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Get with the RFID program, or else.
That's the strong-arm message Wal-Mart has issued to some of its suppliers who have been dragging their heels in complying with the retailer’s radio frequency identification (RFID) strategy.
Suppliers shipping products to the Sam’s Club distribution center in DeSoto, Texas, have been told they have until January 31 to conform with mandates to affix RFID tags on pallets, or face fines. In a letter sent earlier this month to certain suppliers, Wal-Mart warned non-compliance could result in fines starting at about $2. The cost, according to a Wal-Mart spokesman, is meant to cover Sam’s Club’s cost to slap a tag on the pallet.
Wal-Mart appears to be sending a clear message to its suppliers: it is committed to carrying through with its RFID plans, and suppliers must get on board.
The question is, is this the right message to be sending? All along Wal-Mart has been saying suppliers will come on board with its RFID program because they will gain mutual benefits, in the form of cost savings through increased efficiencies and through greater visibility into the supply chain.
Four years after Wal-Mart announced its ambitious plans, however, many suppliers still aren’t sold on the perceived benefits. For many, RFID is just another cost, and given Wal-Mart’s propensity for squeezing profit margins, it’s a cost they can do without.
If Wal-Mart was able to come forward with clear cost and benefit metrics for its suppliers showing they will get a payback from an investment in RFID, suppliers would be jumping on board the train instead of needing to be pushed.
That's the message the retailer needs to send. Forcing suppliers to pay a fine only raises more doubts about whether Wal-Mart is blindly pursuing its RFID plans.
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