Q&A
Sam, I Am Tagging
A Sam's Club spokesperson discusses the company's recently-instated policy that requires suppliers of a Texas DC to tag their pallets — or face a service fee.
By Eric Van Osten
In a letter dated January 7, 2008, Sam's Club suppliers were told that they were required to apply EPC Gen 2 RFID tags to pallets heading to a DeSoto, Texas, distribution center (or directly to one of its stores served by that DC) by January 30. The letter included a 21-month timeline for RFID compliance. Suppliers failing to comply will be charged a service fee, starting at $2 per untagged pallet and capping at $3 per pallet on January 1, 2009.
Susan Koehler, Senior Manager, Corporate Communications, Sam's Club Public Relations, explains why this mandate was put in place and how it can benefit everyone involved.
How are the suppliers reacting to the monetary penalty for not tagging their items?
"Penalty" is not the right characterization for what we're providing. We are providing a service for those who may not be far enough along to be tagging at the pallet level.
In general, we've been communicating with our suppliers to put together a road map for EPC implementation over the next couple of years. We know that some of those folks may not be a far along as others in their own RFID initiatives, and not all of them have the processes and capabilities. So we said: "We can do it for you and pass the cost onto you." The rest of the letter outlines additional timeframes into 2009.
This is a multifaceted, dynamic project. We want to get it right. There are benefits for the supplier community as well as our members, ultimately. They 're going to see increased efficiencies such as the right products in the right place. This is a good approach for all of us to take together – baby steps toward the ultimate goal where labels are used at the item level.
Why was a Sam's Club distribution center the chosen location for this initiative to begin?
Our rollout is very conservative. Because Sam's Club includes just under 600 clubs, and we have limited SKUs in the wholesale format, we have some advantages compared to Wal-Mart, given that we have a much smaller, more controlled environment. We are moving forward as a division with a plan. A lot of our merchandise is displayed in the club at the pallet level. It's a step-by-step approach so that we can continue to learn and get it right and make progress and adjustments along the way.
Are the suppliers embracing RFID to its full potential?
We're seeing a lot of interest. There are resources for suppliers. EPCglobal and the University of Arkansas – we're getting increased calls into those resources. Our suppliers are looking into attending trade shows. Some case studies that are out there, such as Daisy Brand, show that there is a degree of involvement that many companies have achieved with RFID. And there are companies who are not there yet.
How is the tagging service carried out at the distribution center?
We will tag the goods at the distribution center; however, there are RFID providers and consultants that can help the supplier community to learn more. That's where networking with organizations like EPCglobal can help suppliers better understand their options for their specific products and business.
Is it a concern that some suppliers may choose to opt out of working with Sam's Club because of this mandate?
We haven't had any issues with suppliers threatening to discontinue sales to Sam's Club. This service is an interim solution. We anticipate that this will benefit both our businesses, and that in time, suppliers will have their own solutions. We are not the only retailer moving into this environment. Other major retailers are embracing RFID so it's going to benefit the suppliers' businesses in the long run.
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