New Findings on RFID Capability

FAYETTEVILLE, Ark. — New results from a University of Arkansas study on the impact of RFID technology on out-of-stock products at select Wal-Mart stores revealed a 30-percent reduction in out of stocks for products selling, on average, between 0.1 and 15 units per day.  

“The preliminary results released late last year were conservative by design in that we did not want to overestimate RFID’s impact,” said Bill Hardgrave, founder and director of the RFID Research Center, a subunit of the Information Technology Research Institute in the Sam M. Walton College of Business. “Since the release of the first series of data, we have been diligently examining the data, trying to isolate the effect of RFID on out of stocks. Thanks to the great work of Professor Matt Waller, we have been able to identify the effect of RFID as it relates to sales volume. Specifically, across a broad spectrum of sales quantities, we found that RFID, when controlling for such things as case pack size and shelf quantity, actually reduced out of stocks by about 30 percent. This number, rather than the original estimate of 16 percent, is a much better estimate of RFID’s true benefit.”

Hardgrave announced the findings Wednesday at RFID Journal Live!, the journal’s fourth-annual conference and exhibition in Las Vegas. More than 2,200 people attended the conference.

The study, sponsored by Wal-Mart Stores Inc. and conducted by Walton College research faculty from Feb. 14 to Sept. 12, 2005, examined 24 Dallas-area stores, half of which were RFID-enabled and the other half of which were control stores. In November, the research center announced preliminary results that showed the use of RFID technology reduced out of stocks by 16 percent when compared to control stores. Those results also demonstrated that test stores outperformed control stores by 63 percent, and RFID-tagged items within the test stores outperformed non-tagged items within those same stores by three-fold.

Radio frequency identification is a wireless data collection technology that uses electronic tags for storing data. Like bar codes, they are used to identify items. Unlike bar codes, which must be brought close to the scanner for reading, RFID tags are read when they are within the proximity of a transmitted radio signal. The technology has applications for business and industry including retailers, suppliers and transportation providers.

In June 2003, Wal-Mart requested that its top 100 suppliers place RFID tags on pallets and cases shipped to stores in the Dallas region. With that request, Wal-Mart jump-started a 50-year-old technology that previously had found limited, but successful use in a variety of areas. Since that announcement, the RFID industry has blossomed. Several major retailers have launched RFID initiatives, with Wal-Mart leading the way in number of stores and distribution centers and number of suppliers involved. The goal of the UA study is to answer the business case for the use of RFID in the supply chain.

Strategically positioned in the retail epicenter of current RFID activity, the RFID Research Center has recruited sponsors from more than 30 national and international industry-leading organizations. The center, a subunit of the Walton College’s Information Technology Research Institute, was formally approved by the Arkansas Department of Higher Education and began operations on Feb. 4, 2005. The center officially opened in June 2005. In September, the center passed accreditation criteria established by EPCglobal Inc., a global not-for-profit standards organization commercializing the Electronic Product Code and RFID worldwide. The center is one of the first EPC/RFID research laboratories worldwide to receive the EPCglobal Performance Test Center accreditation.

Collaborators with the RFID Research Center within the Walton College include the information systems department, the Supply Chain Management Research Center and the Center for Retailing Excellence. Leveraging multidisciplinary expertise across the University of Arkansas, the center also has collaborative relationships with the College of Engineering, including the departments of computer science and computer engineering, industrial engineering, electrical engineering and mechanical engineering; the J. William Fulbright College of Arts and Sciences, including the Center for Advanced Spatial Technologies and the department of public policy; the Dale Bumpers College of Agriculture, Food and Life Sciences, including the department of food science; and the School of Law.

Hardgrave, holder of the Edwin and Karlee Bradberry Chair in Information Systems, is also executive director of the Information Technology Research Institute. Waller is an associate professor of marketing and logistics in the Walton College and holds the Oren Harris Chair in Logistics.