RFID: It's Here to Stay

— August 01, 2003

It's official: RFID is no flash-in-the-pan technology.

The news came in the form of an announcement by Linda Dillman, senior vice president and CIO of Wal-Mart, who shared with the wedged-in, door-bursting, standing-room-only crowd at Retail Systems Expo in Chicago that Wal-Mart will be rolling out RFID scanning technology for product receipt at its distribution centers.

The process will be gradual, with plans to go live with the company's top 100 vendors, at the pallet and case level, by January 2005.

Dillman touted the advantages of RFID technology for both suppliers and retailers. RFID, or radio-frequency identification, enables suppliers to plan production more efficiently and respond more quickly to demand, she said. It automates inventory count and speeds shipping and receiving at distribution centers (DCs), and it reduces out of stocks, prevents theft and makes product tracking more efficient at the retail store level - just to name a few of its pluses.

While the potential benefits of RFID have been well known for some time now, its prohibitive costs - RFID tags currently cost about 50 cents to 60 cents apiece, for example - have been a hurdle to widespread adoption.

For item-level tagging specifically, Dillman comments that current RFID technology is "really not ready" - in Wal-Mart's store-shelf-level field test with Gillette's Mach3 razors, the hardware required to implement RFID on just one shelf was an overwhelming tangle of cables and boxes - nor is it cost efficient. She calls the cost hurdle a "chicken and egg problem." The tags are too expensive to implement, and costs won't come down until volume increases.

Of particular interest to Apparel readers is that Dillman specifically mentioned that Wal-Mart's apparel, with its low price points, is not earmarked for RFID tracking in the near future.

Nevertheless, Wal-Mart's RFID initiative is bound to make rapid and significant headway in knocking down the barriers to widespread RFID adoption. Although cartons and pallets are its focus now, Wal-Mart's committed push into RFID is sure to start the price slide that may prompt the company to reinvestigate RFID as a means to profitably track inventory at the item level - assuming consumer privacy concerns are resolved.

What all of this means for suppliers, manufacturers and retailers in all industries is significant. To begin with, Wal-Mart's news is a major boon to the RFID industry, whose members can probably expect to see their businesses ratchet into double time. (Answering a query from the audience, Dillman estimated that the initial phase of its RFID implementation will require the use of 1 billion RFID tags in the first year alone.)

Perhaps more important to the apparel industry specifically, Wal-Mart's endorsement of RFID portends a major revolution in the way global supply chains do business, if Wal-Mart's history of technology leadership is any indicator.

Companies that take the time now to research RFID carefully and plan accordingly will be better prepared to reap the rewards of the technology as it becomes feasible for them to do so.

Imagine the time and labor savings when your cartons pass through your DC unopened, their contents recorded in inventory as they pass by the RFID reader at the point of entry. Imagine truck fleets fitted with RFID readers that automatically record and track freight as it's loaded into the trucks for distribution. Imagine "smart" retail shelves that know exactly how many items they hold.

It's not science fiction.

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