RFID Realities

Retailers

Wal-Mart:
Wal-Mart is probably the most high-profile user of RFID and could see the quickest financial benefits from the technology, thanks to the economies of scale from its massive retail network.

The company has set a deadline of January 2005 for its top 100 suppliers to achieve pallet-and-case-level tagging, with the overall aim to have all its US suppliers on board by 2006. Once the US has been migrated, Wal-Mart intends to motivate European and Canadian suppliers to follow suit.

Simon Langford, manger of RFID strategy at Wal-Mart/ASDA, claims the technology itself is not new; it is only its application in the supply chain that is relatively untried. "RFID is being used by 20 million households in the US, so it is not new. Our focus is at case and pallet. But the majority of benefit today is at store level -- that's where the real low hanging fruit is. We will get better and smarter at inventory levels and our inventory systems will be able to react more effectively," he says.

Adoption has started in a big way, says Langford, at not just Wal-Mart but the US Department of Defense and Delta Airlines as well. Different industries have recognised the importance of RFID.

Tesco:
To confuse matters, the UK retail giant refers to RFID as the "radio barcode". The company has been experimenting with the technology since 1992 and aims to have readers in all the key points in its supply chain, in stores and, eventually, at all its tills -- but that is some way off, says Tesco IT director Colin Cobain

"We have done four significant trials. One item-level one with Gillette. It helped improve security and shrink, but also showed that item level is not viable in terms of price," says Cobain

The company has also carried out an item-level tagging trial with home entertainment products, such as DVDs, in its Leicester and Sanford stores, tracking to shelf level. RFID helped in this instance as stock often gets moved around the shelves by browsing customers, which makes it extremely difficult for Tesco to keep track of inventory "It's the best trial we have in terms of item level; we know what is on the shelf and what isn't."

Tesco has also been experimenting with the security aspects of RFID to create a secure supply chain, with readers at shop back doors and distribution centres to control all high value items. The company is working with IBM to realise this level of visibility of high profile goods from distribution centre to store, and is planning a mass roll-out for Q1 2005.

Woolworths:
Woolworths has been trialling RFID for more than two years, initially as part of a Home Office project but more recently internally to investigate the benefits of using the technology in the supply chain between its distribution centres and stores.

There needs to be international cooperation on RFID standards for the technology to be a real success, says Geoffrey O'Neil, director of strategic projects for Woolworths UK. "We need cooperation on a global basis. We don't want different flavours of RFID developing in clusters around the world."

O'Neil adds that most companies were also overlooking some important issues surrounding the cost of RFID projects and claims that integration with enterprise applications and logistics infrastructure is the real problem. "A lot of people seem to be focused on the cost of tags but I am far more interested in the costs of integration," he says.

RFID cannot be considered in isolation but should be seen as part of a whole stock management system comprising elements including bar codes, GPRS tracking of vehicles and supply-chain management software, says O'Neil. "RFID won't produce benefits on its own; it has to be part of a whole strategy."

Suppliers

Michelin:
Robert Brescia, Michelin VP of logistics says that as part of an ongoing RFID trial, the tyre manufacturer had seen savings of around 10 to 20 cents per unit. He explains that because tyres are traditionally dealt with as single items when it comes to loading and unloading, RFID technology could really benefit his company.

"If anyone is set to benefit from RFID, it's the tyre industry. All of our tyres are offloaded individually, which means we have our share of logistics problems," he says.

But Brescia adds that the manufacturer was still waiting for the right moment before deploying the technology wholesale across its business. "We are assembling a business case to strike when the momentum is right."

According to Brescia, RFID has the potential to revolutionise the way tyres are identified. This is currently done with labels, which "consumers hate because it takes about 50 miles for the residue left by the sticker to wear off".

Nestle:
The world's largest food supplier, with more than 500 factories and 250,000 employees worldwide, has been trialling RFID at case-and-pallet level all over the world. The company has been collaborating with Wal-Mart since 2003 on tracking dog food through the supply chain.

In the UK, the company has been carrying out a trial tracking Kit Kat product containers, using 900 MHz tags and 500 MW readers. The company claims the study is being broadened out to the whole supply chain from end to end despite some problems with instillation and signals reflecting of metal surfaces in the factory. Chris Tyas, Nestle's group supply chain director adds that there were also some problems with the RFID data, which wouldn't work across the corporate network because of security settings.

"RFID was about twice the cost of the existing barcode technology so we had to find benefits at least equal to that of the extra cost. The savings were mostly in labour costs and day to day or minute to minute factory operations and being able to handle mixed containers," he says.

Tyas claim the company has only scratched the surface with existing trial but until the costs come down, real benefits will be hard to achieve. Also, more retailers need to adopt the technology to make it worth Nestle attaching tags to all products. "The cost of the tags is still about 20 to 30 cents each and we ship 200 million cases a year. We need to make sure we see real benefits from all of these

Technology companies

Microsoft:
Microsoft is out to take a more formal role in the development of radio-frequency identification technology and recently announced that it is forming the Microsoft Radio Frequency Identification Council. Participants in the group include Accenture, GlobeRanger, Intermec Technologies and Provia Software.

Microsoft says it will be providing a "platform," on which the partners can create RFID-based products and services, drawing on its own Windows CE operating system, SQL Server database and BizTalk Server software.

Microsoft, like competitors Oracle and IBM, is working to develop middleware for RFID systems. In January, it added RFID technology to its Axapta Warehouse Management software for small and mid-sized businesses.

"Middleware is a very important bet for us but it is also very important for the companies building the readers. Those guys have got very precise needs about they are going to work with the next generation Microsoft mobile platform -- [including] the evolution of CE.Net [and] the evolution of XP embedded," says Sandana Kitcheane, Microsoft European retail technical manager.

The company also says it has joined forces with EPCglobal, an organisation that is developing RFID standards for the Electronic Product Code Network

"We are already members of a lot of the RFID industry groups but we still need to be a responsible leader and we have a responsibility to our partners. There is a growing ecosystem of Microsoft partners building RFID solutions on our platform," adds Kitcheane.

Microsoft's mass-market approach to technology could be important in convincing the small suppliers that RFID is an affordable option. "The big retailers are asking Microsoft to make the technology easily available to all the suppliers. That's really important as you can't imagine how many suppliers are not yet IP enabled, a lot of faxes, a lot of telephone calls. There is a huge supply chain efficiency angle there. But we are also aiming at the large retailers too -- it's completely linked," says Kitcheane.

BT:
BT has created a special business unit to focus on RFID implementations -- BT Auto-ID Services. The telco has released some more details about the unit, including the fact that it will provide a suite of managed RFID services that will integrate with customers' existing ERP and warehouse management software.

BT Auto-ID Services chief executive Ross Hall likened the infrastructure around RFID to the telephone network, with BT in the middle acting as central hub or switch -- feeding in data from tags and dishing out information to a company's internal systems. "BT's expertise in IP infrastructure and data management, combined with our unrivalled global network, makes BT the obvious choice for highly scalable and secure Auto-ID services," he says.

BT Auto-ID will provide the tag and reader infrastructure for customers' products or inventory and then route the resulting data over broadband links to its own data processing centre, where the information will be converted into a form that can be pumped back into a company's existing systems. On receiving the data from a customer's site, the BT platform will use agent technology to manage its distribution of data to various sites in the customer's supply chain.

But despite the momentum behind RFID technology, BT claims to have a realistic view on how long the technology will take to become pervasive. "RFID is often referred to as a 'better barcode' but the reality is that both technologies are likely to co-exist for the foreseeable future. That's why we support barcode applications as well as RFID," says Hall.

Oracle
Oracle plans to develop RFID middleware, joining rivals IBM, Microsoft and others in the race to release software programs specially designed to handle the deluge of data that RFID systems are expected to produce. The information technology systems most companies use today are not equipped for a world in which billions of objects report their whereabouts in real-time, Oracle and its competitors say.

Oracle plans to build RFID data-processing capabilities into releases of its database and application server programs due out this summer. It plans to include special programs, called device drivers, in its software, says Allyson Fryhoff, vice president of Oracle Sensor-Based Services. The drivers are the technical bridge that allows computers running Oracle's software to talk to RFID readers, which wirelessly collect data about objects in within range.

Oracle is working with a number of RFID reader makers, including Alien Technology and Intermec Technologies, which develop the driver programs. Oracle is also developing a "device driver framework" that will help companies administer and build application software for their RFID systems, Fryhoff says.

Oracle expects the adoption of RFID to fuel demand for its database, application server and business application programs as companies grapple with how to make sense of RFID data, Fryhoff adds. The company is packaging the new capabilities into these core products, rather than creating separate RFID products. As previously reported, the company expects to release an RFID-ready version of its warehouse management program in June.

"You don't have to buy yet another piece of middleware for RFID," Fryhoff says. "You should be able to leverage your existing Oracle database."