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Article

Title: Wal-Mart's Radio-Tracked Inventory Hits Static

Author: McWilliams, Gary Article Type: Company
Source: Wall Street Journal, v249 n38 pB1(2) Publication Date: Feb 15, 2007
  ISSN: 0193-2241
  Illustrations: Photographs
URL of Publication: http://www.wsj.com

Wal-Mart Stores Inc., which has often pioneered low-cost practices that are then copied by competitors, has pushed its suppliers to use radio-activated tags in order to reduce labor and inventory costs. However, tests indicate that the tags do not provide any savings, and the suppliers that have been forced to invest in the technology are unhappy. At one time, Wal-Mart hoped to have as many as 12 of its approximately 120 distribution centers use radio frequency identification (RFID) by January 2006. The RFID technology has only been installed at five facilities and 1,000 stores to date, although Wal-Mart plans to add another 400 stores in 2007. Because the major driver of Wal-Mart's pricing advantage involves its logistics, it needs to have another breakthrough in that area. Wal-Mart still has the lowest operating costs in the retail industry, but competitors like Target Corp. and CVS Corp. are catching up. Wal-Mart's expenses represented 18.4 percent of its sales in 2006, almost two point higher than in 2001. Comparatively, operating costs at Target and CVS increased less than one percentage point each between 2001 and 2005. Wal-Mart has not made a public statement regarding its RFID initiative, but spokesperson Kevin Gardner said the tags had improved product availability and improved the efficiency of store managers in restocking their inventories.

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