By George Anderson, Editor-in-Chief, RetailWire
From some viewpoints, it's been pretty much all good on the radio frequency identification (RFID) front as retailers such as Metro in Germany and Wal-Mart here in the U.S. have reported impressive results from the use of the technology.
A report in The Wall Street Journal, however, says all is not well in RFID land as suppliers continue to express concerns about the investment in the technology while pointing to less than satisfying returns.
The retailer, according to the Journal, had planned to have 12 of its distribution centers using RFID by January 2006. To date, the technology is in place at five of the DCs along with 1,000 stores.
The controversy surrounding the use of RFID does not appear to be a over whether the technology works or that it provides certain benefits to all participants in the supply chain. The question that appears to be increasingly asked is if it is the right technology and whether another might achieve the same or better results without the expense and effort involved.
Discussion Question for the BrainTrust panel: How "slow" should trading partners be proceeding with RFID projects if that is the prudent course to take? Are there other technologies that would achieve similar results to those predicted for RFID without the apparent hassle (cost and implementation) involved?
RetailWire Instant Poll Results: 
RetailWire BrainTrust Comments:
The advantages of RFID are overwhelming for retailers. But over ambitious plans will linger as the early adoption hiccups run their course.
It is always better to install a new technology in a contained environment. Wal-Mart's plan involves hundreds of trading partners and many locations. All innovative retailers should experimenting with RFID, but on a much more limited scale. Try it out in a controlled test on a measurable business problem: shelving systems, dressing rooms, high pilferage items, shopping carts, fixtures, pallets, etc. You'll learn for yourself the pitfalls, the true costs and reaction from your customers, suppliers, and employees. These lessons will be priceless in the coming rollout of RFID.
Beyond the hype of RFID it is good to go slow. But it also good to go.
- Bill Robinson, Senior Executive, QuantiSense
There's a good rule in technology (and life for that matter)--just because you can, doesn't mean you should. Didn't anyone wonder what the advantage was of bringing in product to a DC that then had to be de-palletized, scanned and then re-palletized?
Some of us get blinded by the technology and begin to adopt business processes to it rather than approaching it the other way around. We need to clearly define the business problem and then chose the best (defined in many ways from efficiency, to cost, to least disruptive) available technology to solve the problem.
None of this is to say that RFID doesn't have a place in retailing. It is to say however that retailing has to get over the notion of a magic technological bullet that solves all problems.
- Ryan Mathews, Founder, CEO, Black Monk Consulting
The buzz on RFID started in 2003 and really took off when Wal-Mart made the mandate to their top 100. It took off like wild fire only to fizzle when the real ROI was not found in major CPG distribution. Because a majority of the top CPG companies developed work-arounds to comply with the mandate, RFID not only didn't save them money but they also incurred substantial cost to comply.
Consultants and others used the buzz to sell solutions and analytical studies much like Y2K. One CPG company embarked on their RFID mission after the consulting company said they had an ROI...only to find out that the study was based on 5 cent tags while they were really 97 cents. Oops!
What if Wal-Mart had not made that mandate? RFID would be years behind in development. So their vision and future-looking ideas did help to develop the technology, which still has some ways to go. RFID captures and shares information. A bar code on steroids!
Currently the technology has not matured to the point that a pallet with 80 cases of soap detergent can be read with 100% accuracy. Last report was in the 80 percent accuracy range, causing CPG companies to read the cases prior to palletizing, which increases steps and costs money. So for low end items, it's still a long race.
Many companies that jumped on the bandwagon with prototypes have since taken the wait-and-see position. RFID has its place in asset management and will continue to develop but my guess is we are some years away from widespread adoption in the typical distribution center.
- Susan Rider, President, Rider and Associates, LLC
Count me as another member of the "I told you so" camp. What a waste of energy! Wal-Mart had the chance to work on its merchandising mix and focus on localized assortments. Instead it spent 3 years and its vendors' money seeking cost reductions from an immature technology where standards hadn't been set and no real applications had been written. There's an old rule in retailing: you cannot 'expense reduce' your way to long-term profitability.
Look at the results. Comp sales down. Turnover across the organization. Marketing message thrashing. Time lost. Good will lost. And for what?
There are interesting applications for RFID. I personally don't see carton and pallet tagging as one of them. Asset tracking, merchandise provenance, and someday, the ability to cycle count stores the way warehouses are cycle counted with bar code are interesting. It's all about high value merchandise. Not containers of peas or Tide.
It wasn't easy to say these things when the tide of RFID was rising (oops--there goes a pun). Now, it's kind of fun to say "I told you so." There are fundamental rules to retailing success. RFID on cases and pallets doesn't change those rules.
- Paula Rosenblum, VP Research and Content, Retail Systems Alert Group
There is real progress being made in the manufacturer--retail DC loop, but not as much at retail. Manufacturers and retailers are seeing 100 percent or near 100 percent tag read rates on unit loads and cases (although many unit loads need to carry multiple tags) up from 85 percent to 95 percent 14 months ago. The deployment of analytical tools to actually make better decisions based on the data collected is coming along, which is one of the most underreported developments of the past year. The reason why it hasn't been widely reported is because the companies having success want to have a little competitive advantage after investing millions in the projects.
As to what course to take, the answer is totally dependent on the line of manufacturing and retailing. High-end and consumer electronics retailers and suppliers need to act more quickly than those in the discount and food channels because there is a loss prevention element that will be combined with the tracking component of RFID. Distributors looking for a new value-add proposition also will need to invest sooner. The drug and DIY channels will have to take the issue category by category, which should yield some great implementation lessons. Interestingly, insurance and health care are seeing plenty of advance around RFID. Long story short, this is far from a dead issue.
- Ron Margulis, Managing Director, RAM Communications Read the entire story and RetailWire discussion at:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/11991
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