The RFID Imperative

The RFID Imperative

RFID Remediation: Y2K Redux

Today, most retailers' systems have been written to hold 11-digit UPC barcodes. But the serial numbers encoded on RFID tags, known as electronic product codes (EPCs), are composed of 13 digits. To accommodate those two extra digits, CIOs are going to have to expand the numerical structures inside their systems.

An initiative called Sunrise 2005, launched in 1997 by the Uniform Code Council (UCC), a standards body for the retail and manufacturing industries, mandates that US and Canadian companies be capable of scanning and processing up to 14-digit barcodes by January 1, 2005. If they don't, they won't be able to share information with their trading partners and they'll experience time-to-market delays and added costs. According to the UCC, this will require retail CIOs to either replace legacy systems with so-called RFID-ready systems or undertake a Y2K-like effort to reprogram their systems so that they recognize 13-digit EPCs.

Retailers such as Saks Fifth Avenue that sell a lot of European-manufactured merchandise have a head start on this database expansion because the serial numbers on European products contain 13 digits. Because Saks executive vice president and CIO Franks started preparing for Sunrise 2005 a few years ago and has already remediated many of his systems, he's got a good foundation for RFID.

Franks inventoried all of Saks's systems and all of the documents Saks exchanges electronically with its 1900 suppliers to ensure that they contain enough space for global trade item numbers and EPCs. If they didn't, those systems had to be remediated in much the same way that Saks readied its systems for Y2K. He says that now he's going over all the information from purchase order to advanced shipping notice to invoice to payment acknowledgement to make sure Saks is in compliance with Sunrise 2005 and therefore will be able to support RFID when the company pilots it in early 2005.

"We will approach the enhancements on a priority basis as the business value and operational necessity dictates," says Franks, none too cheerfully.

RFID Integration: Forward to the Back End

Two years ago, 7-Eleven piloted a VIP (Virtual Instant Payment) card at the 7-Eleven store inside the company's corporate headquarters in Dallas and at a store in Plano, Texas. The VIP card was equipped with an RFID chip and functioned like a debit or credit card. By waving her VIP card near an RFID reader by the cash register, a customer could pay for purchases without having to stand in line or fumble through her purse or swipe her debit card through a reader (at just the right speed). This was the company's first foray into RFID, and it helped CIO Morrow understand what system changes he needed to make in order to integrate this new application with the company's back-end systems.

One of Morrow's biggest challenges was getting information about sales conducted with the VIP card into the company's primary store system, its Retail Information System, which provides the in-store tools for point of sale, scanning, ordering, merchandising, receiving and various other management reporting functions. "We couldn't have a stand-alone transaction network and then not clear that against our product sales," says Morrow. So he had to create a service that ran on the back-office computer and pulled transactions made with VIP cards into 7-Eleven's cash reports. He also had to make sure that the store system had a way to identify VIP card transactions, in much the same way that purchases made using cash, cheques, credit cards or debit cards were identified as such. To that end, he programmed a new payment mechanism for the VIP card into the system so that when a customer wants to pay with a VIP card, a sales clerk can select "VIP card" from the point-of-sale system instead of cash, debit, credit or cheque.

"The integration work was laborious," Morrow recalls. "[But] the actual hardware pieces - once we got them tuned to read at the distance we wanted, which was two to three inches - were pretty straightforward to deploy."

Brett Kinsella, general manager of the supply chain management group for IT consultancy Sapient, says the type of RFID application will determine which enterprise system it will get hooked up to. For example, RFID at the pallet and case level will have to be linked to warehouse management systems. RFID at the item level will touch virtually every system from inventory management to replenishment to CRM systems. But because item-level tagging is still a way off, few if any companies have given this level of integration - particularly with CRM systems - much thought. CIOs who have implemented an infrastructure for enterprise application integration are going to have the easiest time moving RFID data into existing enterprise systems, says Kinsella, "because they can look at this data as another node on their EAI servers".

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