Company hopes to tame Wal-Mart RFID requirement with IBM system

Schiff Nutrition International piloting wireless system to ultimately cut costs

Schiff Nutrition International, a Salt Lake City-based maker of vitamins and nutritional supplements, is in the middle of an RFID pilot intended to help the midsize company deploy the technology in order to continue doing business with Wal-Mart.

“We knew we needed to do this to meet [Wal-Mart’s] requirements, but we also wanted to do it with a big enough, strong enough backbone so that we could make use of it within our four walls or even further back in our supply chain,” says Rod Farrimond, manager of business analysis at Schiff.

In 2003, Wal-Mart began setting deadlines for suppliers to start using RFID tags on their shipments. In April, Schiff learned that it was among a group of about 200 companies facing a January deadline to implement the RFID technology, Farrimond says.

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Schiff Nutrition International, a Salt Lake City-based maker of vitamins and nutritional supplements, is in the middle of an RFID pilot intended to help the midsize company deploy the technology in order to continue doing business with Wal-Mart.

“We knew we needed to do this to meet [Wal-Mart’s] requirements, but we also wanted to do it with a big enough, strong enough backbone so that we could make use of it within our four walls or even further back in our supply chain,” says Rod Farrimond, manager of business analysis at Schiff.

In 2003, Wal-Mart began setting deadlines for suppliers to start using RFID tags on their shipments. In April, Schiff learned that it was among a group of about 200 companies facing a January deadline to implement the RFID technology, Farrimond says.

Wal-Mart’s efforts have been slower to roll out than the giant retailer had predicted, and an article (subscription required) in The Wall Street Journal earlier this month lambasted the whole effort, saying that the RFID tags weren’t resulting in the savings Wal-Mart expected, and many suppliers were complaining about the cost of implementing the technology.

Schiff, for example, uses RFID only for its Wal-Mart shipments, which means that less than 1% of its products make use of the technology that was deployed at a cost of about $320,000 last year. “We ship about 25,000 cases weekly to all customers, and only 180 of those cases will see an RFID reader,” Farrimond says.

But Farrimond says he doesn’t expect to see big returns on the investment until RFID technology is more widely used. In the meantime, he says, meeting Wal-Mart’s demands not only will help Schiff stay in good stead with Wal-Mart, but also will put the vitamin company in a good position as more retailers embrace RFID.

“Our big thing is being able to say, ‘When you’re ready to go full-bore RFID, so is Schiff,’” says Farrimond. “When we can tell that to our customers, then they see us as an enabler in the supply chain, as opposed to somebody who’s whining that the initiative costs a lot of money.”

And while some may question the success of Wal-Mart’s efforts, Farrimond says he’s convinced the project ultimately will help cut costs and improve efficiencies.

“When Wal-Mart decides to go for it, they decide to go for it because it’s best for their consumers. And if it’s good for their consumers, it means it’s good for us, too,” Farrimond says. “We just have to figure out how to do it in a manner that’s accessible to our business processes, as well as to Wal-Mart. Then what we’ve done is, we’ve built a stronger supply chain.”

For that reason, Schiff focused on using open standards to build a flexible system that could change as business needs changed. Schiff turned to Big Blue for help in rolling out the project.

“The reason we picked IBM was because we knew we wanted to build a strong system. We’re a small to medium-sized business with gross sales of about $200 million, so we couldn’t take a big swing and have it fail,” Farrimond says.