RFID at the Edge: Retail’s Mandate Moment

John DiPalo: Bill, it’s great to be here. Thanks for having me on again.

Kelly Breneisen: Yeah, great to be here. Excited to talk about this subject.

Bill Wohl: Super. John, let’s start with you. It seems like RFID is really coming of age now driven by supplier requirements. Are you seeing that with customers?

John DiPalo: Absolutely, Bill. You know, the interesting part about RFID, you know, it’s been coming a few different times over the past, you know, decade or so, and this time I think it is here to stay.

You know, we are seeing a lot of people adopting RFID technology. We’ve seen a lot of requirements for product in the supply chain that needs RFID in order for companies to be able to track that product and also be able to utilize that information, you know, primarily in the movement and tracking of the product from a shipment perspective as well as a receiving perspective.

Bill Wohl: Perfect. Kelly, welcome again to the program. Regular listeners and supply chain practitioners will know Zebra, well known in this industry as a global leader in tags, devices, readers for the edge, RFID, and barcoding, but also managed services and ruggedized devices. Pretty strong portfolio globally. Inside Zebra, Kelly, what is your role?

Kelly Breneisen: So, today at Zebra, I play the role of a regional portfolio manager, which is a really fancy word to say that I get a lot of questions. People ask me a lot of stuff: how does RFID work? What does it work for me? How do I use it? And I help the sales team figure that out.

Bill Wohl: Well, fantastic. So, let’s talk a little bit about Walmart. They have a new requirement. Some are calling it a mandate. I think Walmart likes to say this is something we want our suppliers to do by September 1st. What is it specifically, and what’s keeping customers awake at night?

Kelly Breneisen: So, heck, we get this question a lot. We have gotten telephone calls from suppliers that don’t even know how to spell RFID to others that are already kind of down the road.

So, it’s interesting to note that even though the hot topic is Walmart right now, this is not new to retail. There’s a lot of large retailers out there that have already done this and are already down the road. So, this is just another retailer jumping on, and it’s exciting for all of us here in the RFID world.

When I say other retailers, Kohl’s, JCPenney, Target, Dillard’s, the list goes on and on. So, what Walmart is asking is that their suppliers RFID tag at the source, manufacturing, or DC, whatever that works for them. So, all product coming into Walmart is tagged by September 2nd.

That’s not very far away. And even when they launched this, I think it was in January, that’s really a short timeframe.

The other dates that are important: one has already passed. So June 3, they were supposed to have ARC approval. So that is sending their label, printed and encoded, into Auburn University to approve to say, yes, this is good. You know what you’re doing.

And then they’re calling it the must-arrive-by date is actually August 7th. So, they’re saying you need to start shipping product into Walmart by August 17th, I’m sorry, August 17th, so that it is in stores by September 2nd, tagged.

And important to know, once you start tagging, you can’t go back, because if you don’t tag, then you’re really going to screw up the supply chain.

Bill Wohl: So, it probably gets into the relationship between Walmart and their suppliers. But typically, when Walmart puts in a requirement, they make a pretty strong case that, look, if you’re not going to operate in our technology system this way, you run the risk of losing shelf space or positioning. Are you hearing that with customers that you’re talking to? Is that what is driving them beyond the deadline?

Kelly Breneisen: That’s a great question, and I have asked that. And you know, Walmart’s kind of keeping that close to the chest, as they say. That’s the conversation between the supplier and Walmart.

For all intents and purposes, everybody’s moving forward the best we can in this constraint—I’m going to call it—a chip inlay situation we are all in.

Bill Wohl: I remember working with Walmart on projects some 20 years ago, and at that point they were really focused on getting their key big-brand suppliers EDI compliant. Everybody set up their own offices in Bentonville to create these integrations from a technology perspective.

Despite the fact that the deadline’s right in front of people, for progressive technology companies, this isn’t a surprise. This has been coming.

The technology though has finally reached the point where the cost of tags and the ease of doing this is pretty straightforward, right?

Kelly Breneisen: Absolutely. So 15 years ago, when Walmart started down this path, you were looking at tag prices of 25 to 30 cents.

You can easily, in very large volumes, millions of volumes, let’s say you need 10 million a year, you’d be looking at somewhere between five and seven cents. Now it’s very reasonable. Yes. It makes it worthwhile now.

Bill Wohl: So, the variety of products that Walmart stocks in its stores and offers to customers is pretty broad. There’s got to be a difference in how RFID is applied to, say, automobile tires versus apparel?

Kelly Breneisen: Yeah, absolutely. So, one of the mandates, oh, sorry, there’s that word again, one of the requirements that they put forward was for tires. And we’re very excited about this one. The ROI behind being able to count tires as they come off the truck is unbelievable.

Actually, that’s not having to reconcile, understanding what’s on the shelf. If you’re a customer and you’re coming in to get four tires and you only got three, you’re walking away, and Walmart just lost that sale. So, very important.

However, with tires, they’re very difficult to label. The tire treads you need a very gooey, gummy adhesive to stick to that tread, as well as you need a specialized inlay that will read on that carbon that’s inside the tire and sometimes the steel that’s inside tires.

Now flip that over to apparel. You just need a little one-by-one, two-by-two label to go on that hang tag or even inlay inside the hang tag. Completely different solution.

Bill Wohl: And this is where Zebra’s expertise comes in, right? Because you’ve spent a long time thinking about how these tags could be applied in a variety of different circumstances. I suspect that some of these questions you’re getting from suppliers to Walmart really are, okay, what does this look like and what are the variety of tags that I need to get? Is that where a lot of the discussion points are? Or is it really around how these tags can get integrated to their own technology?

Kelly Breneisen: So, I think because it was a really fast timeline, most of the conversations that I’m having on the label tagging side are: help me get compliant, I need labels, what do I got to do?

So there’s a couple options there. Walmart has four requirements. It’s general merchandise—that’s toys, home goods, automotive, electronics. That fits into certain specs that have been outlined by Auburn University. It is spec Y, W1, W3, and W4.

What those specs do is list—I’m going to say 50, I don’t know the exact number—50 different inlays that say these inlays work in this spec. Mr. Supplier, you have to label your ice cube trays—and yes, that’s a real example. I don’t care what label you use. I don’t care what inlay you use as long as it fits in this spec.

So, you go out there and you pick an inlay, and then you find a converter and say, “Hey, can you make me this label?”

I’m making it sound simple. It’s not that simple, because possibly the inlay you want to use, the label size won’t work on your product. Where is it going to fit? Where’s the real estate you have on your product? All those questions can be helped and answered by a Zebra expert from, you know, a labeling standpoint. We help you figure that all out. It’s very cumbersome when you don’t do labeling for a living, and if you are just under the gun and just want to get this done.

The other part of this is printing them. So, you have to be able to print and encode these labels. And if you don’t already have printers, that’s going to be a challenge. So Zebra also can help with that. We can batch print labels for you to get compliant for the September date.

Then future stance is, you know, the secondary part of that question that you asked is, okay, what’s in it for me, and how do I use this going forward? And we also have plenty of resources that can help you outline what that solution looks like and how can you start using that RFID for yourself.

Bill Wohl: Right, that makes sense. One of the things that you said earlier inspires a question. So, as we see other retailers like Kohl’s come into this space, should we expect should your potential customers expect them to adopt different standards? Or is the weight of Walmart and the work that they’re doing with Auburn likely to become an industry standard for retail tagging?

Kelly Breneisen: If you go out on the Auburn website, the specs are listed. They’re not listed as Walmart specs. They’re listed as specs for specific types of merchandise.

So, if you’re selling iPhones at Walmart and you’re selling iPhones at Target, you could expect similar specs. However, the use cases are different, right? So, Walmart might be using a different reader than Target or Kohl’s or Best Buy. And so sometimes those specs are a little different.

I actually had a conversation earlier today that confused me because it was a spec for jeans, but that spec for jeans is different than the spec for jeans that Walmart’s using.

So, really, I think that they’re going to at some point kind of consolidate—continue to consolidate, I guess I’m going to say. But using those Auburn specs, they’re supposed to be a little bit general, and they should be an easy guideline, and I definitely would use those in a retailer environment. I would go out there and take a look at those.

Bill Wohl: So, we talked about the requirement, I’m going to use the requirement word. The requirement has a series of deadlines. Some have already passed.

For companies that are late to this game, the reality is they’re just not going to make it. So for them, it really is a process of maturing to the point where they can be compliant. But if you’re not well along the path at this point, meeting the first week of September, just isn’t likely. Correct?

Kelly Breneisen: It depends. I’m going to say it depends.

It depends on how much product you have. It depends on how much product you need to label up. There’s going to be customers that kind of are still in that just-in-time delivery phase. So, they’re making product and shipping it same day, next day. Those customers could perhaps come up to speed pretty quickly using a service bureau concept.

Like I said, we could, here at Zebra, print and encode the labels, send you batches, you apply them and move on.

There’s others that maybe if you have a large volume of product already sitting in a warehouse somewhere that needs to be tagged up same concept: use a service bureau, have the labels printed and encoded, get a team out there to label them.

Again, I make that sound really easy. That’s giving a lot of customers a lot of heartburn. One of the tire suppliers was really struggling with that.

Again, I make it sound easy, but if you have a hundred places that you have to go tag up merchandise that’s sitting on shelves, and I send you 10 rolls of 5,000 labels, now you have to have somebody separate all those labels, send them to the different places. So, it’s cumbersome. It can be done. I think it still could be done. But you got to, you got to get moving.

Bill Wohl: Well, there’s lots of opportunity for value to Walmart and its customers, and there are lots of opportunities for value for suppliers in their own supply chain.

John, coming back to you, obviously when we talk on this podcast, we talk a lot about how complicated and challenging and daunting managing a supply chain can be.

In this area of meeting retailer mandates, there’s a lot to get done here, and Kelly’s described many of those tasks. How do companies think about getting started to make a project like this successful?

John DiPalo: Yeah. I think there’s a couple of ways that you can look at the kind of the getting started question, right?

And the first thing that you want to think about is, even though you have to move quickly in order to meet this particular requirement, you still need to think about how am I going to ultimately integrate this solution into my existing processes so that it’s not just an added thing that I’m doing, you know, at a very late time in the process, right?

So even though you may be moving quickly, you may be putting in a solution that is going to be used for a period of time, I think companies have to be careful about falling into the 3P trap. Which is what I say is that pilot becomes production and production becomes permanent, right?

So, if you do that and you don’t then circle back around to say, well, how can I start to achieve value out of this new requirement that I have to fulfill, you’re going to be stuck in this additional services and additional labor process forever.

So, I think you need to take all of the things that Kelly talked about into account. I think you need to satisfy your biggest customers, and then I think you need to turn around very quickly and say, “How can I engineer this to fit inside of my existing supply chain processes?”

Bill Wohl: Well, that’s a nice segue to a hint about our next podcast. There’s a lot to talk about here and unpack, and certainly finding value back into your supply chain, not just satisfying Walmart or Kohl’s or Best Buy. And we’re going to do that in the second podcast and dig into how companies can think about RFID tagging and the value they can pull out of them with Kelly’s colleague Michael Fein. And that’s coming up in the next of the podcast in this series.

I’d like to thank Kelly Breneisen of Zebra and John DiPalo for joining. Thank you both for being on the program.

Kelly Breneisen: Thank you.

John DiPalo: Thanks, Bill.

Bill Wohl: And thanks to everyone at ACSIS for making this podcast series possible. We welcome your comments and questions about the discussions on these podcasts. You can engage with us at the official ACSIS Twitter and LinkedIn accounts.

So, be a part of the discussion and don’t forget to learn more about supply chains at acsisinc.com. I’m your host, Bill Wohl, and for everyone at ACSIS, thanks for joining. We look forward to our next podcast. Talk soon.

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