RFID the solution for Tracking & Tracing?

The last couple of months there is a lot of attention (RFID); chips that can be read without a line of sight are embedded in items. Some of these articles are often biased, sometimes extremely positive and in other cases most negative. But what can this technology really offer you, what is currently the status, who is doing what and why?

A B O U T THE AUTHOR

Marcel van Trier is senior Consultant at EAN Nederland. His major activities are in the field of Business Development and Business Innovation. He has lead several large projects in different industries, such as Food, Drug & Cosmetics, Healthcare and DoD. He holds the secretariat of the EPC working group of the Global Commerce Initiative (GCI). His email address is vantrier@ean.nl

Supply Chain improvement

The German organization Metro opened their Future Store in a small village Rheinberg, close to Dusseldorf. Their purpose was to test all kinds of new technologies in a real life environment. RFID is tested too, because Metro wants to learn what the technology can do and what it can't for consumer satisfaction and supply chain efficiency. In the Future Store, products from Proctor & Gamble, Kraft and Gillette are tagged. The reduction of errors in the Supply Chain was Gillette's core motivation to get involved in the development of this technology. They plan to save large amounts of money by making date entry more reliable and create better management information on for instance their stock positions in the Supply Chain. In their distribution center in Fort Devens (USA) cases are tagged. The tags are read on conveyor belts and all movements are therefore registered. Their inventory accuracy has improved to a very high level. Metro uses tags to follow products from their distribution center, through transport, receipt at the store and finally placement at the shelve and purchase by a consumer.

Consumer satisfaction

Tagged products are stored on smart shelves in the Future Store. These shelves are equipped with RFID readers that can detect the presence of products. For Proctor & Gamble, Kraft and Gillette, consumer satisfaction is extremely important. Empty shelves not only mean less turnover but also dissatisfied consumers. Smart shelves at the Future Store notify the retail system whenever a minimum stock availability is reached to enable a purchase of that product. Also the system can warn for misplacement and loss of freshness of articles and the electronic display always shows the correct description and price.

Out of stocks is a huge problem for manufacturers. Proctor & Gamble is sure that smart shelves contribute to better forecasting and replenishment. In the end the main purpose is to reduce stock of finished goods, raw materials and packaging material. Real-time information on consumer behaviour will optimize manufacturing processes. Companies will no longer base themselves on point of sale information, but on information directly from the shelves. This will correct information with theft and loss. UK retailer Tesco has made some serious improvements in this field. Their goal is to make stores more consumer friendly, operations easier for their staff and to save money at the end of the day. The major reason to start using RFID for Tesco, was to better understand the technology. Proctor & Gamble also uses RFID for promotions. Consumers get information on the product that they just picked from the shelve on plasma screens at the Future Store.

Costs

The current price of tags, makes the technology not applicable for all products. But studies by the Massachusetts Institute of Technology (MIT) have shown that a broad adoption of the technology will make the one-cent-gag feasible in a couple of years time. Costs of tags are only part of the investment companies have to make. A major part of the costs will come from integration of the technology in Enterprise Resource Planning (ERP) systems and Warehouse Management (WMS) Systems. If your information systems of today cannot make the distinction between two pallets, it still is incapable of doing that if these pallets contain a tag tomorrow.

Don't wait

Should companies wait until the technology becomes cheaper and fully mature? It is highly recommended not to wait but to start understanding the technology and the developments. Get information from your local EAN Member Organisation and start a conversation with your trading partners. Try to set up mutual projects. By cooperating it will be possible to influence the development of the technology, legislation and price of readers and tags.

Two comparisons are in place. When the internet came up in the '90's, some companies stopped implementing EDI. Internet would solve all their problems, so they reasoned. By now, we know that both technologies coexist and are complementary. The same accounts for bar codes and RFID. Investments in bar code systems are not a waist of money, but can be an excellent step for the implementation of RFID, if implemented wisely. Starting with RFID could be just starting to attach RFID tags to products, if your primary goal is to satisfy the demand of companies like Wal Mart, Tesco and Metro who are asking their top 100 suppliers to start tagging products by the end of this year. But more likely, starting with RFID is organizing processes and systems, collaborating with trading partners and technology vendors en sharing experiences. You can start with that today. And even though tags are too expensive for some products, RFID is already used successfully on high volume and high value product flows.

The second comparison that is often made is that of the first automobile. That car looked like a carriage without horses. It was much later that technicians understood that they had the ability to redesign the concept of vehicles using new technologies. The first metal bridges were built like stone bridges, but out of a new material. It takes some time before the human mind fully understand the impact of new technologies. The first RFID systems will most likely look like bar code systems, but will evolve to new Supply Chain concepts, some of them already described by the MIT and tested by organization such as Metro, Tesco, Wal Mart and Target.

Links

EPCglobal: http://www.epcglobalinc.org

EAN International: http://www.ean-int.org

GCI EPC Working Group: http://www.gci-net.org/it

PETS International Magazine ISSUE 4,2004