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Transcript of RFID Technology
Intro to Walmart and RFID technology
Analysis of Technology
Technology Value and Competitive Advantage
RFID and the Value Chain
Industry Analysis using Porter’s 5 Forces
Change in Industry Dynamics
Other Uses and the Future of RFID Technology
Walmart is an American multinational retail corporation that runs chains of large discounts department stores.
Third largest public corporation and largest discount retailer in the world
Headquartered in Bentonville, Arkansas
Operations are divided into three key segments:
RFID: How It Works
Porter’s Three Generic Strategies
As a result of streamlined supply chain processes using RFID technology, Walmart is able to offer customers their Everyday Low Price and Price Match Guarantee
Most other retail stores cannot match these claims or maintain a low cost structure
Walmart is a cost leader in its industry because of its efficient supply chain processes
Beats competitors on price in the retail industry, including Sears, Kmart, Target, and Kohl's
Unlike Walmart, Kmart failed to make technology investments early in its business. This led to poor inventory forecasting, inefficient category management, and frequent out-of-stock products
Operates on a low-cost structure model, offering consumers the lowest prices everyday
How does Walmart offer the lowest prices? The answer is in their supply chain operations, which is made efficient through the use of RFID technology.
Walmart has the largest technology infrastructure of any private company in the world.
It’s high-level technology allows Walmart to accurately track and predict inventory levels, forecast demand, develop highly efficient transportation routes, and manage customer relationships and service response logistics.
Introduction to RFID
Also known as Radio Frequency Identification tags, RFID technology uses electromagnetic fields to store and transfer data
Intelligent barcodes that can “talk” to a networked system
Transfers data stored on tags on a product or other object, facilitating identification and tracking
Requires minimum human interference to carry out processes such as billing, supply chain management, and inventory tracking
Provides real-time data that allows manufacturers to better manage inventory and improve supply chain operations, thus maximizing profits
RFID Technology at Walmart
Wal-Mart has been a leader in pioneering innovative technologies to achieve operational efficiencies that ultimately bring savings for its consumers. It implemented an advanced RFID technology system in 2003 to streamline its supply chain processes.
RFID tags offer a broad array of advantages
Stores more data than traditional barcodes
Can be tracked automatically, thus removing any human error
Can be scanned from a distance and without a clear line of sight
Both retailers and suppliers can better manage inventory
Multiple tags can be read simultaneously; a specific item can easily be tracked and identified within the distribution center or store
Benefits of RFID at Walmart
RFID enables Walmart to have efficient inventory management:
By keeping track of products traveling along its supply chain and through the warehouse
By cutting the volume of excess inventory at Walmart
Enables Walmart to keep track of customer behavior and also know what they are spending on
RFID enables Walmart to better stock their shelves by monitoring when certain products run out
Enables Walmart to minimize labor costs and strengthen inventory control
Walmart has developed its own proprietary software to manage information received from RFID trackers.
The Value Chain
RFID technology adds value to several different activities in the value chain.
The Value Chain
Movement of inventory can easily be tracked as it is delivered from suppliers.
Goods can be received and shipped much faster.
Tags can quickly provide employees with important information about a specific product, such as where it came from, lot number, expiration dates, and where to stock it in the store
The Value Chain
RFID tags automatically alert employees when a product is running low, allowing Walmart to effectively reduce out-of-stock situations
RFID tags make it easy to predict product demand and forecast future supply
Shoppers can save time when shelves are always fully stocked
Walmart can offer low prices on products by having an efficient supply chain, thus passing those savings on to consumers
The Value Chain
Walmart can offer effective customer service after a sale
Specific products can be traced back to their manufacturer in case there is a defect or issue
Can help consumers find exactly which product they're looking for, whether its in stock or store, etc.
Effects of RFID at Walmart
Sales have boosted because Walmart can avoid out-of-stock situations
Walmart is able to restock RFID-tagged items 3 times as fast as non-tagged items
Walmart has reduced its out-of-stocks (OOS) by 21% over non-RFID based retailers
Walmart’s RFID software can automatically order any product that is running low on inventory directly from the supplier
This reduces manual ordering by 10%
Walmart: Cost Leadership Strategy
Walmart offers the lowest prices on products
Sells common, everyday goods that almost everyone needs and uses
Wide range and variety of products
Porter's Five Forces
Bargaining Power of Suppliers
Better insulated from powerful suppliers
Walmart often pressures suppliers to comply with its Everyday Low Pricing model
For many suppliers, especially large CPG ones, Walmart is their biggest customer account (buyer) giving Walmart leverage and strong negotiation power
Bargaining Power of Consumers
Ability to offer Every Day Low Price
Walmart is able to offer the lowest prices making the bargaining power of buyers very low
Low prices are made possible through an extremely efficient supply chain which RFID helps aid
Threat of New Entrants
Ability to cut prices in retaliation deters potential entrants
Because of Walmart’s size and success, they could easily drop their prices to beat out any new competitors in the industry
Low prices serve as an entry barrier
Threat of Substitute Product/Service
Can use low price to defend against substitutes
Walmart doesn’t make any unique products
Many of the products they sell are common and sold in a variety of stores; however Walmart offers the lowest prices and convenience
Better able to compete on price
Walmart is the industry leader
Its cost leadership strategy serves as a competitive advantage for Walmart
Able to offer lower prices than its competitors and sometimes can even eliminate competition
Walmart requires its top suppliers to equip their products with RFID tags
J&J, Gillette, Kraft Foods, Unilever, P&G, Nestle, and HP are just a few of the many suppliers that must abide by Walmart’s RFID tag requirements
Walmart has bargaining leverage here and strong buyer power
RFID in other Industries
Improve data quality, asset visibility, and track military supplies around the world. Testing the implementation of RFID tags in soldiers to provide health updates and locate them from virtually anywhere.
Volkswagen uses RFID technology to track cars during the production phase, speed up vehicle pickup from car lots, and improve customer service
RFID tags are used to prevent shoplifting
RFID technology is not unique to Walmart stores. However, what gives Walmart its competitive advantage is how it uses RFID to streamline its supply chain processes, track and manage inventory, and forecast future supply planning to offer customer the lowest prices
Future of RFID
Industry analysts predict that RFID technology will dominate the retail industry within the next few years
Walmart’s RFID mandates will eventually affect thousands of suppliers
RFID technology will eventually be used to scan all items in a shopping cart at once at checkout to streamline the checkout process
Track customer buying behaviors and purchasing trends past the initial purchases
The Future of RFID