Warehouses in the Age of RFID

Retail leaders push RFID from DCs to stores

When executives at Marks & Spencer decided the time was right to find a better way to save time and improve inventory accuracy in its warehouses for its food and apparel divisions, it became one of the first major retailers to turn to Radio Frequency Identification (RFID). The company chose to affix Texas Instruments RFID tags running at 13.5MHz to its crates that transport food from more than 100 manufacturing facilities to warehouse depots and then to stores. The tags include information about the contents of the crate, sell-by dates and the supplier's name. When the warehouse receives the product the tags are read by RFID readers from Feig Electronic GmbH of Germany.

On the food side alone, the pilot showed a time-savings of about 35 seconds per crate during the process of dispatching the crates from the supplier to the receiving depot. This represents a potentially significant times savings when multiplied by the 3.5 million food crates Marks & Spencer moves continuously.

Buoyed by those positive test results, the company has begun the process of rolling RFID out on all of those 3.5 million crates and, "by the end of 2004, about 80 percent of the company's suppliers will be compliant with the RFID initiative," says James Stafford, head of the company's RFID project.
The success of that pilot also spurred a similar pilot on the apparel side of the business, where Stafford says the main objective is inventory accuracy. This pilot includes affixing UHF-based RFID tags from Switzerland-based EM Microelectronic and read by a mobile scanning device from SAMSys Technologies Inc. of Ontario, Canada.

RFID by Necessity
By instituting the use of RFID tags in the retail warehouse — and by default, requiring its manufacturers and suppliers to do the same — retail leaders like Wal-Mart and Marks & Spencer have begun the process of legitimizing the use of RFID in the minds of retailers everywhere.

Although only a few retailers have issued Wal-Mart-style mandates, such as UK supermarket chain Tesco and German retailer Metro Group, others have begun significant RFID trials — a relatively new and promising development in the retail world. Pharmacy chain CVS is expected to begin a small pilot using RFID tags on prescription drug containers, while Gap and Prada have each tested the technology. U.K. retailer Sainsburys has tracked prepared foods using RFID and Ahold has expressed interest in the technology.

Analysts view this trend as a positive one for RFID. Market research firm IDC predicts that RFID spending for the U.S. retail supply chain alone will grow from $91.5 million in 2003 to nearly $1.3 billion in 2008 as more retailers jump on the bandwagon. Issues that could delay adoption include the costs of RFID tags and readers, as well as the inevitable learning curve that accompanies any new technology implementation.

Other RFID vendors including Intermec, NCR and Symbol have worked hard to increase their presence in the retail market. Additional players include Cisco Systems, Manhattan Associates and Checkpoint Systems.

Robust Pilot Testing
UK-based Woolworths PLC has been watching the development of RFID for several years. Now that the technology has become more reliable and robust, "it's worth a large-scale pilot project to assess its potential within the retail supply chain," says Geoff O'Neill, head of central logistics.

Woolworths' pilot, implemented in 2001 and recently ended, was to tag removable plastic cartons and track their movement between the distribution center and the stores. The project, which included not only active RFID technology from Savi Technology, but bar code and Global Positioning System (GPS) technology, allowed the company to automatically track an individual item from the moment it was picked until the moment it was delivered to the store.

Home Depot has taken a different tack. The company has performed only one controlled pilot, but pins its hopes on a comprehensive testing plan that systematically tests a variety of RFID technology. "The standards are still evolving, and that evolution impacts the kinds of technologies available — how they work, what they cost, and how they can be leveraged," says Brad Albers, Home Depot's IT director of planning. "There is always a sweet spot in the adoption curve, and there is a lot to learn about individual deployments."

By waiting and testing, Albers believes Home Depot will be poised to implement the right RFID technology when the time is right. "As standards crystallize, we'll see manufacturers be able to focus on building to a standard and increasing manufacturing capability around that standard," Albers says. "That should drive costs down and make achieving Return on Investment on [RFID] deployments more feasible."