Non-tagging fee: Wal-Mart to charge suppliers for not using RFID

Apparently frustrated by suppliers’ slowness in complying with its edict to put RFID tags on pallets sent to its distribution centers, Wal-Mart says it will start charging suppliers $2.00 for each pallet arriving at its Sam's Club warehouse outlet distribution center in Texas without an RFID tag.

01/28/2008


Apparently frustrated by suppliers’ slowness in complying with its edict to put RFID tags on pallets sent to its distribution centers, Wal-Mart says it will start charging suppliers $2.00 for each pallet arriving at its Sam's Club warehouse outlet distribution center in Texas without an RFID tag.
The fee is scheduled to take effect January 30.
Wal-Mart started pressing its suppliers to tag their inventories with RFID three years ago to optimize supply chain, warehouse, and distribution operations. The $2.00-per-pallet noncompliance fee is roughly an 80-cent premium over the cost of attaching an RFID tag to a pallet, running at around 20 cents per tag depending on volume.
It is estimated that more than 15,000 Wal-Mart suppliers have yet to comply with Wal-Mart's RFID mandate. It seems that Wal-Mart is ready to push its Sam's Club warehouse operations as a poster child for its RFID efforts that aim to provide item (product)-level tagging for all of its 22 U.S. distribution centers by 2010.
Sam's Club contributed around $41.5 billion to Wal-Mart's $345 billion revenue in 2007.

The fee also could serve as a loud wake-up call to its suppliers that the company is deadly serious about RFID. Wal-Mart's decision to focus on its Sam's Club operations also makes sense for a couple of reasons. Sam's Club has far fewer suppliers than Wal-Mart's main superstores. Plus Sam's Club customers often tend to purchase in bulk, often in larger individual packets than normal stores and sometimes by the pallet itself, which means fewer and less costly RFID tagging overheads for suppliers. Suppliers already complying with Wal-Mart's RFID mandate must now be smiling smugly as rivals scramble to catch up. But things could turn interesting in 2010 when Wal-Mart starts to call for more granular, item-level tagging.





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