RFID technology: A roadmap to success

To understand the gap between Radio Frequency Identification aspiration and reality, it is necessary to consider the technology�s development and growth. RFID has been in use since the Second World War, but only in recent years has it received much attention in business circles. RFID made a dramatic appearance in retail largely due to the work of the Auto-ID initiative.The technology was also driven forward by Wal-Mart, which owns Asda, Tesco and the US Department of Defence as they issued mandates to their suppliers requiring all products to be tagged before shipping.

Initially, RFID technology was mooted as the next technical revolution for the supply chain. By mid-2003, the hype had given way to pragmatism and in 2004 Gartner predicted that by 2006, RFID would hit the �trough of disillusionment� in the �Hype Cycle.�

In the Gartner report, some of the factors impeding RFID adoption were identified. These include:

• Unit cost of tags and the overall cost of RFID implementation. This is one of the greatest obstacles to RFID adoption in the retail sector.

• Availability and standardisation of RFID frequencies. Although there are some frequencies in the low and medium ranges that are commonly allotted for RFID use worldwide, there is no common agreement on the ultra high frequency band (860?930 MHz) or microwave frequencies, which are either unavailable or which vary between countries.

• Privacy issues are still making news. With consumer concerns � including the perceived risk of privacy invasion and misuse of data by retailers � of critical importance.

• Physical limitations. For example, radio waves are incapable of travelling easily through metals and liquids.

So RFID, in its current guise at least, may not be suitable for every business. On the other hand, there are occasions when it can work wonders and help organisations exceed their expected return on investment. The most important thing is to evaluate the technology for its suitability to specific business processes and requirements, assessing its feasibility and chalking out a detailed implementation plan in advance. Partners with a sound understanding of the business and RFID implementation should be involved in the evaluation...

In other words, RFID is no longer a technical solution to a business problem. Instead, it is a business solution that uses an emerging technology. Some of the business benefits of properly evaluated RFID across the retail supply chain include:

• Optimised inventory management, preventing out-of-stocks and reducing excess inventory

• Phenomenal savings on labour costs through reduced manual supply chain and stock management processes

• Real-time visibility of stock and enhanced responsiveness across the supply chain

• Reduction of demand-supply cycles

• Enhanced customer satisfaction

• Reduction in shrinkage, theft and counterfeit purchases

The benefits of RFID are also being experienced in other industries, including the automotive, manufacturing, pharmaceutical, livestock, library, government and military sectors. In 2004, we began to see a change in the kinds of organisations offering RFID solutions. While the market was initially dominated by pure technology players, now there are companies that focus on industry-specific business solutions. These business-focused RFID specialists bring expertise in key industry practices and deliver sound business solutions for many of their large customers.

Critical success factors

The following have been identified as critical success factors for RFID implementation:

• RFID should be seen as a way to integrate a range of business processes in the long term, and not merely automatic data-gathering technology to replace bar codes.

• Trading partners, including suppliers and customers, must be involved from day one to ensure the success of any RFID deployment.

• Radio frequency site surveys should be conducted in the initial stages of any RFID implementation to study the impact of potential interference from wireless networks, short-range radios and cordless phones. These can all affect the performance of RFID systems.

• Potential long-term ROI for the solution should be evaluated. The expense associated with the pilot scheme should be considered part of the research and development budget or innovation cost, rather than as IT spending.

The impending spread of RFID technology is evident from its growth in the first quarter of 2005. Last year Wal-Mart introduced it in more than 700 stores, 36 SAM�S Club stores and 12 distribution centres. Despite resistance from privacy activists who fear possible misuse of data, RFID adoption in Europe is not far behind.

German retailer Metro operates a well-established RFID program, which will soon be expanded from its current pallet tagging to incorporate carton and case tagging. Marks and Spencer has been using RFID in its grocery trays for years and is now conducting trials with clothing.

RFID success at Wal-Mart, Metro and Tesco has convinced the retailing industry the technology is capable of helping them track goods through the supply chain more effectively. It could ultimately fulfil every retailer's dream of having the right products in the right stores at the right time. But appropriate adoption of RFID not only contributes to supply side operations, it also changes demand, ultimately leading to improved customer satisfaction.

Next-generation UHF RFID tags could further speed up industry adoption of the technology. With new uses for RFID constantly being discovered, it is finally seen as much more than a bar code replacement. With its increased acceptance across a range of industries, the gap between potential and actual implementation of RFID will be significantly reduced. The key to RFID technology success is the continuing partnership between technology vendors and solutions providers.

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