A failed marriage of business, technology

A failed marriage of business, technology

This week marks four years since Wal-Mart directed its suppliers to use radio-frequency identification. The retailer's top 100 suppliers were given a January 2005 deadline to use RFID on Wal-Mart's shipments, and the remaining suppliers were to fulfill the mandate by January 2006. Suppliers risk losing Wal-Mart as a customer if they do not conform to the demands.

With the promise of 100 percent of global supply-chain visibility at the pallet, case, carton and line item, Wal-Mart set an objective of initially having 12 of its 137 distribution centers fully equipped with RFID tag readers by 2007, with the rest to follow shortly thereafter.

Many of Wal-Mart's competitors followed with major RFID announcements of their own. The momentum was building, with many technology consultants touting RFID benefits that ranged from reducing inventory cost to providing total shipment visibility throughout the supply chain.

With so much hype and pressure, there were a few dissenting voices, mine among them. I am in favor of the technology, but not based on arbitrary and unrealistic deadlines. On this page in December 2003, I warned about implementing RFID too fast.

I noted that while RFID theoretically can provide 100 percent visibility throughout the supply chain, the implementation is not that straightforward, and that with its high cost, lack of technical standards and absence of supportive regulations in most countries, RFID had a lot to overcome.

I hoped that Wal-Mart would consider the huge problems that would result from imposing a system before the industry was ready for it. In subsequent articles, I argued that the cost of RFID is not limited to the price of tags and readers but should include the additional cost needed for doing a complete overhaul of information technology infrastructure that would support supply-chain visibility.

Wal-Mart's announcement succeeded in creating a sense of urgency that lasted through 2004 but faded quickly in 2005, as companies found it difficult to quantify RFID business value. Those who started RFID evaluation did little in terms of implementation. Consultants attempted to make the case for technology by finding new applications that might justify its use. National security, reduction of in-transit cargo theft, and securing the food chain were all introduced as benefits of RFID.

In 2006, Wal-Mart acknowledged that it could not meet its own deadlines; today only five distribution centers have achieved the objectives.

In an attempt to salvage some of the effort spent by Wal-Mart's IT team, last year there was a practical shift of focus to internal applications of RFID. Today, RFID technology implementation at the SKU level has shown limited success in acting on RFID data to reduce out-of-stock items and to improve the management of in-store promotions.

Wal-Mart's failure to achieve the original objectives reflects the questions facing many other companies of all sizes - namely, who should lead, technology or business? The never-ending struggle between business leaders who have little understanding of technology and technology leaders who think they know what the business needs are has proved detrimental to RFID at Wal-Mart.

Wal-Mart's unrealistic timeline reflects a major business initiative based on technology experts' opinions. The cost of infrastructure support, database modification, business process changes and creation of new monitoring and control procedures are still major hurdles today, just as they were four years ago. These are problems faced by any major technology implementation initiative.

For an industrywide initiative to be successful, collaboration is needed among all business partners involved. Wal-Mart's attempt to push RFID implementation, in combination with unrealistic deadlines, made many people describe the company's approach in many non-flattering ways, the least of which was "collaborative."

Wal-Mart's history has shown that the company is a great industry leader. But when the needed leadership goes beyond a company's own walls, organizations must ensure the collaboration of business partners from the start. Changes such as wholesale adoption of RFID must be based on sound business objectives and well-thought-out technical implementation. Maybe if Wal-Mart had succeeded in marrying business strategy with technology in its RFID initiative, there may have been hope for its followers. This would have been "real" leadership.