Best Buy To Benefit From RFIDBest Buy To Benefit From RFID

Best Buy Co. has a radio-frequency identification effort under way to help address out-of-stock problems that beset high-demand products such as laptops. Down the road, it hopes to use RFID to make it easier for consumers to service, exchange, and protect their high-value items.

By January 2006, major suppliers will have to include EPC-compliant RFID tags on cases and pallets, and it expects by May 2007 that all its suppliers will be participating in the effort. Best Buy says it hasn't determined any item-level tagging strategies, but because many of the products are sold to customers in cases, there's a chance that customers could begin to see RFID tags on products' cases in stores.

For now, a main goal is to have on hand the products customers want to buy. "We know that sometimes people leave our store empty-handed because a product they were looking for wasn't on the shelf, but with RFID we envision customers coming in and always having what they are looking for available to them," says Paul Freeman, RFID program director for Best Buy.

"Because we have so many stores and warehouses carrying electronics, just understanding where the products are and allowing us the ability to divert inventory to other stores much more effectively is the real advantage of RFID," he says. The technology will enable the retailer not just to track and trace products more easily but also help reduce inventory in stores.

Best Buy will adhere to the same standards as other retailers such as Wal-Mart Stores Inc. and Target Corp. in order to accelerate the adoption curve for its suppliers.

Best Buy began to examine RFID nearly three years ago and has been testing it internally, Freeman says. Before making the decision to implement RFID, Best Buy conducted one-on-one sessions with its suppliers to get their feedback on the technology. In addition, the company participated in a consortium sponsored by Accenture, a management consulting and IT outsourcing company, to evaluate the effects of RFID across the consumer-electronics supply chain.

"The electronics industry has some areas of opportunity that stand out a little bit more that the fast-moving consumer goods, and this industry is notorious for those products being out of stock," says Lyle Ginsburg, managing partner for Technology Innovation within Accenture's Products operating group. "The post-sale warranty process is an especially challenging area, and we feel that RFID will help ease the difficulties of getting valid warranty information when the product is purchased."

Best Buy already has provided its suppliers with a supplier requirements document. Best Buy will also team up with Accenture to manage rollout and implementation, Ginsburg says, and to assist suppliers with integration and compliance requirements.