost of the RFID tags and penalizing those that don’t, Wal-Mart is now able to update its inventory and predict when they need to place an order automatically. This reduces inventory but also can prevent items from being out of stock. Perishable items can be put on the shelves and even offered for sale to move the item before it expires.
Efficiency in the warehouse can be enhanced by automating with machines the can run twenty-four hours a day and the return on investment is lower than human labor. Misplaced pallets are a thing of the past as workers can now scan an entire pallet and know its contents, ship date, store location and expiration date if applicable.
Incorporating RFID technology in the Point of Sale (POS) reduces the amount of time at check out. Rather than scanning each item individually a cashier can technically scan the whole cart at once. This could also be used at self check-out lanes as well, greatly increasing customer satisfaction. Data from sales could be updated to reflect what items were purchased and need to be restocked or ordered.
With a global network of a 146 distribution centers, Wal-Mart has a competitive advantage over the competition and using RFID technology has enabled Wal-Mart to streamline their logistics operations. The cost savings enables Wal-Mart to continue to over low prices to its customers.
