For all the hype and hoopla surrounding radio frequency identification over the past few years, many food retailers, as well as manufacturers, are probably still wondering, "Is it for me?"
So far, only the largest of retail companies have pursued RFID. Wal-Mart Stores has spearheaded the development of RFID in the U.S. with its Dallas-area program that formally began in January. Albertsons is getting ready for an October launch in the Dallas market, where Target is also conducting a pilot. In Europe, Metro Group, Tesco and Marks & Spencer have been leading the way.
Meanwhile, the identification system at the heart of RFID tests in the retail industry -- the electronic product code (EPC) -- continues to develop under the direction of EPCglobal and its U.S. counterpart, EPCglobal US. Those organizations have overseen the creation of a new standard for RFID/EPC technology -- known as Generation 2 -- that is expected to facilitate implementations in the future.
For the industry at large, still curious about what it all means, education remains a key. To that end, EPCglobal US' parent organization, GS1 US (formerly the Uniform Code Council), Lawrenceville, N.J., held its annual U Connect conference June 7 to 9 at the Gaylord Texan Resort and Convention Center in Dallas, with plans to hold the EPCglobal US conference Sept. 13 to 15 at the Georgia World Congress Center in Atlanta.
At U Connect, the RFID pioneers, including Wal-Mart and some of its key suppliers, were on hand to demystify the technology and encourage industry adoption. For the industry, the good news is that, unlike some technology applications, RFID is not cloaked in competitive secrecy. Because it requires mass adoption to drive costs down, RFID's early practitioners are only too happy to share their initial experiences with those who are taking a wait-and-see approach.
At this early stage, even Wal-Mart, the recognized leader, is still in the process of mastering the intricacies of RFID. "The whole thing has been a learning process," Ron Moser, Wal-Mart's RFID strategic analyst, told U Connect attendees. "The key [to RFID] is to just get started."
It's certainly no coincidence that Wal-Mart, long fixated on supply chain efficiencies, would go after the benefits promised by RFID. Just what are those benefits?
In essence, RFID is a way for objects to communicate their presence to computer systems without human intervention. Cars, for example, use RFID in toll collection systems to automatically pay tolls. The retail application works much the same way. Communication is enabled by radio signals that move from an RFID tag attached to an object (a pallet, case or product) to an RFID reader. The tag contains a microchip holding the EPC data and an antenna that transmits the signal.
Experts predict that over time RFID will facilitate the replacement of the bar code with the EPC and become part of the way all retailers do business.
Even without the size and clout of Wal-Mart, experts insist that there are steps supermarkets can take to work toward RFID implementations. The first involves looking inward.
Before reaching out to suppliers, supermarkets should focus on putting together an internal, cross-functional RFID team with upper-level support, recommended Sue Hutchinson, director, product management, EPCglobal US.
Since the ultimate objective of any RFID project involves gaining greater business insight, data analysts must not be overlooked. "You have to get the key data analysts involved early on so that they're thinking about your data infrastructure. Once that data starts coming in, it's not going to stop," Hutchinson said.
The synchronization of accurate data prior to implementation may smooth the transition. "With dirty data, all RFID does is help you move it faster," Hutchinson said. "If you have clean data synchronized with a partner's [data], it's only going to make the back end that much better. [Data synchronization] is not required, but it's highly recommended."
Wal-Mart is certainly generating volumes of data. Six months after the start of its mandate requiring its top 100 suppliers to tag cases and pallets, Wal-Mart has processed more than 1.8 million cases of tagged product and more than 55,000 pallets, and made more than 25 million RFID tag reads of cases and pallets shipped from more than 100 mandated and voluntary suppliers.
Among the locations that have been outfitted with 14,000 pieces of hardware and more than 230 miles of cable are 104 Wal-Mart stores, 36 Sam's Clubs and three Dallas-area distribution centers.
EPC reads are taken at various stages of a product's journey, from the time it enters Wal-Mart's DC until it reaches its store shelf destination. For instance, products shipped to Wal-Mart's general merchandise DC are read as they enter the facility by readers at the receiving doors. Certain DC conveyor belts have also been outfitted, on the top, sides and bottom, with readers.
At participating Wal-Mart and Sam's Club stores, readers have been installed at backroom receiving doors as well as at the doorways to the sales floor. They've also been placed near compactors used to destroy packaging materials and attached tags. This is done to confirm that the contents of a tagged case -- previously detected as it entered the sales floor -- have been unloaded onto the shelf.
The result is improved replenishment, Moser said. "In the past we relied on humans to execute replenishment," he said. During busy times, "only about one out of 12 out-of-stocks was being replenished. [With RFID] we can look at every item, every minute."
The information prevents over-ordering as well. "Greater visibility helps [Wal-Mart] associates locate specific products in our backroom instead of just re-ordering them like they may have done in the past," Moser explained. "It reduces excess inventory for both Wal-Mart and its suppliers." The system also facilitates having fresher product on the shelf.
Wal-Mart has been sharing its item visibility and read-rate information with suppliers who've invested in tagging them. It's done in near real time via Wal-Mart's Retail Link portal.
And the sharing is not one-sided. "We've learned tricks from suppliers by working together," Moser said. For instance, the contents of certain cases can inhibit a tag's readability. "[Radio signals] can get through the neck of a bottle of water, but not the broader part of the bottle [that contains more water], so you should move the tag up," Moser said.
Other problems have been harder to diagnose. "Our read for a particular case may be 'X,' and Wal-Mart's may be something different," said Rich Wilson, director of corporate distribution, JM Smucker, Orrville, Ohio. "We're getting different read rates at different retailers."
But Smucker discovered the root of some of the inconsistency. "The data time stamp of one [reader] was printing the same date in a different format than another reader," he said.
The other U.S. food retailer acknowledged to be entering the RFID arena is Albertsons, Boise, Idaho. The chain is conducting an RFID pilot in the Dallas/Fort Worth area that incorporates several of its stores, one of its DCs and 30 suppliers, according to John Raudabaugh, vice president of systems implementation, Albertsons.
"Every month, we are bringing a new wave of suppliers and more items on board," he said. Albertsons has mandated its top 100 suppliers to begin shipping tagged cases and pallets by October.
"In order to realize the significant benefits that RFID can bring to supply chain optimization, we are working collaboratively with our suppliers as we integrate this technology at our stores," he said.
Albertsons electronically sends data derived from tag reads on a monthly and weekly basis to its suppliers. "Through collaboration with our suppliers, we have identified information they would like to see from RFID," Raudabaugh said. "When we first introduced RFID into our supply chain, we found that it was critical for us to work with our suppliers to reach mutually beneficial solutions and determine exactly what benefits the technology would bring to both of us."
Like many suppliers, Smucker hasn't received a return on its investment yet. But the manufacturer anticipates future benefits, half realized internally and the other half the result of supply chain collaboration.
"Some might ask, 'If you're not seeing a whole lot of benefit, then why move forward?"' Wilson said. "EPC will replace UPC at some time. Trials are the best way to get the early learnings out."
Unlike Smucker, which invests in testing tags and tag placement in a laboratory at its headquarters, many suppliers have opted to do the bare minimum when it comes to complying with mandates.
For example, the "slap and ship" method involves tagging cases/pallets as they leave the manufacturer, with little attention to tag placement.
The time and effort a supplier puts into its tagging is usually dependent on the volume of goods it's tagging, Moser said. "If a supplier is only tagging 3% of shipments, they may opt to slap and ship," he said. "As the number grows, the supplier is more likely to tag sooner in the process."
Careful tag placement often equates to more accurate reads and better returns for both retailer and supplier. For example, if a tag is carelessly placed on the top of a case, it may be destroyed when the case is opened.
Factors like these contribute to the often-unpredictable return on investment that retailers achieve through RFID. To get a better handle on the ROI from RFID, retailers can employ tools developed by EPCglobal. For example, the EPC Value Model is a financial model that retailers can use to identify the business issues and values where EPC/RFID is expected to have the greatest effect.
The tools "let you see where you can get ROI because there is not a single answer," Hutchinson said. For instance, in addition to improving replenishment, Wal-Mart's RFID initiative is helping it deal with recalls. "Almost every day, [recalls] happen somewhere," Moser said. "In the past, we'd have to notify every store, even if an item had only been shipped to 10 stores. With RFID we can trace it and tell where it is."
While many suppliers have taken the easy way out of complying with an RFID mandate -- opting for the "slap and ship" method -- some are taking it seriously indeed.
For example, Irving, Texas-based Kimberly-Clark has dedicated a 5,000-square-foot simulated warehouse to researching RFID. The Neenah, Wis., lab enables the company to determine which RFID equipment is most compatible with its existing conveyor, packing, logistics and shipping systems.
Next month, Kimberly-Clark will begin testing Generation 2 RFID tags, readers, printers and applicators at its simulated distribution center. The Gen 2 standard is said to be a higher-quality, lower-cost, globally interoperable alternative to the Generation 1 equipment, which will eventually be phased out.
"We are one of the few end-user companies that have the ability to thoroughly test this new generation of hardware in a real-world environment," said Mike O'Shea, director, Kimberly-Clark's Auto-ID Sensing Technologies.
But there may be some warehouse elements that can't be duplicated. J.M. Smucker, which dedicates space for researching RFID in a lab at its Orrville, Ohio, headquarters, reported that "there are a lot of things that go on in a live production area that you can't simulate," said Rich Wilson, director of corporate distribution, J.M. Smucker.
Still, Smucker has managed to learn a lot about the technology in its lab. "We test a variety of tags and equipment as well as tag placement," Wilson said. -- JULIE GALLAGHER