Wal-Mart experiment ushers in ‘smart tag’ era
Crates of shampoo headed for Wal-Mart’s shelves will silently announce their arrival to a computer when they roll through a cavernous Dallas warehouse.
Quicker than you can say “hydrating curls,” the computer will check whether they are the same crates of Pantene that rumbled out of Procter & Gamble’s plant in Iowa City, Iowa. If any are missing, it will issue an alert.
The first tests for this system are an early step in a closely watched “smart tag” program that eventually will involve all of Wal-Mart’s 25,500 suppliers and the 3.7 billion crates they ship annually.
A smart tag contains a chip with an antenna that communicates using radio waves.
The world’s biggest retailer plans to use a network of smart tags, or radio frequency identification (RFID) technology, to save billions in inventory costs while increasing sales by reducing the times when items are out of stock.
Wal-Mart Stores Inc.’s requirement that its 100 biggest suppliers start tagging shipments with RFID chips by January is the equivalent of a big bang for a fledgling industry that promises to push products from plants to consumers faster and with greater precision .
“There are so many people jumping up and down in that Wal-Mart cloud of confusion, it’s really created a technology feeding frenzy,” said David Adams, strategy and technology senior vice president of TrenStar, which manages containers for companies such as Kraft Foods Inc.
The sheer size of Wal-Mart’s initiative, and a similar requirement by the U.S. Defense Department for its suppliers, promises to advance a technology that one day could create an automated world of objects that communicate without human intervention.
Some possible uses: shirts telling washing machines how to launder them and frozen dinners telling microwaves how to cook them.
For now, the spotlight is on Wal-Mart’s program and similar initiatives by the likes of Target Corp. and Albertson’s Inc.
Consumer goods manufacturers are scrambling to figure out how to meet Wal-Mart’s deadlines and how to pay for expensive systems that are still evolving. Meanwhile, tech companies are jockeying for business and leadership positions.
Total spending on RFID hardware, software and services is expected to hit $2.1 billion in 2005, which is nearly double last year’s $1.1 billion, according to Venture Development Corp.
Many predict an early shakeout among tech vendors and some dashed expectations.
“We think there’s a big hype bubble that’s going to burst,” said Janiece Webb, senior vice president and general manager of Motorola’s RFID start-up, Secure Asset Solutions.
“We think the Wal-Mart initiative will take off, but it’s going to go through some bumps along the way.”