About six years ago this week, the EPPglobal organization was launched. So, we’re going take that anniversary as a catalyst to look at both the history and the future of RFID.
As many of you know, Radio Frequency Identification (RFID) has been around for decades, and certainly was being deployed in both supply chains and other applications in the 1990s at some reasonable volumes.
But the technology remained mostly a very niche solution. Tags were very expensive, and were often built to carry a lot of data. There were almost no real standards.
In the late 1990s, a few researchers at MIT University had a different vision – simpler, much less expensive tags that served mostly to simply identify products. They would operate, in a sense, (though many don’t like this term) as electronic bar codes, and identify each item uniquely.
"In the consumer packaged goods-to-retail sector, consumer goods manufacturers are almost totally dependent on retailers to make RFID work for them."
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In 1999, the MIT Auto-ID Center was born, under the leadership of Kevin Ashton, David Brock and Sanjay Sarma with funding from Procter & Gamble, Gillette, the Uniform Code Council (now GS1), Unilever and eventually others. As the founding sponsors imply, the Auto-ID center vision was largely oriented on the consumer goods-to-retail supply chain. Parameters were developed for this more simple tag, which came to be known as the Electronic Product Code or EPC, with compelling visions for how this would transform the retail supply chain.
Simple pilots were conducted. If I remember right, in 2002, a tagged pallet left a Unilever DC and was received via EPC read at a Walmart DC. Rightly or wrongly, the concept of “the 5-cent tag” was born, and has been a vision – and maybe a bit of a conceptual millstone – ever since.
There was clearly tremendous excitement. In June 2003, Walmart made its first announcement about its planned supplier EPC tagging program, which started something of a frenzy. At a conference in Chicago in October, 2003, the EPCglobal organization, an offshoot of GS1, was born. There, it was announced that the Auto-ID center was basically turning over leadership of its pioneering efforts to this new EPCglobal.
There was a huge crowd at the event, including representatives from virtually every consumer packaged goods company, plus many other manufacturers and retailers.
Digital maven Esther Dyson gave a compelling speech on “the internet of things.” EPCglobal announced a vision that included an “Object Naming Service” (ONS) that would basically be an on-line repository of EPC data, so that participants in the value chain could use web services to view or use data about the manufacture and movement of an item, case or pallet-based on its EPC tag number.
What mostly stuck me from the event was that for the first time, companies had a real vision for knowing where everything was in their supply chains, all the time. This would have profound implications if, and when, it occurred.
So, here we are six years later. While I actually am quite bullish on the future of RFID, I think it would be hard not to say that, to date, EPC has been a disappointment in most respects. Certainly so in comparison with the expectations I think most had in those heady days of 2003.
Here’s where we are at, I believe.
EPC activity in the consumer packaged goods arena, where it all started, is at a virtual standstill. The Walmart program is stalled, and its future uncertain. Among other retailers that were prominent early on, the RFID program at UK’s Tesco, which seemed so promising early on, also appears to be treading water. Only Germany’s Metro Stores group continues marching on, though in fits and starts.
Here’s what the RFID program manager at one of the largest consumer packaged goods companies – one very committed to RFID – told me earlier this year: “I would say we are almost numb to the point of cynicism now.” Consumer packaged goods companies have rapidly downsized their efforts and staffs in this area. RFID, not long ago looked like a great career move – now, most that went that way have, or are looking, to get back into mainstream supply chain or logistics roles.
On the positive side, EPC-based technology is being adopted in a large array of other types of applications, from aircraft manufacturing to an increasing number of distribution center applications, to asset tracking and more.
On the retail side, there is a lot of momentum in the apparel sector. Item-level tagging seems to have a compelling value prop. American Apparel has rolled out a successful program in its vertically integrated supply chain and retail store network. Many other apparel retailers are conducting successful pilots. I think you will see a lot of other actual deployments in this area over the next few years.
Also good news is that EPC technology has advanced substantially since 2003, and the “Gen2” standards and products are more than up to most requirements today. That R&D was driven largely by expectations of a Walmart-fueled bonanza that never happened. Lots of venture capitalists saw their investments in RFID companies disappear in value, but the technology did move strongly forward.
So, what went awry with the original core vision? I asked that question to Tim Zimmerman, an analyst who follows the RFID market for Gartner, and he had some interesting things to say.
“It’s as much a matter of expectation as it is of reality,” he said. “The adoption curve of RFID has actually been faster than bar coding and many other supply chain technologies before it. But the expectations on the pace of adoption were set so high when ECPglobal was launched, it was unlikely they could be reached.”
He also said that the belief that you could leap-frog into broad “open-loop” or cross-;company systems before you had a large base of “closed-loop” or internal RFID systems to build on was unrealistic.
I asked a number of other people this same question, and I learned one thing very quickly: no one will publicly say anything that even modestly implies any criticism of Walmart. I don’t think they are really that sensitive.
So, here’s my quick view. In the consumer packaged goods-to-retail sector, consumer goods manufacturers are almost totally dependent on retailers to make RFID work for them. Walmart led the charge, and virtually every other type of retailer sat back and waited to let Walmart do “the dirty work” of moving the technology along, and getting vendors to add tags.
That program fizzled. Hence, manufacturers and most other retailers are stuck for now.
Second, at a case level, tag costs are still too high to provide a clear cross-company cost justification. (Promotional displays are different.)
That said, EPC is increasingly doing some great things in manufacturing, asset tracking (though other RFID technologies are also used), and increasingly in closed-loop distribution systems – especially for companies that don’t have a real-time, bar code-based WMS system yet in place (more on that soon).
Additionally, I believe something to break through the current logjam is likely to occur over the next couple of years. We need to find a way to get the cost of tags down another ratchet from current prices, and think we will. In the next few years, we will start to see real adoption in consumer goods-to-retail and, within five years, hit an inflection point where at the pallet and case level we do see rapid adoption.
That’s my very concise take and view. Would love to hear your perspective.
What is your reaction to Gilmore’s take on EPC six years after its launch? Has ECP to date been a disappointment, or not? Why? How do you think this will now play out? Let us know your thoughts for the Feedback button below.
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