Sam's Club wants RFID tagging from suppliers

The division of Wal-Mart plans to charge suppliers a fee for untagged pallets.

By Sean Murphy, Associate Editor -- Modern Materials Handling, 1/24/2008

Sam’s Club, the warehouse club owned and operated by Wal-Mart Stores, has unveiled a plan to use RFID tagging on every level—pallet, case, and item—by the fall of 2010.

In a letter to suppliers dated Jan. 7 of this year, Sam’s Club outlines a two-year plan to phase in the tagging, starting with pallet-level tagging on products coming into the club’s Desoto, Texas, distribution center by next Wednesday, Jan. 30.

As of Oct. 31 of this year, pallet-level tagging will also be required at the company’s distribution centers in Kansas City, Mo.; Dayton, Texas; Searcy, Ariz.; and Villa Rica, Ga. As of Jan. 30, 2009, pallet-level tagging will be required at Sam’s Club distribution centers nationwide.

The club plans further expansion of its plan to include case-level RFID tagging phased into its centers from Oct. 31, 2008, to Oct. 31, 2009. Item-level tagging is planned as well, according to the letter, to be phased in from Oct. 31, 2009, to Oct. 31, 2010.

The letter makes it clear that RFID tagging is not optional for suppliers, at least on the pallet level. Sam’s Club plans to charge any suppliers who do not tag pallets at required centers escalating fees per pallet of $2.00 from Jan. 31 to Oct. 30 of this year, $2.50 from Oct. 31, 2008 to Jan. 30, 2009, and $3.00 per pallet starting on Jan. 31, 2009.

Susan Kohler, a spokeswoman for Sam’s Club, insists the fees mentioned in the letter are not a punitive “fine,” as they have been classified by some reports. The fees, she says, are part of what she calls a “service” the company is offering to help suppliers who are not yet able to provide their own tagging.

Dean Frew, president and CEO of Xterprise, an RFID systems integrator, says some of his clients, which include about 40 consumer packaged goods companies, have never used RFID technology before. Those suppliers will have to go through a crash course in using RFID tagging to prevent getting socked with fees from Sam’s Club.

“It’s going to be a sprint for some of these (suppliers),” he says.

Kohler says Sam’s Club’s plan is a long-term one that will take some time to fully implement, and that the club’s competitors are likely to implement similar plans soon.

“It’s not as though we’re the only retailer that’s headed that way,” she says.

Sean Murphy is an Associate Editor for Modern’s sister publication, Supply Chain Management Review.