Les Jones

Economics > Bush Beans, RFID Tags, and Wal-Mart

Yesterday in Oak Ridge Todd Schultz of Bush Brothers spoke to Tech 2020 about Bush's efforts to comply with Wal-Mart's requirements for integrating RFID technology. Bush is a privately-owned company located in Chestnut Hill, near Dandridge, TN, and is best known for Bush beans. Wal-Mart is Bush's biggest customer, and provides about 20% of their sales.

From reading news reports and commentary I had the impression that RFID technology was quite advanced, but I got the opposite impression from the presentation.

Availability of the tags is somewhat limited, with a two-to-three month lead time needed for delivery. For a brief period supply got so ahead of demand that tag prices went up.

The tags are quite a bit larger than I had imagined. Some are roughly 1 x 4 inches, but one tag that was passed around the room was closer to 4 x 4 inches. At those sizes, the current generation of tags are too big to go on individual cans. As per Wal-Mart's request, Bush is putting the tags on palettes and cases. Bush doesn't foresee ever labelling individual cans, though unit labelling makes sense for other companies with more expensive products, such as televisions.

Large tags are sometimes needed to overcome scanning problems. Bush tested different solutions in conjunction with International Paper using Wal-Mart's spec of a conveyor belt moving at 10 feet per second. Bush and International Paper were able to make case tags work on most of their products, but one product line couldn't be made to work. On another product, the tags would work, but only if placed in an otherwise undesirable location on the case. RFID scanning is known to be more difficult when metal, glass, or water are involved, and most Bush's products contain at least two of those elements. Shiny, metallic print labels can also cause problems.

The tags currently cost about 40 cents. Mass production will eventually drive down that price, though second-generation tags may temporarily cause price increases. Schultz said that because of the ad hoc "slap and stick" application method, the labor may cost as much as the tags until tag application can be integrated into the packaging process. At that price, the tag adds a couple of cents to each can. If that doesn't sound like much, consider that Bush is in a highly commoditized market. Because Bush is already very efficient, with 98-99% stocking rates, they currently do not predict any ROI from the RFID project.

In light of similar problems faced by other suppliers, Wal-Mart has slowed down their implementation schedule. For 2006, Bush will introduce the tags on just one product (hominy) and at just one of their distribution centers (the one that serves Texas). Meanwhile, Wal-Mart's RFID project is still very preliminary. If Bush put RFID tags on every case of product they sold in Texas they would dwarf Wal-Mart's current national intake of RFID tags from all manufacturers combined.