MIS Quarterly Executive


Interest in, and subsequent use of, passive radio frequency identification (RFID) in the retail supply chain has grown rapidly in the past few years. Several major retailers have launched RFID initiatives, with Wal-Mart leading the way both in the number of deployments (stores and distribution centers) and the number of suppliers involved. At this early stage of adoption, one nagging question for retailers and suppliers is: what is the business case for RFID? In examining this question, a potential area for improvement is the number of products out of stock on the shelves. Any reduction in out of stocks provides benefits for the retailer, the supplier, and the consumer.

To explore the out-of-stock business case for RFID, Wal-Mart commissioned a study to measure the impact of the technology on out of stocks. For 29 weeks in 2005, out of stocks were examined daily in 24 Wal-Mart stores (12 RFID-enabled stores, 12 control stores) representing all store formats. The results of that study are presented in this article. They show that RFID makes a significant difference: within the test stores, out of stocks were reduced by 21% more than in the control stores, and in the test stores RFID-tagged items experienced fewer stock outs than non-tagged items.