RE: RFID Comes To Retail Full Text for your reading enjoyment:
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Custom Fit
RFID comes to retail
By: Lisa Terry, Contributing Editor
It’s been a technology of the future for at least a decade. But now, thanks to Wal-Mart, RFID in retail will soon be real.
Since Wal-Mart CIO Linda Dillman’s June announcement that the retailer will mandate its top 100 suppliers put RFID tags on pallets and cases after January 1, 2005, retail’s lengthy flirtation with RFID seems headed for the real thing. Large suppliers who have not already done so are undertaking crash courses on RFID. Meanwhile, ISVs and hardware vendors are rushing to develop packaged solutions.
The RFID road is being blazed by technology-forward retailers and manufacturers. But vendors insist RFID will penetrate lower tiers a lot sooner than you may think. And some see RFID at the item level in stores within five years.
Bar codes are read only during some activity, such as a person using a handheld reader or a product moving on a conveyor. The beauty of RFID is that a tag can be read automatically while the product is idle. That has huge implications in terms of product visibility. AMR Research says RFID benefits include reduced stock outs, automated proof of delivery, improved product security, warehouse labor reduction, expedited cross docking, improved physical counts and reconciliation and improved work-in-process inventory and aging/quality control.
BABY STEPS
RFID has been used for years for access control and to track high value property such as railroad cars. Venture Development Corporation says the RFID hardware market was $89 million in 2002, with compound annual growth of 38 percent expected through 2007.
The challenge in retail and the supply chain has always been to make RFID tags small and cheap enough for its high volume.
One undertaking designed to address retail’s RFID challenges is the Auto-ID Center (www.autoidcenter.org), an academic/commercial partnership at MIT. MIT developed a standard for RFID passive tags called electronic product code, or ePC, as well as a data format and a scheme to store and locate data about unique RFID numbers.
The Auto-ID Center, Uniform Code Council and EAN have formed an entity called AutoID Inc. to set standards for RFID hardware, software and middleware and commercialize the vision. AutoID Inc. is laying the groundwork and recruiting industry participants to help establish standards for vertical industries.
Technology firms have focused on removing costs from tag manufacture, embedding tiny antennas in the circuitry. One firm, Alien Technology, has developed a technique in which RFID components are floated into place on chips via fluid.
With technical hurdles being addressed, early adopters began to experiment with RFID. Among the pioneers and pilot sponsors are Gillette, Proctor & Gamble, Kraft, and Germany’s Metro AG.
Closed loop users such as Benetton have been particularly well suited for early RFID because they manufacture and retail their own products. Public outcry regarding privacy seems to have derailed Benetton’s efforts. Privacy must be addressed before widespread adoption.
UK retailer Marks & Spencer already uses RFID tags on trays of chilled foods to monitor movement and freshness, after a pilot brought an 80 percent reduction in labor costs and a faster time-to-market. Payback is expected in under a year. UK integrator Intellident was instrumental in the project.
IMPLEMENTATION ROADMAP
The big RFID money is on supply chain applications, with item-level tracking and in-store use trailing it by a few years.
As with bar codes, most observers expect top 100 manufacturers to begin by complying with the demands for tagged pallets and cases and ASNs. Then, with hope, they’ll begin porting bar code-based processes over to RFID. Many consider internal adoption essential, since the savings are expected to fund the supplier’s RFID efforts for retailers as well.
Diane Magidson, project strategy leader for RedPrairie, says the final step is “scanfree” warehouses. With scanning, you’re “restricted by when you can scan. With RFID you know where things are at any given time, so you have more visibility, faster, and you can react.”
In the stores, many expect receiving to be the first real RFID application, followed by in-store merchandise movement and direct store delivery. Down the road, the vision calls for smart shelves: reader-equipped shelving units that monitor shelf contents and debit inventory as an item is removed. The long-anticipated vision of a fully automatic checkout in which every tag is simultaneously read has some physical obstacles standing in the way. Some, such as Dave Latimer, VP of product line management at PSC, believe RFID and bar code will coexist at item level for some time to come. RFID could also be used for processing returns, repairs and warranties.
“I think item-level marketing isn’t going to happen until RFID applications are seen as reliable, understood systems with all the benefits understood,” says Allan Melling, senior director of ePC solutions for Symbol Technologies.
WHAT NOW?
RFID mandates have their largest partners rushing to comply—some stepping up existing pilots while others scramble to learn about the technology and seek solutions in the marketplace.
PSC’s Latimer says, “Suppliers have to learn about RFID technology itself and what’s required to implement a system of that type—the physical installation, data requirements, what it means for a system to handle and produce data.”
Second-tier suppliers as well as other retailers are taking one of two tacks: beginning their own projects or taking a wait-and-see approach. RedPrairie’s Magidson reports RFID compliance is now a standard question in RFPs from suppliers.
Many hardware vendors have handheld and stationary RFID readers and printers in or ready for production. One challenge for hardware vendors is that “the product is going to have to be capable of dealing with multiple protocols and frequencies,” notes PSC’s Latimer.
For software developers, the challenge is in incorporating RFID data into applications in a way that enables it to be easily communicated to others, in real time, in the absence of a standard—or finding a way to supplement software for RFID without rebuilding it. That makes many squirrelly on the specifics of their RFID plans. Microsoft, for example, announced their membership in AutoID Inc. in June, but can’t say precisely how Microsoft products will support RFID.
“We’re getting huge interest from SAP, Oracle, J.D. Edwards, IBM, consulting companies who want to step up efforts,” says Scott Medford, VP, global alliances for Intermec.
“We’ll incorporate RFID wherever it makes sense,” says Eric Estroff, Microsoft senior product planner. He hopes Microsoft will be ready to announce its strategy by this fall, but suffice it to say that “Microsoft has a vision of empowering the small business owner to use RFID technology to help them realize the full potential around managing a business,” Estroff says. “We’re looking at three different areas: the hardware area, the middleware area and the business solutions area.”
RedPrairie has introduced RFID Accelerator, a standalone application compatible with its own and others’ supply chain execution solutions and some legacy systems. The application uses agents to collect and verify tag information, retrieve related inventory information and create ASNs for retailers with pallet and case data. Intermec and Manhattan Associates have introduced pilot kits, and Manhattan will have RFID as part of its standard product offering in early 2004.
Wal-Mart and others are expected to develop and release specifications over the next year that will help their partners and ISVs develop compliant systems. Those specifications are expected to be based on industry standards that are now nearing ratification. However, there are a plethora of standards for different RFID frequencies and applications. Incompatibility of some frequencies with some product types and environments, such as with metallics and liquids, mean there is a lot of work to do in establishing appropriate matches. The end result will likely be a range of standards within industries and vertical markets.
There may also be a blend of active tags, which power themselves, and passive tags; read/write versus read-only; as well as hybrids. Some processes may use RFIDs as license plates, others as portable databases.
VAR ROLE
RFID is at its heart another form of Auto ID, so VARs can expect their role in implementations to be the same. VARs are needed to write middleware between applications and RFID engines, conduct site surveys and design and install systems of RFID readers, also called interrogators. They’ll also help deploy the support system that will lie behind RFID, such as servers and mass storage to handle the exponential increase in data that is likely to result when every product has its own unique identifier.
According to a Venture Development report, “RFID channels are largely underdeveloped and ill-prepared to handle widespread adoption. The RFID market significantly lacks experienced, knowledgeable resellers and integrators” who are needed to incorporate RFID into ERPs and local databases.
“One of the biggest Achilles’ heels with RFID has been the lack of qualified integrators,” agrees Matt Ream, senior manager of RFID systems for Zebra Technologies.
At Texas Instruments’ June RFID Boot Camp, 24 percent of VARs predicted RFID would represent more than 50 percent of their Auto ID deployments in three years. Nearly three quarters said RFID will open new business opportunities. (The Boot Camp will have future stops in Long Beach, CA, and Baltimore in September. See www.ti.com/tiris)
Bill Allen, Texas Instruments marketing communications manager, urges VARs not to wait until RFID is packaged. “Businesses can enjoy an ROI today if they implement some RFID applications. You have to pick a pain point the customer has and prove they can enjoy some benefits.”
The state of RFID today is this, says Symbol’s Melling: “Yes, it works,” he says, but the question is, “how do you roll it out in a deployable way and unattended?” Expect pilots and lots of ROI evaluations as supply chain partners experiment with applications and costs are more clearly discerned. The next year or so will be the time those answers need to be worked out, and VARs need to be a part of that process.