TAGS, You're It!

TAGS, You're It!

That hype aside, Sun's CTO Australia and New Zealand, Angus McDonald, predicts there will be a series of substantial moves and announcements on the technology in Australia over the next three to six months. Those predictions are in keeping with an IBM global survey measuring the usage of and attitudes toward RFID technology among more than 60 leading retail and manufacturing companies that found more than 70 per cent expect to start deploying RFID technology in some capacity by the end of 2004.

By that time, most companies expect to start tagging products by caseload, with 29 per cent of retailers expecting to start tagging at an individual item level. Most companies had expected to tag some high-value items by the end of last year, including toys, electronics and pharmaceutical products. IBM says the primary initial objective of deploying RFID systems will be to better manage inventories, out-of-stock products and warehouse efficiency, although many retailers are also interested in testing RFID for theft prevention purposes and manufacturing companies are considering its potential use in transportation and logistics applications.

IBM Business Consulting Services (BCS) is working with some of the world's largest retailers and manufacturers, including US giants Procter & Gamble, Wal-Mart and Metro, on pilots of integrated business process networks that enable those companies to automatically respond to the tiniest variables throughout that network.

Pushing retail use of RFID along is the June 10, 2003 directive by Wal-Mart CIO Linda Dillman that the retail giant's top 100 suppliers would be required to utilise RFID tags on their cases and pallets by January 2005 (see "The Wal-Mart Factor, page 98), and complementary initiatives from the US Department of Defence.

"That provides a timeline and a sense of urgency," Hood says. "The interesting thing that's going to happen in 2004 is this whole application of the technology will move from the hands of the academics, who have done a great job for the last couple of years in setting up the framework, and into the hands of companies like Visy and others to actually make it commercial with the assistance of EAN [provider of the global EAN-UCC system for product identification, bar-coding and electronic messaging]."

Management consultancy firm AT Kearney says Dillman's pronouncement sent the industry scurrying, and immediately focused both manufacturers and retailers on RFID and the Electronic Product Code (EPC). "Single-handedly, Wal-Mart's action will speed the implementation of RFID and the EPC, creating a whole new way of managing products and ushering in a new era of supply chain efficiencies," the consulting firm says.

Retail Winners

AT Kearney predicts retailers will experience significant benefits from RFID, including reduced inventory, store and warehouse labour reductions and reductions in the number of out-of-stock items, but the blessings for manufacturers will be mixed.

Not only will manufacturers have to pay for readers and infrastructure, they will also incur the significant cost of tagging each pallet and case. For this reason it predicts high impact manufacturers (who sell lower volumes of expensive goods and experience significant out-of-stocks and shrinkage) will fare much better than low impact manufacturers (who sell high volumes of less expensive goods and hence experience limited shrinkages, and who usually already have very efficient supply chains). And the consulting firm points out that some benefits for manufacturers will very much depend on the actions of trading partners.

Nevertheless, BearingPoint national enterprise solutions manager Paul Chester is one who believes the potential for future growth is enormous and limited only by the relative cost of the RFID tag and the development of global standards. "For Australian organizations, proliferation will be so rapid that competitive advantage will be bypassed," Chester predicts. "Savings attributable to increased information flow and inventory reduction will ultimately be enjoyed by the consumer.

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