We received some great letters on our First Thoughts piece on RFID Six Years Later, which looked at the trajectory of RFID since the launch of the EPCglobal organization in October, 2003.
That includes our Feedback of the Week on this topic from Peter Grimlund, CEO of Seeonic, Inc., who says the bigger issue is what can be done with accurate, real-time information, whether its source is RFID or otherwise.
Curt Carrender of
Thinkify says tag costs should not be an issue for deployment, Belgium's Roger Bouvrie offers his company's experience with bar coding and RFID, and Code 3's Ray Scott says we all need to look more closely at what the DoD is doing with RFID.
All these great letters below.
Feedback of the Week: On RFID Six Years Later:
I have been reading your editorial pieces, listening to your industry observations, and learning from your web presentations for several years. I have learned a great deal in that time both from you and from prospective customers of Seeonic about where the application of RFID Technology can deliver the greatest value. Earlier this week I sat in on the “New Ways of Working Together Part 2” webinar. My principle take away was that all of the players in a supply chain continue to struggle with the issue of data sharing and interpretation. This is where we believe RFID based solutions will have their greatest impact. We believe that the key to moving forward with any RFID solution must begin and end with how the application of the technology allows all of the players in a vertical, from retailers all the way through to manufacturers, to satisfy consumer demand. To truly satisfy consumer demand, one must have product that the consumer wishes to purchase available at the location, (POP display, permanent fixture, etc.) when the consumer decides to reach out, remove it from the shelf and stuff it into their shopping cart. When the product is not on the shelf, from a consumers perspective, things go off the tracks pretty quickly.
I believe you mentioned in the last webinar that the industry has been attempting to solve the out-of-stock problem for decades and can’t seem to get fixed. And they won’t do long as point of sale systems and WMS systems are the data proxies for what is available for sale on the sales floor. What all of the industry needs is the ability to automate inventory counts of items on the retail shelf and to communicate that “one version of the truth” data to all stakeholders in the supply chain. Knowing on hand inventory available for sale where the consumer expects to physically see it and sampled frequently enough to see fluctuations in demand, will allow all players to generate better forecasts of demand and improve on their business processes. Consumers will be satisfied because when they walk into a store to purchase something, they actually get to buy it. Retailers and their suppliers will be pleased because they can increase their sales by decreasing OOS and they can lower their merchandising expense because they are substituting technology for manual inventory systems.
So for me, it is not about whether RFID technology has or has not lived up to its early billing, but rather it is about what business can do with accurate, near real-time, item level information, one version of the truth if you will, served up to all partners in the supply chain. Can they collaborate to satisfy me as a consumer. I will spend my money where I know that product is available for me to purchase when and where I chose to buy it. The retailers who figure out how to use RFID technology to get just in time replenishment merchandise into the store for me and their consumers to buy will have a competitive advantage over others in their space.
And that is the opportunity that Seeonic addressing. Using perpetual inventory counts of RFID tagged items on a retail display to drive better replenishment processes and more accurate demand forecasts.
Thank you for your insights. I look forward to continuing my learning at SCD.
Peter H. Grimlund
CEO
Seeonic, Inc.
More on RFID Six Years Later:
I enjoyed reading your article. Thanks. I have a slightly different take on your statement:
"We need to find a way to get the cost of tags down another ratchet from current prices, and think we will."
I tend to think of the value proposition more than the actual cost. If a tag doesn't offer value at even 2 cents it will still be too expensive. Many manufacturers now offer tags at less than 10 cents with a few offering inlays at less than 7 cents in low volume. If the manufacturer, the retailer, the supply chain, (or the end user for that matter), can't find 10 cents of value it may be highly possible that they can't find 5 cents of value as well.
The industry's almost sole focus on tag cost has been a double edged sword. On the positive side for cost, it has caused a few manufacturers to participate in a slow march toward zero in hope of becoming the sole survivor and tag commodity king. This march has been brutal for the suppliers but has resulted in an amazing price drop. Whether the industry has a 5 cent tag or not the price of a single chip based UHF tag has gone from over a dollar in 1999 to under a dime in 2009. That's pretty spectacular whether you consider inflation or not. Most of these tag manufacturers are now attempting to use additional features like extra security or memory to differentiate themselves rather than price. Their margins are that thin if positive at all. So anyway, we do have cheap tags, and I acknowledge that you and others want them even cheaper.
I think the negative side of all this focus on tag cost was that too few focused on real tag value. The thinking was, "When tags cost 5 cents then everything will be wonderful." without a lot of thought about what that meant as far as added utility. After all, let's assume that a tag cost a dollar and gave you $1.50 worth of value. That's kind of extreme I know, but imagine this $1.00 tag is authenticating your kids flu shot and a lot of fake ones are out there. The $1 tag might be OK for that example. On the other hand, let's imagine that we do have an internet of things. If someone doesn't get 2 cents worth of value by knowing that their tomatoes are in Toronto right now then the tag is not worth 2 cents to them. Real and returned value is the key.
My CFO likes to always pose a question when dealing with potential customers. He says, "Lets imagine that tags and readers are free. What would you do and what would that be worth to you? " This often helps us evaluate the effort and both of us focus on the solution. So I would propose the same question to you Dan. How many tags would be fielded if they were free in 2009? I would guess that the number wouldn't be a lot bigger. Anyway, I think it is an interesting question and points out both value and the many other costs in the equation.
Your comments on Wal*Mart are also interesting and I agree. Wal*Mart is another a fine example of the double edged sword that seems to hang over RFID. On one hand they completely accelerated the whole industry with their early mandates. We would not have the EPC Gen 2 or the ISO-18000 6C standard at all if it weren't for Wal*Mart. On the other hand, these same mandates caused a lot of resentment to the suppliers I know. "We tag it and you get the value?" seemed to be a pretty common sentiment in the early days. People forced to do something will take the cheapest possible route. As such the focus on tag cost, (and slap and ship), as opposed to real value discovery on the supplier's part. Of course this has all changed somewhat but the same supply chain managers are in place and it may take a while to get that taste out of their mouth.
So again thanks for the article and keep up the great work.
Curt Carrender
Thinkify
I have being following very closely the RFID programs at the APICs exhibitions and presentations in the past with lots of presentations from Edmund W. Schuster at Auto ID Labs.
In our company we have applied auto ID, but at the barcode level and it already meant a lot to us. At last we knew – cross company – were all our goods went.
Although we run a multiple instance ERP application, we made the bar-coding information – cross company, so that the identifiers can be used wherever in the group, whatever legal company you are. This was the most profitable approach. Puratos counts some 70 legal companies in about the same amount of countries and in more than 120 locations. We produce in 47 factories and we still deliver the goods ourselves at the customer’s doorstep.
The RFID stayed in my head, but the RFID price compared to the SKU price was too high to implement it. On average, close to 1% cost increase per SKU and about the same amount per Sales$.
In my opinion, RFID becomes interesting, when you are handling goods were the importance of:
- theft is high
- location is essential
- cost is relatively low compared to the SKU
- the customer drives it
Till there my personal comments.
Roger Bouvrie
Chief Technological Advisor
Puratos HQ Belgium
You need another column - this one addressing the Department of Defense use.
I have met a number of USTRANSCOM people from Scott Air Force Base near St. Louis, and they are "true believers" in RFID. Check it out - Dr. Ike Kwon at Saint Louis University would be a good contact.
Ray Scott
VP-Supply Chain Management
Code 3, Inc.
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