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Do Tech Mandates Work?

As with any digital transformation, the objective should be to improve business value in some capacity. This could include heightening worker productivity, streamlining businesses process, creating greater efficiencies in the supply chain, or improving customer service, just to name a few. The ultimate goal would be to achieve greater profit margins. But does this always happen? That is the (multi)million-dollar question.

Let’s look at one well-known example: Walmart. The technology giant is known for its one-stop shopping experience that often comes in at a lower price point than competitors. The company has an operation-driven strategy aimed at reducing expenses. It perhaps, then, doesn’t come as a surprise that productivity is king for this retail giant. This approach has grown the company to one of the largest retailers, operating in dozens of countries through its more than 10,000 stores.

Keeping this operation humming along most certainly requires technology. While the company’s approach uses many different types of technology, one of note is RFID (radio-frequency identification), which it began using back in the early 2000s. Back then, the approach was effective in saving money. With this in mind, the company went on to invest almost $500 million in its RFID technology in 2004.

At that time, the University of Arkansas conducted a study on the use of RFID technology. It found there was a 16% reduction in out-of-stock merchandise at Walmart stores equipped with RFID labels using EPC codes. Here is what is really impressive though: These out-of-stock items were replenished three times faster than items using standard bar-code technology. I would call that a success story, if I have ever heard one.

Certainly, this trend was then followed by other retailers including Target, H&M, Nordstrom, and Macy’s, just to name a few.

Now, Walmart no longer can do it alone. Early last year, the company expanded its RFID mandate for many categories beyond apparel (which already had a mandate in place). Beginning in September 2022, it has called on its manufacturers, distributors, and vendors to also use the same technology that has made it so successful. Companies providing apparel, bath and shower, bedding, electronics, furniture, home décor, kitchen and dining, storage and organization, and toys must also use Gen 2 UF RFID tags.

This has been in place for almost a year. Has it spurred adoption beyond apparel? IDTechEx suggests looking at the growth and impact of RFID technology.

More than 72% of UHF RFID tags were deployed in apparel and footwear combined last year. This category still clearly dominates the market. Still, while these two lead, other sectors have experienced notable growth as well. IDTechEx suggests players within Walmart’s supply chain, in particular, have reported a strong double-digit increase in demand as a direct result of Walmart’s RFID mandate. This aligns closely with IDTechEx’s forecast regarding the adoption of UHF RFID technology in other retail sectors.

So, the question looms: Do tech mandates work? Just ask Walmart, a multi-billion-dollar company that continues to push the envelope with RFID technology in its supply chain.

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