Best Buy will begin rolling out radio frequency identification technology (RFID) to its distribution centers and stores over the next several years.
The world's largest CE specialty chain will require its top 90 vendors to be RFID-compliant by Jan. 2, 2006, and will require the balance of its vendors to tag all product cases and pallets with RFID microchips by May 2007.
The controversial technology, which supplants bar codes and scanners with radio wave-emitting chips and antennas, will increase supply chain speed and efficiency, decrease stock-outs, and can expedite the returns and warranty claims processes, the company said.
Despite the greater cost to manufacturers, vendors will benefit from enhanced information sharing and Best Buy's shorter forecast window, the retailer noted. In addition, due to the relatively higher price of consumer electronics, the tags will represent a smaller percentage of the total cost of products compared to other categories.
Best Buy will be the third major national chain to employ RFID, joining Wal-Mart and Target which will both begin instituting the technology next year. Consumer groups have decried RFID, however, citing privacy concerns over retailers' ability to track shoppers after they have left the store.
Best Buy said it surveyed customers and met with manufacturers before adopting the RFID strategy, which it believes will result in a better customer experience. “Our goal is to create a flexible, high-velocity supply chain operating with better product availability for customers at a lower total cost for the company,” said Bob Willett, the chain's executive VP/operations. “We believe RFID technology can transform the way products are produced, distributed and merchandised. Customers will be able to more easily find the products they want, when they want them. Our own operations … and suppliers can share in the benefits.”
Best Buy has enlisted Accenture, a long-favored consultancy, to further refine its RFID strategy, manage its rollout, and aid vendors with compliance.