RFID Case Study: HP and Wal-Mart

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One of the suppliers making strides in complying with Wal-Mart's RFID mandates is HP. We can all learn some lessons from the experience of these kinds of supplier programs.

The Pilot

In early May, 2004, Hewlett Packard began shipping EPC-tagged printers and scanners to Wal-Mart's Dallas/Fort Worth distribution center as one of eight suppliers in Wal-Mart's initial trials. HP expects to ship its entire range of consumer products sold through Wal-Mart many weeks before the January 2005 deadline.

At HP's Memphis manufacturing plant, tags are placed on the underside of product labels for each individual printer or scanner, as well as on the pallets themselves. HP made a point to include labels that clearly identify and explain the RFID tagging. The RFID tags are used to record details of the transfer of the finished goods to a separate distribution center, before shipping to Wal-Mart. In the initial pilot, pallets were processed in just 11 seconds—down from the 90 seconds it had taken previously.


Inform the End Consumer

Wal-Mart, Tesco, Metro, and others have gotten seriously burned by trying to quietly or secretly deploy RFID, and in some cases track consumers' behavior without the consumer's knowledge. This only reinforces paranoia about loss of privacy and Big Brother conspiracy theories, in many cases leading to near hysteria when the story inevitably breaks. HP, with Wal-Mart, has taken the approach of making the identification of RFID tagged product prominent and clear, explaining RFID to the consumer. Time will tell whether this has any negative impact on sales, but it certainly beats the cloak and dagger approach, which has proven to be disastrous.

Making RFID Work with Metals and Liquids

Much has been made of the difficulties of getting accurate and consistent reads using RFID with products containing metals and liquids, which interfere with the RF signal. HP has been confronting these challenges in their Chester, VA plant in the tagging of their inkjet cartridges, which contain both liquid and metal and are wrapped in foil. By experimenting with the placement of the tag on the carton, HP learned that if there was a gap between the cartridge and the place on the carton where the tag was attached, the company could avoid interference problems.

Use Nested Tagging

HP was still unable to get 100 percent read rates on the cartridge cases once they are on a shipping pallet. Wal-Mart has also not been able to reach 100 percent reads accuracy for cases on pallets with other products. HP's systems track which product is put on each pallet and then associate those items or cases with the pallet's license plate. This reduces the need for reading individual items on the pallet. It is helpful for companies to implement systems that can keep track of the nesting of items within cases within pallets within containers within vehicles.

Making RFID Work with Shrink Wrap

HP discovered that the process of shrink-wrapping pallets can create an electrostatic discharge (ESD) that can kill the tags on the palletized items. They overcame the problem by using ESD-sensitive wrapping, installing antistatic flooring where pallets are shrink-wrapped, and using other discharge devices.

Use a Variety of Readers and Tags

HP uses tags and readers from a number of suppliers. They want to ensure interoperability, to make sure their RFID works throughout the delivery chain and across all their retail customers, regardless of the readers being used. It also gives them flexibility in selecting and sourcing the tags.

Taking Quick, Manageable, Incremental Steps

HP started early with a proof of concept. Then, instead of creating a grand integration project, its RFID capabilities were integrated only into the warehouse management systems and shop floor management systems, only at the two initially deployed sites. They are building upon that, rolling RFID out to 29 different plants for all goods to Wal-Mart. In HP's Sao Paulo plant, they are starting to pilot the use of RFID to reduce manufacturing costs. By starting early, taking small but quick steps, and learning, HP has been able to realize value early and more importantly gain invaluable experience in the process. The lesson—don't wait, start now, and take rapid incremental steps.

This article is from Parallax View, ChainLink Research's on-line magazine, read by over 150,000 supply chain and IT professionals each month. Thought-provoking and actionable articles from ChainLink's analysts, top industry executives, researchers, and fellow practitioners. To view the entire magazine, click here.

About the Author

Bill McBeath, Chief Research Officer of ChainLink Research, leads ChainLink's research efforts, as well as the procurement, strategic sourcing, design collaboration, and on-line marketplaces practices.

Bill McBeath can be reached at: bill.mcbeath@clresearch.com.

ChainLink Research is a bold new supply chain research organization dedicated to helping executives improve business performance and competitiveness.

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