A Look at RFID 20 Years after First EPC Conference

We're winding down our recognition of the 20th anniversary of SCDigest, with the first on-line newsletter - which really changed the supply chain and logistics media landscape - coming off the virtual presses on Sept. 25, 2003.

As I noted earlier in the SCDigest anniversary coverage, there was another important 20th anniversary in September 2023, and that was a conference that really started the modern RFID era.

In fact, one of my first "First Thoughts" columns was a summary of what was called the "EPC Symposium" in Chicago. 20 years later, I can say it was really something.

EPC stood for electronic product code - at the time the relatively new, simpler form of RFID developed at the Auto ID Center at MIT.

As some background to all this, in 1999, the MIT Auto-ID Center was launched, under the leadership of Kevin Ashton, David Brock and Sanjay Sarma, with funding from Procter & Gamble, Gillette, the UCC, Unilever and eventually others.

As the founding sponsors imply, the Auto-ID center vision was largely focused on the consumer goods-to-retail supply chain. Parameters were developed for a simpler tag, which came to be known as the Electronic Product Code or EPC, with compelling visions for how this technology would transform the consumer goods-to-retail supply chain.

The MIT Center also was responsible for the notion of the "5-cent tag," which for a long while was positioned as the price point the technology needed to each to trigger mass adoption.

As I wrote then of the Symposium, "There was electricity in the air." In June 2003, Walmart had announced general plans for its famous "RFID mandate," requirements for case-level RFID tagging by vendors. Most attendees believed RFID was really going to change the supply chain world.

There was a huge crowd at the event, including representatives from virtually every consumer packaged goods company, plus many other manufacturers and retailers.

The big news at the event was the formation of a new organization called EPCglobal, a unit of the Uniform Code Council (UCC - now GS1). It was to be chartered with commercializing RFID technology, with the MIT Auto ID center giving up its standards work to focus on research as just the "Auto ID Labs."

At the time well-known Digital maven Esther Dyson gave a compelling speech at the conference on "the internet of things." At the time, I thought this was a term she had coined, though I later learned it is generally agreed that the first person to use the term was actually MIT's Kevin Ashton, during a presentation at Procter & Gamble.

What really struck 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, I noted.

A short history since then. Everyone was happy to let Walmart to do the hard work of getting vendors to tag cases being shipped to its DCs. In November 2003, Walmart announced that its top 100 suppliers would need to tag pallets and cases being shipped to three Texas DCs in January 2005.

The RFID era seemed nigh. There was non-stop talk about various "tipping points," such the point where the volume of tagging was such that the process could be moved from distribution into manufacturing. Another tipping point was around when it would make sense to just tag all cases, so a company didn't need to keep segmented inventories by retail customer.

So 20 years later, where are we at with RFID?

Let's first note the Walmart program was a colossal failure, plagued - as I am one of the few willing to say - by extremely poor execution by Walmart. After years of ramping down, the case-tagging program was basically dead by 2009.

But one fortuitous thing had happened. Expecting a windfall of new business in tag and readers coming from the Walmart program, huge sums of money went into RFID technology development, dramatically moving RFID capabilities forward even as the Walmart program imploded, though many investors took a bath.

There were a few years of not much market progress. But at retail, the focus shifted from case tagging to item-level tagging, in order to solve the problem of lousy levels of inventory accuracy at retail stores.

That is a real pain point for sure, but then something very fortuitous also occurred - the rise of ecommerce, and with it for many retailers a move to store-based fulfillment, including buy-on-line, pick-up-in-store (BOPIS), curb-side pick-up, ship from store, etc.).

With this, the issue of poor store-level inventory accuracy changed significantly. Before, poor accuracy lead to disconnects between what replenishment systems thought was in-stock versus the reality. Some level of sales were lost as a result of out-of-stocks, but it was hard to calculate just how much, and the problem was somewhat hidden.

But with ecommerce, this changed. Now a retailer is committing that a customer can order on-line and then come and pick it up some hours later, or that the item is in-stock and will be shipped from a specific store.

If the inventory is wrong, and the item promised is not there, this is a real problem. Not just in terms of the lost sale - though that is a key issue - but in terms of angry customers coming to pick up an order and finding it's not there. Or after having sent the order confirmation, the retailer has to communicate to the customer it turns out the inventory isn't there.

To avoid this, near 100% retail inventory accuracy is needed - and it has been amply demonstrated that cannot be achieved from bar code scanning alone. It takes RFID, which is why efulfillment leaders led by Macy's, Target and yes Walmart have now aggressively rolled out item-level tagging programs.

With bar code, the action started with item-level scanning of UPC codes at point of sale. That eventually led to broad adoption of case level scanning of serialized cases using the GS1-128 bar code in distribution.

Soon enough, companies will also recognize the tagged items they are all ready shipping, or the relatively today small incremental costs of adding a tag to a case, can provide important supply chain benefits in terms of accuracy, productivity, and visibility.

So we will soon again - and for real this time - be reaching new RFID tipping points, because in the end RFID is just better. 20 years after the launch of the EPC conference and the Walmart RFID mandate, that to-be-state is coming into focus.

As an aside, RFID is well established in other area, such as asset tracking in healthcare and certain manufacturing applications such as work-in-process tracking.

That's my take - would love to hear yours.

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