Re:Walmart drops inventory robots from its stores
by Closi on Thursday November 05, 2020 @03:46AM
(#24996626)
I have some experience of RFID from working for a UK supermarket in their supply strategy team, who did a very limited partial rollout.
The reason is that your original premise is not true - they are not relatively cheap to roll out or maintain (relative to the cost of goods).
They are not cheap to roll out:
- Readers in all stores, including handheld devices, tills, doors e.t.c.
- If you are tagging 100% of products, it affects every single supplier production line, of which there are tens of thousands. A cost to your supplier is a cost to you, because it will inevitably affect the cost of goods sold.
- IT cost implications both internally and at your suppliers.
- If you don't get 100% of suppliers adhering, you don't get as much benefit. Good luck getting Coca-Cola to change their production lines for no benefit to themselves!
They are not cheap to maintain:
- At an estimated 2p per item, if you are shipping 10 billion items that is £200,000,000 a year just in tag costs. Alternatively put, if you sell items for £1 on average and make 4% net profit, that cost of tag cuts deep.
- There is an incremental cost for suppliers to maintain all that equipment to apply tags or build them into the packaging (which comes back in COGS).
- Maintenance of all RF readers
And inventory routines are cheap relative to this cost:
- Assuming you have 1000 stores, and spend 5 hours per day on inventory routines @ £12 total cost to employ, you are talking a £20m cost (5 hours assumes gap scanning & code checking). I assume a manual financial account is still required once a year to account for failed tags.
So we have to come up with other benefits, like top-line growth driven by a better customer experience, but customers will have to be willing to pay for this with higher prices.
The reason is that your original premise is not true - they are not relatively cheap to roll out or maintain (relative to the cost of goods).
They are not cheap to roll out:
- Readers in all stores, including handheld devices, tills, doors e.t.c.
- If you are tagging 100% of products, it affects every single supplier production line, of which there are tens of thousands. A cost to your supplier is a cost to you, because it will inevitably affect the cost of goods sold.
- IT cost implications both internally and at your suppliers.
- If you don't get 100% of suppliers adhering, you don't get as much benefit. Good luck getting Coca-Cola to change their production lines for no benefit to themselves!
They are not cheap to maintain:
- At an estimated 2p per item, if you are shipping 10 billion items that is £200,000,000 a year just in tag costs. Alternatively put, if you sell items for £1 on average and make 4% net profit, that cost of tag cuts deep.
- There is an incremental cost for suppliers to maintain all that equipment to apply tags or build them into the packaging (which comes back in COGS).
- Maintenance of all RF readers
And inventory routines are cheap relative to this cost: - Assuming you have 1000 stores, and spend 5 hours per day on inventory routines @ £12 total cost to employ, you are talking a £20m cost (5 hours assumes gap scanning & code checking). I assume a manual financial account is still required once a year to account for failed tags.
So we have to come up with other benefits, like top-line growth driven by a better customer experience, but customers will have to be willing to pay for this with higher prices.