TAGS, You're It!

TAGS, You're It!

"Application opportunities are endless due to the ability to scan fast-moving products, capacity to scan multiple items simultaneously, expanded transmission distance, accuracy of recognition and non-reliance of direct line-of-sight scanning. One day we may be scanning our trolley once at the self-service supermarket and that day may be closer than we think."

According to NCR managing partner, store performance consulting, Judy Dobson, much of the current thinking on the use of RFID technology in retailing has focused on the supply chain and distribution centres, largely because advantages can be obtained there quickly with tagging only at the pallet and case level. But Dobson says as compelling as the business cases are for RFID use in those contexts, they pale in comparison to the potential for store adoption. "As tag and reader costs continue to drop, more manufacturers and retailers are likely to use RFID at the item level, providing a wealth of opportunities for improving merchandise selection and availability, operational efficiency, protection of merchandise and store property and customer service," she says.

"The value of some applications seems fairly obvious, with early recognition of their benefits by retailers and technology vendors alike. These uses can be accomplished relatively quickly, requiring modest infrastructure investment but with returns that can justify their costs." Dobson lists applications that include: automatic recording of incoming stock, locating merchandise in stockrooms, assisted reordering/low shelf level alerts and securing high-value and theft-prone items. "Several of these applications have the advantage of providing benefits even when RFID tags are applied only on pallets and cases, which many suppliers should be doing by 2005 to meet Wal-Mart's mandate."

Others are not yet quite so enthusiastic.

Australian Retailers Association (ARA) technology director Chad Gates says local retailers are taking a cautious approach, while "seriously investigating" RFID for its potential to reduce reliance on labelling and to take costs out of the supply chain.

Gates says the ARA expects the two biggest retailers - Coles Myer and Woolworths, who both sit on the standards groups - to adopt RFID first, but says he cannot see anything happening in Australia in a serious way before 2005. In fact, while Coles Myer CIO Peter Mahler has previously expressed an interest in exploring RFID, a spokesman for Woolworths says the company has no immediate plans for the technology.

Gates says the relatively high cost of tags currently makes it difficult to achieve a value equation, and retailers are also exploring the possibility the industry may be plagued with conflicting standards, and trying to assess where the technology fits into the supply chain. "One of the things that is said is that it will replace the barcode, which is not necessarily the case," Gates says. "It merely augments what is there, and has different applications as well."

Peter Hind, manager of user programs and InTEP Forum, IDC Australia, says RFID is currently barely on the radar for many Australian CIOs and he doubts it will have much impact in the short term. "Alternatives like OCR and barcodes may lack its [RFID] functionality but they are mature technologies backed by standards and the work of organizations like EAN International. I can see challenges in getting parties to cooperate, challenges in getting the infrastructure in place to harness it. In addition, the standards issue may hold people back and until it gets significant market penetration it will lack the critical mass to encourage adoption," Hind says.

"Perhaps the retailers may drive it through like they did with EDI. Yet these organizations have huge investments in EDI and are in a period of some corporate flux. Why should they do it in 2004? I just can't see it happening in the short term."

For now, the relatively high cost of tags and readers, while dropping, is likely to be prohibitive. For instance Ry Crozier, writing in online magazine RFID News in October 2003, pointed out that while the five cent tag is regarded as the key to bringing RFID technology to mass applications, the only way to meet this price is volume orders demanding billions of tags.

"Unfortunately, to date no such application exists. Even when there was talk of the airline industry using RFID tags as baggage labels, the industry's best price was 29 cents a tag. The airlines baulked at the price, according to Chester Lennard, managing director of Electro-Com, which distributes Texas Instruments' RFID products in Australia," Crozier wrote.

Existing costs are not necessarily an overwhelming barrier, however. It cost $1.6 million for Baulkham Hills Council in Sydney's west to introduce its RFID Self Server Kiosks to four library sites, with the majority of that cost being tagging. Yet systems technology team leader Murray Lawler says even at that price the council is achieving a major return on investment, after surveys showed 85 per cent of library staff's time was previously taken up with circulation duties.

"Now that we have had our RFID in for six months, basically we've found only around 5 or 6 per cent of their time [is spent] on circulation duty, and the rest is free for them to do other things. So as far as that goes there's a return on investment," Lawler says.

However, it is not just the cost of the tags that poses an impediment. When solution provider Icon Global began setting up a system to use RFID to track dairy samples from cows at Northern Herd Development in Northern Victoria, the cost of the tags was not an issue because those had been already provided via a government grant. On the other hand the cost of the readers - at $10,000 plus for a Texas Instruments box - most definitely was. With a requirement for sampling at 70 farms per day at a peak, their solution is to keep moving the readers around from place to place to achieve that value equation.

Like Australian retailers, Icon Global general manager Craig Porte is also concerned about the "hundreds of standards and hundreds of proprietary systems" that currently prevail. Porte says those standards are currently being set on an industry basis, and that this situation will have to change.

For instance the solution for tracking dairy samples relies on the standards adopted by the dairy industry, which are different from the standards in use in the rail industry, yet cattle also travel by rail. This is setting up a situation where companies will have to rely on multiple readers to do business along the supply chain - a situation Porte says must not prevail, for obvious reasons.

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