RFID Alive and Kicking at Wal-Mart and Elsewhere

RFID has well-known benefits and practical applications for retailers but has been cost-prohibitive for vendors. Certainly a mandate by the world's largest retailer is going to speed vendor compliance. As with other digital technologies, broad acceptance and rollout will in turn make it more affordable for vendors to adapt. I'm thinking that other retailers are playing "wait and see" until Wal-Mart drives the kind of critical mass needed to make RFID happen...but we could be looking at a very different picture in five years.

Richard Seesel, Principal, Retailing In Focus LLC

The real issue with RFID is the cost to suppliers. All cost, no matter how well intended, needs to be passed along to the retailer and to the consumer.

David Biernbaum, Senior Marketing and Business Development Consultant, David Biernbaum Associates

The premise of this question suggests a black-and-white issue where none exists. No one has suggested that RFID in all its various forms is dead or dying, in the same way that no one has suggested that RFID would replace barcodes in the near future.

The issue here is whether RFID's original business case--coupled with Wal-Mart's early efforts to force their view of RFID on small suppliers--makes sense any more (or, for that matter, ever did).

The debate is nothing new and recent discussion is bringing relatively little new data to the debate.

RFID has plenty of ROI for companies (such as Boeing and P&G) that are willing to get creative about how they use it. The problem with the Wal-Mart effort was simply that Wal-Mart didn't pay nearly enough attention to the lack of benefits for suppliers (they focused on the stick of losing Wal-Mart's business rather than the carrot of a non-Wal-Mart benefit to the supplier). A lack of supplier benefits plus higher costs than expected costs.

What Wal-Mart--which is quite used to having most suppliers dance to whatever tune Wal-Mart chooses to hum--didn't count on were so many suppliers engaging in passive resistance, namely doing the absolute minimum they could get away with.

RFID is indeed alive and well in retail. It simply looks and tastes a lot different than the original RFID Wal-Mart was pushing.

Evan Schuman, Editor, StorefrontBacktalk.com

The benefits of RFID are many for the retailer. Back room accountability and visibility preventing stock outs is huge.

By 2013 the technology will be more advanced and the cost lessened so many others will adopt the technology. The technology is a no brainer for the large expensive items. In the pharmaceutical world, it will be widely adapted and implemented by then to achieve the pedigree requirements.

RFID is a best way to achieve self service check outs and other convenience processes and is the way of the future. As the technology progresses and costs are reduced more and more, applications will be developed.

Susan Rider, President, Rider and Associates, LLC

It is not a lack of standards or technology failure that have delayed RFID adoption, but rather a combination of physics, cost, and ignorance. The truth is, we would not be as far along today if Wal-Mart had not stepped in and said they wanted the EPC to contain an intelligent key (the GTIN) instead of a random index.

The physics is probably the most bothersome of these factors because, like gravity, it sets the fundamental hurdle that must be crossed for RFID to work. It is just the "nature of things" that metal cans reflect RF signals and liquids absorb them. I am often reminded of the old children's story of the "Emperor Has No Clothes." Until reliable RFID signals and readers can produce read rates even close to bar (and 2D) codes, RFID will not be a viable solution for many product categories.

The challenges presented by the physics lead to solutions that are simply too costly for many manufacturer situations. While RFID might make sense for high cost products that are subject to counterfeiting such as pharmaceuticals, clothing, and accessories, it is still too expensive for most categories. It is retailers who see the major benefit, by using RFID to manage and monitor their in-store processes. RFID helps retailers with everything from finding merchandise in the backrooms of their stores to handling the reverse logistics associated with damaged goods and returns.

Finally, there is a lot of ignorance amongst both sides of the supply chain in regard to what RFID really means. Most of the things people talk about using it for cannot be addressed by RFID. The classic "as soon as it is sold we replace it on the shelf" ignores the reality of the "physical world." Technologists like to talk about "latency," the time between an event and any reaction to it. Unless there is inventory in the store, most items in the store will have to wait until a normal replenishment cycle to be restored. The only thing RFID will do is make it easier to track specific instances of a product and confirm its identity. Even this is a challenge because if you have two products with the same RFID, which one is the counterfeit?

Once we get beyond the problem of the physics, it becomes the asymmetric nature of the costs and the benefits that make RFID adoption slow. Manufacturers seem to bear most of the cost and retailers get most of the benefit.

Bill Bittner, Principal, BWH Consulting

RFID is not dead, but neither is it ready for prime time. Like most new concepts, it looks good on paper but has problems in the real world. Example: metal cans and RFID don't mix. Couple this with high cost and you have slow adaption. Longer term, it should become mainstream, but not until there is further development.

W. Frank Dell II, CMC, President, Dellmart & Company

Mandates did not work last time from Wal-Mart; perhaps a 2$ pallet fee will. However, whether we are talking about the $1-$2 it will cost for the tags on the cases per pallet or the $2 fee the cost will still get passed along until the manufacturer can show ROI to recoup. Two problems with this, as in all cases of collaborative commerce:
1. The benefits to the manufacturer are exception based (based on the number and importance of trading partner able to use them for collaborative purposes) which makes it MORE expensive not less, given they have to run two systems.
2. The benefits to the retailer are similarly hampered.

The ROI discussed to date has been limited and reminds us that regardless of the technology, there are no single silver bullet technologies that will bring the long sought collaborative commerce benefits into our grasp. One of those long standing issues is the product information masterfile...long talked about, long promised via GDSN and still--even with announcements this week at U-connect--unfulfilled because the solution providers want to claim silver bullet status without understanding WHY the processes to date have failed.

Nonetheless, the hundred million dollars that have gone into CPG based RFID companies in the last 4 months indicate that RFID is at least trendy again.

Mike Spindler, Managing Partner, Panther Mountain Companies, LLC

RFID is a dumb technology, not a smart solution. Its limitations are now well understood--economic and technical. A more improved version may indeed prove to be a key element of the retail implementation and compliance uber-solution. We should not lose sight of that goal, because in-store visibility is an essential requisite for improved compliance.

The problem, I think, with the dialog regarding RFID has been its unrealistic positioning as a complete answer, rather than as an element of the larger solution system. As a result, the focus on RFID has diverted attention to a few technical details, whereas process, practice and procedural improvements are at least equally necessary.

James Tenser, Principal, VSN Strategies

In many situations, RFID's benefits just aren't a great quantum leap compared to bar codes. And bar codes are often a quicker, lower-cost solution. So if the retailer or supplier gets 85% of the benefit using bar codes, why take the extra risk, cost, and time to implement RFID, a solution that's been struggling for wide adoption for over 15 years?

Mark Lilien, Consultant, Retail Technology Group