This week marks another turning point for technology in the food retailing and CPG industries as EPCglobal U.S. convenes its first major conference at the Baltimore Convention Center. It's a good time to look at where we are with the EPC (Electronic Product Code) and its associated RFID (radio frequency identification) technologies.
First, a few preliminary facts: EPCglobal (to which EPCglobal U.S. belongs) is the standards organization for the EPC operated jointly by Uniform Code Council and EAN International, the two major worldwide product identification standards bodies. The EPC itself is a coding system that does what bar codes do -- identify products -- but with digital precision and power. The EPC resides in a chip housed in an RFID tag, which can be read automatically by a nearby RFID reader.
Of course, there has been a tidal wave of hype, as well as quite a bit of activity, surrounding RFID/EPC since June 2003. That was when Wal-Mart Stores got into the act, asking its top 100 suppliers to start placing RFID tags on pallets and cases. Wal-Mart's program was launched in April in the Dallas area, and will be fully under way by the beginning of 2005.
While some say the importance of RFID has been exaggerated, I would respectfully disagree. RFID has already begun to improve our lives outside of the food industry. Consider E-ZPass, the toll-paying mechanism that makes driving around the New York City area much more pleasant, or Mobil's Speedpass, a highly efficient way to pay for gas.
EPCglobal's vision for RFID takes those early efforts much further, essentially giving any tagged object the ability to identify itself to a nearby computer. That prospect has raised the hackles of privacy advocates, who understandably see the potential for the technology to be misused. Yet for many industries, including retailing, the ability to effortlessly identify objects as they are transferred is an enormously attractive proposition. Unfortunately, initial RFID pilots and programs, particularly Wal-Mart's, are showing that RFID still has some growing up to do. In particular, read rates on tags are not as reliable as they need to be because of the interference to radio waves caused by certain materials, such as liquids and metals. For food retailers, whose products often contain liquid or moisture, this is a problem that needs to be resolved. There are also issues related to tag costs and developing standards. All the issues are delineated in a story starting on Page 53.
Retailers, normally a cautious lot anyway, are right to be wary about jumping on the RFID bandwagon -- but not too wary. As I have noted before in this space, it would be unwise to allow Wal-Mart to gain too great an edge. Manufacturers, meanwhile, face the dilemma of being mandated by Wal-Mart, Target and probably other large retailers to start tagging pallets and cases, even though a solid RFID business case for manufacturers has yet to be nailed down, according to some observers.
Thus, a lot of work remains to be done before RFID begins to achieve its vaunted potential in food retailing. In fact, the same can be said -- and Transora's Judy Sprieser says it on Page 24 -- about data synchronization, another big technology initiative in the food industry. Still, I suspect that RFID and data synchronization will ultimately help keep the cost of food in check for decades to come.
