Dairy Company Lends Insight Into Wal-Mart's RFID MandateDairy Company Lends Insight Into Wal-Mart's RFID Mandate

Daisy Brands, which sells its sour cream and cottage cheese through retail stores worldwide, joined Wal-Mart's RFID mandate early on to avoid the rush of companies clamoring for help with RFID products, certification and services.

It's been more of a three-year-long walk than a rush, though. Many suppliers are taking their sweet time to tag pallets and cases of products headed for Wal-Mart distribution centers and stores. Wal-Mart hasn't punished suppliers who've chosen not to comply, but that could be changing: Wal-Mart-owned Sam's Club reportedly is asking suppliers to tag pallets with RFID 2 tags or face a fine of $2 per pallet beginning Feb. 1.

While others have hesitated, Daisy says its investment in RFID has been a boon, helping Daisy better manage the flow of its perishable products through Wal-Mart stores and ensure marketing promotions proceed as planned, according to Kevin Brown, Daisy's information systems manager. It also lets Daisy's other customers -- including those who don't use RFID -- better track their orders.

RFID reader and tag company Alien Technology, which considers Daisy a marquee customer in retail, will announce Monday that Daisy is continuing its investment in Alien's technology by upgrading to its ALR9900 readers, which offer improved antenna technology for better read rates. Daisy hasn't done a hard cost analysis on the payback of RFID, but the benefits are moving beyond Wal-Mart compliance, Brown told information.

"It was never really an ROI project for us," he said. "It's all about being a good partner." That includes not just working more closely with Wal-Mart, but improving tracking services for its other customers.

"It's just like going to FedEx to track a package," Brown said. "Our customers can log on to our portal and see what was picked up and by whom." Brown adds that Daisy is beginning to work more closely with Sam's Club on that retailer's RFID ramp-up efforts.

Wal-Mart officials have insisted they're making good progress with RFID, particularly with in-store applications such as faster replenishment of out-of-stock merchandise. But the retailer has scaled back plans to use RFID in its distribution centers in the past year or so, primarily because a vast majority of Wal-Mart's 20,000 suppliers sending products to those centers haven't adopted the technology. The cost of RFID tags, which might run $1 apiece compared with a few cents for a bar code, and read problems with some materials, such as liquids, glass, and metals, has slowed the adoption of RFID in retail.

But the rate of Wal-Mart compliance isn't a big deal for Brown, who hopes to keep improving his business with RFID and get his raw material providers on board with the technology, too. Daisy, like California tomato canning company Pacific Coast Producers, insists that RFID is proving worth its while.

In 2003, Wal-Mart announced 100 top suppliers would launch its initial RFID effort. Daisy was among another 30-some companies that also volunteered. "We wanted a relationship with the appropriate partners and providers to get this done," Brown said. "Quite frankly, I didn't want to be in line."

But there were other reasons it made sense for Daisy. It's based in Dallas, Texas, near Wal-Mart's own distribution centers. It makes perishable products that live by a relatively short expiration date and must move quickly through the supply chain. By the fall of 2004, the company had started shipping RFID tagged cases and pallets to Wal-Mart. Now, every one of its cases to Wal-Mart is tagged, and all of its pallets (which carry 70 to 180 cases) are tagged, no matter where they're heading. Among the bigger issues Brown has had to work through include dealing with the two-inch cases that carry the company's 4 oz. containers of sour cream. The cases are too short for the automatic tagger, so the company stacks two cases to create a four-inch height, requiring a bit more manual work, and tags both cases at once. There have been occasional issues with getting bad reads due to metals and liquids. But the technology is steadily improving. "What we've seen is reader technology and tag technology evolves about every 12 to 18 months," Brown said.

Using Wal-Mart's Retail Link Web site for suppliers, Brown can track, by lot number, how quickly pallets of product make it to stores and when they're unpacked (Wal-Mart has readers at its dock entrances and on its cardboard case compactors), and when products pass through a store's point-of-sale system based on their bar codes. Daisy's own ERP systems contain production and expiration information on all cases and pallets shipped. If product is moving too slowly, indicating a potential issue with freshness, Daisy can dispatch someone to a store to investigate. The information also provides Daisy with insight about trends and behaviors among different types of stores. RFID is far superior to bar codes, Brown said, because it doesn't require a line of site from a reader.

Brown is also using the information to track promotion success. If a Wal-Mart store, for example, is scheduled to run a two-for-one promotion on sour cream, the items are usually loaded up in an easily accessible, waist-level "coffin cooler." If Daisy doesn't see a proportionately large number of cardboard cases getting destroyed via the compactor--which happens when a store loads up a coffin cooler -- it knows the promo may not be taking place as planned.

"We need to know the product is going to make it out of the warehouse and into coolers," Brown said. "Is the store ready, and when the coupon breaks, is the product going to be there? We just went through promotions with the holidays, when lots of cooking happens, and we wanted to make inventory in warehouses is actually getting put into stores."

Brown is bullish that RFID use will increase, and believes it will get picked up by his raw materials supply chain. That will aid in collaborative planning and forecasting, and help Daisy monitor the quality of raw products.

So what's Brown's advice for other consumer goods companies planning to get on board with Wal-Mart's mandate? Take it one product at a time. "Find the item you can get value out of tagging first," he said. "New item introductions are a great place to start with. You want to know, 'Is my new item on the shelf?' If you're spending marketing dollars, you want to see that product moving."

Suppliers should use RFID as an opportunity to partner more closely with Wal-Mart, but that's not all. "There's more benefit in the long run, using RFID internally, than just compliance," he said. "It's one thing to give a customer a purchase order and an invoice, and another to give them insight into how you proceed all of that."