RFID About Systems, Not Tags


By George Anderson
Radio frequency identification (RFID) technology remains the hot topic in retail technology circles due in large part to Wal-Mart’s mandate that suppliers be RFID compliant by 2006.
Some, however, have questioned if the current costs of getting RFID programs up and running outweigh the benefits of using the technology. Others have identified technical hurdles RFID needs to overcome to be of value across the tracking board.
For most involved in the implementation of RFID, it’s not a question of whether retailers and their suppliers should pursue the use of the technology but what is the most prudent way to go about it.
Robert Malone, writing on the Forbes’ Web site, concludes, “The question is not do I or do I not tag but where, when and how much.”
According to Mr. Malone, “It is best to start with a pilot program of enthusiasts rather than committing to the technology across the board. Plan the application and understand the system, get the right suppliers, and test for quality, cost control, etc.”
He also points out that current and upcoming technologies make it clear that it is probably not wise for retailers and suppliers to put all their eggs in the RFID basket.
“Bar code is far from dead,” writes Mr. Malone, “and its broadly based use and the investment it represents are not about to fade from the scene quickly. RFID may be more robust in the sense of being able to deliver more information and without the need for proximity and clear sight lines as with bar code, but the devil can often be in the details. The devil can also be in an unwieldy system. Currently, the RFID system may err in the direction of complexity as processing the huge amount of information a set of tags can send out requires information integration of a high order and some kind of data warehousing to make sense. These require investments of consequence.”
As for up and coming technologies that some may see as competitive to RFID, Mr. Malone points to the potential use of “smart dust or microelectromechanical sensors (MEMS) made by companies like Dust.”
The objective of the technology is to create communicating sensors “the size of a grain of sand,” writes the author, adding, “Don’t laugh much progress is being made even if you can’t see it.”
Ultimately, however, Mr. Malone says the benefits of RFID established in quantifiable studies means companies will need to dedicate human and financial resources to the technology.
He adds a caution and advice: “The standards for RFID are well along, but they are not cut in brass and therefore the smart money would bet on a limited investment and most of
that in research into the technology, the code standards, the vendors offering tools or services, and planning, planning and planning. Did we suggest planning?”
Moderator’s Comment: What is the current state of RFID in retailing? Where is it headed?
– George Anderson – Moderator
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12 Comments on "RFID About Systems, Not Tags"
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The great leap in product code identification was the UPC (EAN in other countries) bar code. I have a feeling that RFID’s ROI is a fraction of the value of the UPC.
It appears that tech improvements do not all have the same quantum leap ROI. For example, the first widely used spread sheet pc program was Visicalc. Then came Lotus 123. Then came Excel. Lotus and Excel did not have the same degree of improvement that Visicalc did. The latter 2 programs were incremental improvements not quantum leap improvements.
Some say that the biggest potential ROI for RFID comes when the retailer knows the item is in the store’s stockroom or warehouse but not out on the shelf. But that application doesn’t seem to be the one getting the most focus.
RFID adoption will be speedy when the ROI is proven excellent. So far, the jury has not seen this evidence. They’ve heard a lot of theory, but they need some proof.
The question (to paraphrase JFK) is not what retailers have done for RFID, but what can RFID do for them? The jury is still out – way out. The price is still high – way high. And…as one of my colleagues recently pointed out, Wal-Mart’s mandate has slipped a year.
RFID has to be looked at with much more specificity than it has in the past. Which retail and CP segments will benefit? At what level (pallet, case, item, component)? Active or passive tags? When is the price of the reader a gating factor, and when is the price of the chip a gating factor?
Finally, what are the business benefits of each application? These questions are overlooked under the umbrella of “RFID”.
If you really want to think about RFID as a technology, it is tags and sensors. The whole industry seems to equate RFID with tagging products – in the warehouse – a very worthy application. We have been tagging shoppers on the sales floor for four years. I don’t think it is too much of a stretch to point out that, once again, many retailers are more obsessed with their products than they are with their customers. This raises serious questions as to whether people even know what “customer-centric” is. You can chalk me up as a skeptic about the retail industry being customer centric.
One of the great potential applications for RFID hasn’t been mentioned here so far.
The ability to read the presence of individually identifiable items–on the floor, in the stockroom, or in the warehouse–will very nearly eliminate error in merchandising data.
In the past, a merchant was able to verify that 100 units of a SKU arrived at the shipping dock. From that point forward, stock on hand was determined in one of two ways: 1) subtracting sales from the number of units received, or 2) a physical count of merchandise. RFID allows the data providers within a retailing organization to verify–in real time–that the number of expected units on hand can be accounted for and located.
For all the hype in the press about RFID tags, the reality is that they should be tested by willing participants, not forced by a mandate. There are still too many technical problems that need to be resolved – tag read reliability for all package types including glass and metal, having the systems and processes to handle the huge amount of data that will be generated, and then being able to analyze the data that is captured to make decisions.
Until the problems are solved, it should only be in test by those willing to absorb the cost.
I think we are looking at the sizzle, what may come from RFID at this point and proceeding like those benefits already exist.
LucB nails it. Retail RFID holds potential to eliminate the supply-chain “blindspot” that lies between the loading dock and the POS terminal. (Word on the street says this is the primary motivation behind Wal-Mart’s interest in this technology.)
Retailers need better operational analytics so their store and regional managers can regain a fighting chance as merchants. RFID could provide a real-time information flow in support of this goal, by feeding in to the local information loop that would allow store managers to efficiently stay in-stock, on-price, and on-program.
Not only would headquarters gain a clearer picture of store conditions, but managers would gain an edge on maintaining them.
Individual item level information would be a boon. No more OOS driven by bad perpetual inventory data. No more under-ring theft, immediate total checkout, reduced total inventory levels because you don’t have to allow for bad data.
It all sounds great. The problem is the investment in the technology to equip the shelves/registers/backrooms to read the tags is ridiculous vs. the benefits, the reliability of all the equipment in a real retail environment does not exist, interference by other RF sources has not been overcome, and we can’t even get all the cases on a pallet to read 100% of the time going through a “portal” specially designed to do that.
When the technology works and the cost benefit ratio works, people will adopt it readily. Today RFID at retail is mostly flash with very little substance.
The biggest piece of this RFID puzzle has yet to be conquered, and that is the exorbitant cost of both tags and readers (portals). During a meeting I attended in the fall of 2004, one of the pioneers of this technology admitted that even the most optimistic analysts say that the cost per unit will never fall below a nickel each. How do you justify this investment on consumer goods that may only cost $0.15 to $1.00 each? It may make sense someday for more expensive consumer goods, but never for the everyday cheap items that are sold worldwide.