As most readers know, we’ve covered RFID in several columns this year. This includes the controversy over the Wall Street Journal article that was very negative on Wal-Mart’s RFID program (See Does RFID Have Issues?), and then the subsequent passionate and articulate case for RFID in the consumer goods-to-retail supply chain made in SCDigest by Procter & Gamble’s Dick Cantwell, delivered in two parts that have been perhaps our most popular articles of 2007 (see full interview).

I promised back then to share my perspective on RFID in more detail, and here it is.

While bar coding will be with us for enough years to be, for the sake of our discussion, “forever,” I think it’s pretty clear that RFID’s eventual benefits will come to dominate the automatic identification market. Why? Because we are simply moving everywhere to automate the heck out of everything and take the human being as much out of it as possible. If we’re going to point our key fobs to buy gas or use our fingerprints to pay for groceries in a millisecond without need for a credit card, we’re going to increasingly expect that we shouldn’t waste time manually scanning bar codes, whether it’s at retail point of sale or the warehouse floor.

But that’s a future state, to be realized over time, not the here and now.

The weirdness with RFID is that in the US, it has kind of been divided into Wal-Mart … and everything else. In Europe, I see Metro Group and to a lesser extent Tesco obviously making some moves, Tesco more cautiously (prudently?) and Metro more aggressively – the Wal-Mart of Germany, in terms of RFID (and presence, actually) – and encountering lots of hurdles to its RFID vision.

It’s of course really, really interesting that no US retailers have done much of anything with RFID other than Wal-Mart. There was vague talk from Target about a looming mandate early on (2004) - then nothing. Some are in fact huddling, waiting for the right moment.

Outside of retail, or Wal-Mart, RFID is starting to thrive. While there is still some element of companies or individuals grabbing onto RFID and looking for a problem to solve with it, what’s emerging is that RFID is just becoming one more tool in the automation systems tool bag for data collection requirements – and with valuable new capabilities. Indeed, a couple of years ago, after a story we did on use of RFID in the disk drive industry to track work-in-process, a West Coast VAR told us he gets RFPs for similar RFID-based systems in the high tech manufacturing sector several times per month. Routine.

The only downside here is that people looking to make a career out of RFID should be cautious that before long, just as bar codes before them, RFID will probably sooner than we expect become a fairly routine technology to use in business applications. There will always be room for specialized knowledge, as there still is in bar codes, but the need for and value of that really specialized knowledge will shrink. But the next 3-5 years or so will still be good for RFID experts.

So, my current summary views (with some repeat from the above) on RFID are as follows:

• RFID is a great and increasingly routine technology in many applications, especially so-called “closed loop” systems. It’s used where it makes sense, and delivers the best solution and ROI. The number of places where it does so in these applications is growing as awareness, understanding and price-performance improves. And Wal-Mart played a role here, even if indirectly.
• The extreme trend towards eliminating the human element will continue to drive this forward. Procter & Gamble, for example, noted to us how they have taken a huge amount of time and labor out of the process for transferring product from plants to third party warehouse operators by switching from bar codes to RFID and thus eliminating manual validation at the hand-off point.
• Wal-Mart simply bet it could dramatically move the whole industry down a curve in terms of cost and adoption much faster than it would naturally progress – and it turned out it was mostly wrong. Not totally wrong, but mostly. And to some extent, it actually goofed the whole industry up. Note, just for example, former Wal-Mart and DoD focused Alien now (belatedly but smartly) targeting closed loop applications with its product strategy, where Intermec is making hay.
• The fact that, to the best of our knowledge, no CPG company applies tags to cases for its own internal benefit says quite a bit, actually. Combined with the lack of other retailers in the RFID boat yet, and it’s pretty clear that the powerful value prop is simply not here yet in that market. Everyone must be pretty dumb, if it is.
• I agree with Dick Cantwell, Kimberly Clark, and now it appears Wal-Mart itself (See Wal-Mart is Changing Its RFID Tune, Launching a New Set of Pilots) that there is great potential in improving store execution of promotional activities and displays, and that this is where the ROI is right now. My initial reaction was that this poor store promotional execution could be solved in other ways, but Cantwell argues strongly that every other method has been tried and failed, and I’ve never run a retail operation. So let’s just agree with this. It’s probably right.
• These benefits – better execution of store promotions, better targeting of store sales rep activities based on in-store inventory information – is quite valuable… to the CPG company marketing or brand manager. Frankly, once the supply chain has delivered the product to the retail DC or store, its job and worries are largely done. So, for now in consumer goods to retail, the marketing function ought to be the one championing RFID and attending the conferences. They can stand to benefit a lot from better sell-through insights and execution of their programs.
• If the marketing/sales benefits drive over time the ROI of tagging, the supply chain and logistics functions should obviously see how they can “tag” along and get some additional benefits in moving and tracking product. But for now, supply chain in consumer goods to retail is simply not driving the train.

I spend a lot of time thinking about all this. If I have it wrong, please let me know.

I'll see many of you in Philadelphia at the CSCMP conference next week!

What’s your take on Gilmore’s RFID perspective? So far, has RFID been Wal-Mart – and everything else? Has that been good or bad for RFID adoption? Is RFID in consumer goods to retail more right now about marketing than the supply chain? Let us know your thoughts at the feedback button below.