University of Arkansas Study Quantifies Wal-Mart's RFID-Initiated Improvements

BENTONVILLE, Ark., -- Wal-Mart customers found items they wanted in stock more often due to the retailer's use of electronic product codes (EPCs) powered by radio frequency identification (RFID) technology, according to an independent University of Arkansas study's initial findings.

Researchers at the University of Arkansas found a 16 percent reduction in out-of-stocks at the test stores versus control stores. Additionally, the study showed that out-of-stock items with EPCs were replenished three times faster than comparable items using standard bar code technology. Equally important, Wal-Mart experienced a meaningful reduction in manual orders resulting in a reduction of excess inventory.

"This is no longer a take-it-on-faith initiative," said Linda Dillman, e.v.p. and c.i.o. for Wal-Mart. "This study provides conclusive evidence that EPCs increase how often we put products in the hands of customers who want to buy them, making it a win for shoppers, suppliers and retailers."

The 29-week study analyzed out-of-stock merchandise at 12 pilot stores equipped with RFID technology and 12 control stores without the technology. All Wal-Mart formats -- Supercenters, Discount Stores and Neighborhood Markets -- were included in the study.

The study is the first to compare the impact of EPCs on merchandise availability in functioning stores. While Wal-Mart commissioned the study, it was conducted independently by the University of Arkansas. Specific items were selected to be analyzed at the beginning of the study, and these items remained constant throughout the entire process to ensure data consistency.

To both establish a pre-study baseline and to measure the impact of RFID, out-of-stock items were scanned every day throughout the study period, at the 24 stores. Other than the introduction of EPCs and RFID technology, the stores continued to operate normally.

The study design allowed the researchers to examine differences between the 12 control stores and the 12 RFID-enabled stores. It also provided the ability to compare performance in the same stores through analysis of the baseline data and the data collected during the use of EPCs.

As part of its standard processes, Wal-Mart has focused on driving improved product availability for its customers through a series of initiatives unrelated to RFID technology. The research was structured to isolate the impact of RFID to be able show the improvements directly attributable to the RFID process improvements.

Beyond improvements in in-stock, Wal-Mart also sees benefits in overall inventory reduction, which is key to driving costs down. "The initial changes we made in our stores didn't stop at reducing out-of-stocks," said Rollin Ford, e.v.p. for logistics in Wal-Mart. "We are also using the technology to reduce our inventory in the whole supply chain. With little effort we have been able to make inroads into this area. Manual orders placed by stores were reduced by approximately 10 percent. However, as Linda Dillman has said, impacting in-stocks is only the start."

Details and findings of the study will be made available in the near future via a series of white papers released by the University of Arkansas.
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