Retail giant Wal-Mart has announced plans to adopt radio frequency identification for products supplied by its Chinese suppliers from January 2009.
Compared with the currently used bar code, which costs about CNY0.05, the cost for a RFID marker is about CNY1. The 20 times cost increase is expected to be a heavy burden for Wal-Mart's 1,000 plus Chinese suppliers.
However, the new technology is expected to make substantial savings for Wal-Mart. According to Chen Chang'an, general manager for the Shenzhen-based RFID provider Invengo Information Technology, by using RFID, Wal-Mart can check product information, including brand name, production location, and price very quickly, which will greatly reduce its supply chain and distribution management costs, saving the company USD8.35 billion each year.
Wal-Mart started to impose stricter standards on Chinese suppliers in October 2008. Mike Duke, vice president of Wal-Mart, has said that Wal-Mart would not only ask its Chinese suppliers to report the name and factory location of their products, but also require them to take the responsibility for their subcontractors' work and products. Suppliers who failed to meet these standards would be droped from Wal-Mart's Chinese supply chain if no improvements were made. He said the new standards would be put into effect in the apparel sector from November 2008 and gradually cover all products in its stores.