Reference #: ITRI-WP058-1105 Date: November 1, 2005

Does RFID Reduce Out of Stocks? A Preliminary Analysis


The interest in, and subsequent use of, passive RFID in the retail supply chain has been growing rapidly in the past few years. Several major retailers have launched RFIDinitiatives 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 in the in-stock position of products on the shelf. That is, any reduction in out of stocks provides benefit for the retailer, the supplier, and the consumer. In an effort to explore this potential business case, Wal-Mart commissioned a study to examine the influence of RFID on out of stocks. From February 14 to September 12, 2005, out of stocks were examined daily in 24 Wal-Mart stores (12 RFID-enabled stores, 12 control stores) representing all store formats. Preliminary results presented in this paper suggest that RFID is making a difference: within the test stores, out of stocks were reduced; test stores outperformed control stores; and tagged items outperformed non-tagged items within test stores.