There was a time when I started to think that RFID was an acronym for “Radio Frequency is Dead," but despite some slow periods, there are signs of life for the technology.
Since Wal-Mart’s high-profile pilot tests in 2005, it seems like the only discussion of Radio Frequency Identification (RFID) was coming from organizations with a vested interest in promoting RFID. Manufacturers of RFID tags and scanning equipment, software vendors, and information standards organizations continued to tout the virtues of these electronic product codes (EPCs), but few retailers and manufacturers did more than evaluate RFID in their supply chains.
The highly publicized opening of the Metro Group RFID Innovation Centre, the Tesco initiative to tag all pallets of high-value goods, and the Wal-Mart pilot test of pallet-level RFID tagging by its top 100 suppliers serving three distribution centers were anticipated to be the dawn of a major rollout for the technology. But as the RFID timeline created by Supply Chain Digest suggests, the Wal-Mart initiative was short-lived and short on success. The same could be said for numerous other companies that failed to overcome the cost challenges and technological limitations to derive the anticipated value from RFID implementation.
By 2009, it seemed like RFID had become yesterday’s news and a topic of limited interest. Even the anti-RFID privacy groups like CASPIAN (Consumers Against Supermarket Privacy Invasion and Numbering) had become less vocal. The organization’s last major protest, touted on their website, was in 2008.
Fast forward to July 2010 with Wal-Mart’s announced intention to place RFID tags on apparel. A July 23, 2010 article in the Wall Street Journal reports that the company would place removable EPCs on individual units of jeans, socks, and underwear. The tags can be read by hand-held scanners on the store floor and in the stockrooms. As the diagram indicates, this streamlined use of RFID technology is intended to improve inventory control and product availability of staple items that are continuously replenished.
Source: Bustillo, M. July 23, 2010. Wal-Mart radio tags to track clothing. Wall Street Journal.
As you might expect, the announcement reinvigorated the pundits and paranoid types alike. Proponents of RFID suggest that item-level tagging with EPCs is the sweet spot for the technology versus the initial pallet-tagging efforts that produced limited value. Privacy advocates fear that underpaid retail clerks will be wandering store floors with a scanner that can read credit cards and shopper loyalty cards embedded with RFID chips. They also worry about the opportunities for unscrupulous marketers and thieves to capture EPC information.
I’d tend to agree with the pundits on this streamlined RFID strategy. From the cost and actionable knowledge standpoints, it is pointless to put a tag on every pallet and every unit moving through a supply chain. You just create a great deal of data that will not be used to manage the flow of goods. Some products move too quickly to effectively leverage EPC information, low-value products cannot bear the cost of the tags, and one-time purchase goods are not replenished. Hence, EPCs should only be used for select product types. Here are a few of the applications that seem to make the most sense:
- Apparel – Given the vast range of sizes within a specific style of clothing (think of the high number of waist/inseam combinations for jeans), there is a need to know which sizes are selling and which are gathering dust on the shelf. This will help with speedy shelf replenishment to ensure in-stock availability of these high-profit margin items. JCPenney, American Apparel, and other retailers are taking a similar approach to Wal-Mart, with selective application of item-level RFID apparel tagging.
- Cold Chain – Temperature-sensitive items subject to supply chain traceability regulation are candidates for RFID usage. While pallet- or carton-level tagging may be financially viable for fresh produce, vaccines and other sensitive medicines are candidates for item-level EPCs. RFID is being used to monitor product temperatures, product movement, and expiration dates. Security is another huge issue for pharmaceutical cold chains and RFID can help.
- High Value Goods – In addition to the improvements in product flows, EPC tags can be used to enhance supply chain security. GERRY WEBER International AG will sew fabric RFID labels directly into its products. The low-cost tags are deactivated when the consumer has paid for the goods at the checkout. If a thief tries to exit the store without the tag being “killed,” an alarm is triggered at the entrance to the store. The company also believes that RFID will result in greater inventory accuracy, visibility, and the elimination of time-consuming manual inventory counting.
- Critical Components – Another effective use of RFID is for tracking parts that require periodic maintenance. Boeing is using RFID tags on 2,000 maintenance-significant parts for the 787 Dreamliner. These “smart” read/write tags contain unique part identification, maintenance, and inspection data that will enhance parts’ traceability and reduce cycle time to solve problems. It will also improve the speed and accuracy of information exchange with Boeing parts suppliers.
In my opinion, these targeted RFID applications will boost future adoption of the technology. RFID, for all its promise, is not a universal tool like the low-cost, easy-to-use barcode. Companies will be best served to use RFID for goods that are high value, time and environmentally sensitive, repairable, and/or replenishable.