RFID Gets Real

Retailers are focusing IT investments on supply chain efficiency this year in order to stay competitive, with RFID accounting for a growing amount of interest and investment, according to new research by the NRF Foundation and BearingPoint.

The study, Retail Horizons: Benchmarks for 2004, Forecasts for 2005, found that 53 percent of the more than 300 U.S. retailers surveyed put replacing and upgrading their merchandising and inventory-management systems as their top information technology strategic initiatives for 2005. RFID spending will be part of an increasing number of the companies' budgets for improving inventory management: 35 percent of companies indicated they will deploy the technology to some degree this year. That figure was up from just 15 percent in the same survey carried out last year.

"The retail community is clearly looking at RFID to see how real it is and whether or not it should be a strategic initiative," says Brian Higgins, director of supply
chain strategy and emerging solutions at Bearing Point. In addition, 50 percent of respondents said they would tag between 6 and 10 percent of their merchandise with RFID this year.

Reliable RFID
While tags have advantages over bar codes, which must be manually scanned, the technology is not without problems. Technical difficulties during trials including tag collision, system disruption and poor read rates, and the questions of privacy, economics and retailer mandates have also attracted attention.
However, Metro Group and Intermec recently announced the successful completion of implementation of RFID readers and tags at the retailer's largest
and busiest distribution center (DC) in Germany. Located in the town of Unna, the DC is equipped with Intermec IF5 Intelligent RFID readers and RFID tags powered by Intermec. With more than 50,000 pallets read to date, Metro claims to have 99 percent tag read-rates, as well as complete compliance with ETSI radio standards for operation in Europe.

"With the strong read rates and system performance we've seen from our hardware, Metro Group is proving the efficiency and accuracy that RFID promises for retailers," says Gerd Wolfram, executive project manager of the Metro Group Future Store Initiative.

Auto-ID research centers throughout the world continue to research and refine aspects of the technology to help make RFID more reliable and to increase transmission distances. Areas of profitability improvement from supply chain RFID include reduced shrink and loss of inventory, reduced out-of-stock conditions at store level, more efficient transportation and logistics, reduced inventory and lower labor costs associated with receiving.