Eating into your profits?
Written by Glynn Davis
Since justifying a slice of IT budget on any type of Radio Frequency Identification (RFID) implementation has been a tough one for many retailers to swallow, it will be interesting to see just what the big food retailers make of cutting edge developments like edible RFID tags.
Hot out of the labs is the RFID-enabled NutriSmart ‘tag’ that can be incorporated into virtually any foodstuff. The early
prototype includes a ‘smart’ plate that reads these consumable tags in the food and can inform consumers of just how many calories they are about to eat.
While this might seem a little bit pie-in-the-sky for now, there is no doubt that RFID technology has begun to gain some traction over the past year following a long period when it has not quite lived up to the early hype.
Steve Howells, senior director for market development at Checkpoint Systems, says: “Over the years many people have over-sold it and it never lived up to expectations. But over the last two years each quarter has seen some retailer or other implementing. And over the last six months we’ve had Wal-Mart putting over one billion tags on men’s basic clothing.”
And in the UK Marks & Spencer has proven the business case for tagging trays of food and re-usable assets like roll cages. There is no doubt that these well respected players have given some confidence to the global retail industry and that after a few false starts they’ve shown that RFID can now be justified on a robust return on investment (ROI) basis.
Where the business case is proving strongest is with apparel – or clothing. “ROI is generally based on an increase in sales and it is very easy to prove [this increase has been delivered] with clothing,” says Howells.
This is based on the fact that the greater product visibility that RFID can provide across the supply chain enables faster replenishment of top-selling items and the ability to ensure that products are positioned in the correct locations in-store. Both combine to generate increases in sales. “The right items can be in the right place and you are able to only replenish what is needed,” suggests Howells.
Boosting replenishment efficiency is without doubt one of the big benefits of RFID. Keith Sherry, general manager of BT supply chain solutions, suggests RFID technology could enable 10,000 items per hour to be read in-store during a stock-take. “This reduces the time spent [taking stock] so that staff could be involved more with customer service activities,” he says. This is a radical improvement on the time it would take to manage the same process with hand-held barcode readers.
With stock replenishment such a key driver of RFID adoption Sherry says the ‘retail-in-a-box’ solution from BT includes software for inventory management, which incorporates a store replenishment system.
Along with fast-selling goods, RFID tagging is also well suited to high shrink items and Procter & Gamble has been active with placing tags on its Gillette razor ranges, which are highly desirable to thieves. RFID gives merchants greater tracking of these sorts of goods and to also know when they have been stolen – thereby enabling swift replenishment.
Shrinkage is an area that RFID is playing an increasing role and Checkpoint is a prime mover in developing RFID-enabled EAS (Electronic Article Surveillance) tags. When these are combined with the group’s overhead Wirama Radar readers (which reduce false alarms) then they represent powerful theft prevention tools. The falling price of such tags has also been a driver of the adoption of these anti-theft solutions as well as broader RFID implementations. This has coincided with a continued improvement in the performance of the technology.
David Lyon, retail sector manager at GS1 UK, says: “The price has fallen through the floor and the performance has gone through the roof.” Whereas individual tags cost between 20p and 30p five years ago they are now more likely to cost 10p although for weatherproof versions for roll cages the price per unit will be around the £1 mark.
With such prices, BT’s Sherry, says the generally recognised lowest price point for tagging of $10/£6 has fallen to the point where Wal-Mart is even tagging at the sock level.
And the cost of readers has also moved in the same direction,
according to Sherry, who suggests devices that previously would have cost as much as £5,000 are now available for £1,000 or under. “Having both barcode and RFID reader in one device is also making things more workable for retailers and this all makes the ROI more feasible.”
Extra efficiencies are also being generated from the growth of tagging at source, which is being driven by the big players like Wal-Mart. The US-based giant has mandated many of its suppliers to embed tags at the point of production. Not only does this help reduce costs but also allows the tracking of items throughout the whole supply chain.
Ultimately Sherry foresees the time when all garments are tagged at source and that this will benefit retailers of all sizes who can piggy-back on the current efforts of the big players. He says China is presently adopting RFID across various sectors and such is the output from the country that it will undoubtedly have a positive impact on RFID adoption by retailers in the UK.
“The [Chinese] manufacturers will put the RFID tags in the products and retailers will then need to make the best of it,” says Sherry.
The one place where retailers have not yet been able to make the best of it is with groceries. Some years ago Tesco looked closely at tagging food but decided against it, according to Lyon, who suggests that even though costs have gone down for all RFID technology there is still a big question mark over whether individual item level tagging is necessary for
“Why track a tin of beans? But with a tray of 24 ready meals at £3 to £4 each then a re-usable tag makes sense,” explains Lyon. This is exactly why M&S uses such tags on its trays of food. But the other grocers have yet to fully commit themselves to tagging foodstuffs.
This suggests that despite the great potential for RFID in boosting efficiency in the supply chain and dramatically improving replenishment the retail industry is light years away from
adopting the likes of edible tags.