Ding. Ding. Ding.

Marketing assistant professor Concha Neeley watches boxes full of inventory leave the truck and enter a Wal-Mart distribution center.

Ding. Ding. Ding.

She notices that no one has been around to make sure the crates’ bar codes are lined up for the line-of-sight reader. And she never sees a red light scan over the boxes.

So how can Wal-Mart be sure the items are accounted for? The answer: Radio-frequency identification (RFID) technology.

For her dissertation project at the University of Texas, Neeley explored the effects RFID can have on the supply chain. She found that these little radio transmitter tags strengthen the supply chain and make it more efficient. Neeley said RFID is “like a barcode on steroids.” Wal-Mart today has become one of the first major retailers to incorporate this technology into its supply chain management.

Using a cereal box as an example, Neely said a scanned barcode lets the retailer know that cereal has been purchased, but it doesn’t say which box. Neeley uses cereal because it is her favorite product. As a child, she spent hours in the cereal aisles with her mother looking for new products and noticing the colorful arrangement on the grocery shelves.

“The RFID tag has exactly when that cereal was produced, where it shipped from, and what truck it was on,” said Neeley, who started teaching at CMU in the fall. “You know exactly which box of cereal is being purchased. It is basically quality control.”

It also helps with recalls. She said if all pet food recalled this spring had had RFID tags, once the source of the problem was found, the supplier would have known exactly which batch was contaminated.

Not only does RFID make the supply chain more efficient, it also is a wonderful marketing tool, Neeley said.

RFID can be used to track any consumer product. On clothing products, when the RFID tag is scanned and detected, immediate access is provided to a database containing a rich stream of content for every garment, shoe, and bag. This is in the form of sketches, catwalk video clips, and color swatches, according to Web site RFIDjournal.com.

“When you go into the dressing room with an item, there is a video screen that will flash up accessories that will go with the item you chose,” Neeley said.

In her dissertation, Neely also wanted to know how companies used the technology. She sent out 3,500 surveys to people who worked in all areas of the supply chain – from production to retailer. She found that very few companies were using the technology.

“Great technology is out there, but why aren’t organizations adopting it, and why aren’t they implementing it, because there are so many advantages?” she asked. “What is the hold up?”

When she lived in Texas, Neeley said she used RFID technology frequently when driving on toll roads. She said many people also use Mobile gas station’s Speed Pass, which has a RFID tag.

“The Department of Defense has used the technology for many years, so this is not new,” she said. “We are using old technology in a new way.”

When reviewing the dissertation surveys, Neeley understood why some companies aren’t switching over: cost, limitations, and lack of understanding of the benefits. Tags run from 5 to 20 cents each.

Another problem is that RFID doesn’t read through liquid or metal, so the tags can’t be used on items like soda. But the biggest inhibiting factor is that companies don’t understand the potential return on
investment (ROI).

Wal-Mart is one of the corporations that does understand the benefit and recently mandated that its top suppliers become RFID-compliant.

“Wal-Mart has been successful based on distribution. It is their competitive advantage. RFID is just one more tool to make them more efficient,” Neeley said. “RFID eliminates out-of-stocks. All the products are on the shelf when the customer wants them.

“RFID allows for real-time collaboration
among everyone in the supply chain. Everyone knows where products are and
what is needed when.”

Neeley believes that most products will eventually get the tags because of Wal-Mart’s push, but not for the reasons that she teaches in class.

“What I have found is that manufacturers are adopting the technology because the retailers tell them to. They are not doing it for collaboration, which is counter to the marketing concept we teach. Ideally organizations should be adopting the technology to benefit the end customer.

“Bringing that down to a classroom level, the conclusion is that we shouldn’t adopt technology for technology sake; we should adopt technology that will make sure that manufacturers can provide the right product to the right place, to the right people, and in the right quantities.”

That way Neeley’s favorite cereal will always be in stock.