September 2, 2004

Best Buy Taking Baby Steps to Full RFID

By Evan Schuman, eWEEK

Best Buy has gone public with its RFID plans, pledging to move all of its major suppliers to start delivering RFID-compliant tags for all product cases and pallets by Jan. 2, 2006. The deadline for those suppliers to support all product cases and pallets is May 2007.

But the $25 billion Fortune 100 retailer said this rollout—which has been in the works for about a year—is being done at a relatively relaxed pace. "This is going to be a 'go slow to go fast' move," said Bob Willett, executive vice president of operations for Best Buy, in an interview. "We've barely got our feet in the water."

Willett said the deadlines were set by a group of Best Buy executives and 11 major supplier representatives. "We haven't dreamt up this deadline on our own. We're deliberately keeping this [requirement] at a low level, to keep it digestible," he said. "We're not asking for massive levels of sophistication here. We could have asked for a much more sophisticated level of tag."

The reason Best Buy wants to let its more than 750 storefronts ease into RFID is that, while they are certain that RFID is where the industry is—and should be—headed, "none of us have yet worked out how to get there. Frankly, we're learning. There's a lot of hypothesis around this," Willett said.

"This is all about trial, evaluate, rollout. No one isn't embracing RFID," he said. "But at the end of the day, no one is absolutely sure where this will all lead."

The Best Buy EVP took pains to differentiate using the technology and using it wisely. "Best Buy is a very innovative company. But I don't see [this RFID effort] as pioneering. What is pioneering is how we'll use it effectively," he said. "Few companies fail because of lousy strategy. They fail because of poor execution."

Best Buy wants to use RFID to advance customer objectives and to make major improvements in inventory control, labor forecasting, price optimization and value targeting.

"RFID is not RFID on its own. How do you use that technology? For example, how does it get used in space optimization?" he said.

The most basic supply chain management—the much ballyhooed product transparency—is a top Willett goal. One of his frustrations is with promotional merchandise. "One of the haphazards is that the promotion is short in terms of duration and in terms of quantity. You don't want to upset customers by promoting something that isn't going to be there," he said. Even preliminary RFID efforts "should further enable product availability at the store level so we know where product is at any one time."

With so much attention focused on efforts of retailers to move from bar codes to RFID, it's important to note that the near-term stage—which could last five or more years—will see the two technologies co-existing.

RFID "is vastly superior to bar coding. The speed and efficiency is there. But RFID tagging is a step change," Willett said. "We know that we are going to have dual systems for a considerable time. Ultimately, though, you can't [permanently] have dual systems."

This week's announcement comes on the heels of Best Buy's announcement of a seven-year strategic relationship with Accenture for consulting and outsourcing services. That announcement identified the retailer's IT goals as supply chain management optimization, improved call centers, better functionality from their Web sites, and improved analytics and reporting.