| RFID’s superiority to barcodes seemed unarguable: it could be used in various different ways, including improving security, store layout planning and stocktaking as well as delivering unheard of efficiency improvements in the supply chain; and everyone was sure hardware costs were falling fast. Yet here we are in the second half of 2008, and success stories are hard to spot in the UK retail sector. The only big name in the High Street to have rolled-out a major implementation remains Marks & Spencer, where the success of the technology has surely been helped by the unique nature of its supply chain.
You could argue this just shows how sensibly conservative retailers can be. As Mark Croxton, managing director at retail and wholesale software provider Aldata, puts it: “Retailers tend to be relatively slow adopters: they tend to wait until things are mature, proven and cheap – and I think all these points relate to the RFID take-up.” This company’s strategy, informed by input from retailers, has been to focus on developing its GOLD Track traceability software, part of its GOLD software suite but capable of interoperating with other supply chain systems. The software has been successful, but many of the retailers using it are doing so in conjunction with barcode-based systems, not RFID.
Neil Matthews, vice-president and general manager for northern, central and eastern Europe at Checkpoint Systems, is sure the hype surrounding RFID five years ago damaged the technology’s reputation. “The technology was still in its infancy,” he says. “There is now a standard chip available for retail, but we were nowhere near that stage then. Plus, most retail IT systems were designed at SKU level, rather than item level. So a lot of peoples’ IT systems were not designed to handle item-level tags.”
At the same time, some trials run by UK retailers used US versions of the technology more powerful than European regulators would later deem acceptable. Until March this year, the EU standard limited tag reading power to 500 milliwatts. Now RFID systems can use up to two watts, giving systems a depth of field for reading by handheld devices of 1 m to 1.5 m, depending on the size of the tags, with a greater range for fixed readers, and certainly good enough for most retail applications.
But the most fundamental problem is still cost. In 2001, RFID suppliers were predicting that the cost of RFID tags, then about 50 cents each, would quickly fall to five cents. Today the cost of a tag is more like 20 cents, and retailers also have to pay for new infrastructure in warehouses and stores.
These things take time
Not everyone, however, accepts that the rate of RFID adoption in retail has been unacceptably slow. “Many European retailers are very interested in the technology, and are either planning or
running trials, or rolling out RFID, particularly in apparel,” protests James Stafford, head of RFID adoption at Avery Dennison. “The only fair comparison I can think of is the barcode. The original patent for that was granted in 1952. So if you think that it wasn’t until 1974 that you had the first barcoded product, and it was 1990 when Marks & Spencer adopted it – these things can take a long time to catch on!”
At present, says Aldata’s Croxton, the uptake of RFID technology for traceability is usually associated with one or more of three main factors: “Either they’re dealing with high value items, or they’re using it for tracking valuable (storage and transportation) assets, or there are some retailers that have taken some EU Directives and legal requirements (relating to merchandise in the supply chain, not RFID) seriously.”
Aldata has worked with French drug wholesaler CERP, which supplies about 250 retail pharmacies. “They have RFID tags on the sealable trays they use to deliver drugs, to trace them through the warehouse and track returns,” says Croxton. “They see that as cost-justifiable, because you have high value items, they want proof of delivery, and there are legal requirements which mean they need to be able to trace the drugs that have gone out to the stores and what’s come back.”
Aldata has also worked with the Swiss grocery retailer Migros on an implementation that tracks fresh fish as it passes through the supply chain serving the company’s 600 stores. “They do some food preparation in the warehouse, some cutting of the fish into smaller slices, and then some repackaging,” Croxton explains. “They have an RFID system that covers traceability of what comes into the warehouse and goes through that preparation process, so they can track it back to its place of origin. They also have legal requirements with which they have to comply around food preparation.”
In the UK, Marks & Spencer now uses RFID to tag clothing. The initial pilot began in a single store in 2003, was extended to six shops within 18 months, to 42 shops in 2006, and is now used in more than 120 stores across the UK. “It has presented a great opportunity to do a more detailed stocktake of sizes and colours, not simply improved the efficiency of previous processes,” says a spokesperson for the retailer. “Improved availability has improved customer service and provided more detailed information when stores conduct stocktaking. RFID also gives us visibility through the supply chain, right down to item location. Our goal is to get more suppliers to use the technology.”
Of course, Marks & Spencer is a special case, because it has such a high degree of control over its own-label products and its supply chain. One would assume that only when a major retailer that dealt with multiple brand-name suppliers and had the power to influence them into using RFID would the technology acquire critical mass. Tesco could have fitted the bill, but its adoption of the technology has been slow and piecemeal, and mainly restricted to pallet level inventory applications.
On the other hand, you could argue RFID isn’t so natural a fit for the low value, low margin goods in grocery anyway. Andy McBain, EMEA product manager for mobile devices and the RFID product set at Motorola Enterprise Mobility, believes it will soon start to make greater inroads in clothing retail. Motorola reader technology is currently being used alongside Avery Dennison tags, by the US retailer American Apparel, in a project similar to the Marks & Spencer implementation. The technology was rolled-out at item level across 17 stores in the New York area between April and July this year, and there are plans to extend it to more than 120 stores across North America.
But how long will it be before many UK retailers even start to think about the aforementioned issues? Motorola’s McBain remains bullish about RFID’s push into the store. “We are engaged with a number of top tier one UK and western Europe retailers, for applications that reduce the weekly stocktake down to a quick wander around the store once a day,” he says. “That’s particularly helpful for stores that have reduced the amount of back of store support they have: High Street fashion or retailers diversifying away from their core product range.”
We may still have a while to wait before RFID really becomes established in the UK retail sector, but that day will come, insists Avery Dennison’s Stafford. “There will always be businesses that don’t need the most sophisticated technology,” he admits. “But where businesses need to get very close accuracy and correlation between their IT system and their real physical stock systems, RFID is the ideal technology. All I can ask you to do is to watch this space. There will be more adopters coming forward, but they will do it at their own pace.”
So, RFID: not dead, just sleeping.
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