))) Wal-Mart Inventory Plan a Boon to Radio-Tag Firms

Technology's makers, such as TI, may benefit.

Crayton Harrison
November 4, 2003

Technology sales executives dream about opportunities like this: Wal-Mart Stores Inc. plans to meet Tuesday in Arkansas with its top suppliers to discuss new technology that uses radio signals to identify products, potentially replacing bar codes.

That means hundreds of executives of big-name companies - from Procter & Gamble Co. to Tyson Foods Inc. - will be in one place, many looking for help to meet Wal-Mart's deadline to implement the technology.

For companies that make radio-frequency identification technology, including Dallas-based Texas Instruments Inc. and Richardson-based GlobeRanger Corp., it's a great chance to prowl for customers.

"Now's the time for people to pick their dance partner," said Jackie Kimzey, a partner in the Dallas office of Sevin Rosen Funds, which has investments in GlobeRanger and in California-based Alien Technology Corp., a manufacturer of radio-frequency tags.

Wal-Mart wants its suppliers to start putting radio-frequency tags on all of the cases and pallets they use to transport products to the retailer's warehouses.

Each case and pallet would have a tiny transponder that would broadcast information about its contents. A tag reader could read the information through radio signals, making the process of keeping inventory wireless and much less reliant on humans.

Finally paying off?

Wal-Mart has said that its top 100 suppliers should begin adopting radio-frequency identification, or RFID, on cases and pallets by 2005, with the rest of its suppliers following suit by 2006. Some analysts believe the retailer could soften that deadline somewhat in Tuesday's meeting as a concession to some of its biggest suppliers.

Either way, RFID companies say this week will mark an important turning point, with some of the biggest consumer products makers in the world finally investigating a technology they've been trying to sell for years.

"The RFID industry has been pushing a big snowball up the hill," said Bill Allen, e-marketing manager for Texas Instruments' RFID systems. When Wal-Mart came on board, it "basically pushed the snowball over the hill."

Getting the word out

In a meeting on Tuesday near its Bentonville, Ark., headquarters, Wal-Mart will give specifics about the RFID program it has already outlined. RFID company executives said they don't expect any huge surprises in Wal-Mart's specifics, and a Wal-Mart spokesman said the retailer wants Tuesday's meeting to be collaborative.

"I think this'll be a great information exchange," spokesman Tom Williams said. "With our top 100 suppliers, it's a partnership."

On Wednesday, the consortium that developed the RFID technology standard will host a mini-convention where Wal-Mart suppliers can browse through the technology companies' booths.

Some of Wal-Mart's suppliers have already been talking to RFID companies, while others have waited for more specifics from the retailer.

"There's one camp that's going to be concerned about just essentially being compliant with Wal-Mart's RFID initiative," Mr. Allen said. "The other camp wants to definitely become compliant, but wants to know how it can best use RFID."

The companies that figure out how to use RFID to save money will benefit from Wal-Mart's directive, said John Koenigs, chief executive of GlobeRanger, which makes software that tracks inventory and logistics information based on RFID-generated data.

"Wal-Mart came out of the closet on this thing and said, 'Listen, guys. We expect to save over $2 billion a year on the efficiencies and effectiveness of the use of these technologies across our supply chain,'" Mr. Koenigs said. "Everybody else can do their own math."