ALBERTSONS LAUNCHES RFID PROGRAM 2004-03-15 (1)

MICHAEL GARRY

BOISE, Idaho -- Albertsons here has joined the growing ranks of major retailers who plan to require their top 100 suppliers to affix RFID (radio frequency identification) tracking tags on pallets and cases headed for retail warehouses and stores.

Albertsons revealed its RFID strategy on March 5, about a week after Minneapolis-based Target made a similar announcement. Metro Group, Dusseldorf, Germany, announced its plans in January at the National Retail Federation show in New York, following Wal-Mart Stores, which became the first retailer to mandate RFID tags last June.

Albertsons is the only traditional U.S. supermarket operator so far to set RFID tagging requirements for its top suppliers.

Albertsons, which is currently in "the testing phase" with "select suppliers," said it expects its top 100 suppliers "to be participating in the RFID program at the case and pallet level by April 2005." The company is piloting the technology with one category of products, said Karianne Cole, corporate communications manager for Albertsons, who declined to identify the category.

RFID tags contain a digitally coded microchip and a tiny radio antenna that is activated in the presence of an RFID reader. Upon activation, the antenna transmits the information on the chip to the reader, which channels it to the appropriate servers and databases. Albertsons would need to install readers at its warehouses and stores to capture information on pallets and cases from suppliers.

The information on the microchip, describing a pallet, case or product, will adhere to a standardized identification system called the EPC (electronic product code). Standards for the EPC are being developed by EPCglobal, a joint venture between EAN International and the Uniform Code Council, which are responsible for bar-code standards. Unlike bar-code scanning, no human intervention is required in reading EPC chips, enabling products to be tracked efficiently throughout the supply chain.

"We are confident that RFID technology will further enhance our service to customers by improving consumer demand chain management," said Bob Dunst, Albertsons' executive vice president and chief technology officer, in a prepared statement. "We'll be able to instantly locate products as they flow through our supply chain."

Added Gabe Gabriel, executive vice president of merchandising and supply chain for Albertsons, "RFID is a cutting-edge tool that will give us a win-win advantage with both customers and suppliers."

As a founding member of EPCglobal, Albertsons said it plans to be an "active participant" in the standardization process for the EPC and the EPC Network, which includes the infrastructure supporting the EPC. EPCglobal was formed last November to drive the commercialization and standardization of the EPC following its development by the Auto-ID Center at MIT. Other retailers said to be involved in standardization efforts include Ahold, Best Buy and Lowes.

According to Pete Abell, senior partner/co-founder, The ePC Group, Boston, other food distributors who may be considering an RFID program similar to Albertsons' include Ahold, Wegmans, Hannaford Bros., Safeway, H.E. Butt Grocery and Unified Western Grocers.

Abell said Albertsons and other retailers are expected to use tags called Class 1 Version 2, a read/write tag with an open-air interface protocol. "By the end of this year, tags should be available in limited quantities of this version," he said. In addition, most retailers are going with "agile readers," which should be available from numerous sources as well, he said.

In a related announcement, Albertsons has begun the national implementation of a total planning solution from Manugistics in an effort to "make"marketing, merchandising and the supply chain more efficient," Gabriel said at the company's Q4 2003 conference call last week.

The Manugistics system will support strategic sourcing, inventory demand planning and forecasting, inventory optimization, and vendor collaboration and scoreboarding, as well as network, transportation and logistics optimization. Gabriel also said Albertsons has begun strategic sourcing of such general merchandise items as vitamins and diapers.