Deloitte paints accurate picture of RFID adoption

Related tags Rfid Hypermarket

An interesting new report looks behind the headlines about Wal-Mart
and Metro roll-out programmes and asks to what extend RFID
technology has been embraced by both large and small companies.
Anthony Fletcher reports.

"There are two sides to every story and the retail RFID story is no exception,"​ said Tom Friedman, president of Retail Systems Alert Group and founder of Retail Systems Conference & Exposition.

"Everyone knows about the highly publicised efforts and mandates of Wal-Mart, Target, Tesco and Metro. But no one knows the other less vocal companies, who represent an equally compelling side of the RFID story."

The Deloitte survey, entitled "RFID: How Far, How Fast?"​ provides the most recent snapshot of how 90 retailers, distributors, CPG companies and apparel manufacturers view RFID adoption and innovation in the 2004-2005 timeframe, as well as provides initial insight into industry-wide investment and expectations for RFID in the next five years.

Deloitte's conclusion is that although RFID has the clear potential to transform the retail supply chain through real-time product tracking and identification and elimination of human error, the industry has been slow to embrace the new possibilities it offers.

"Our analysis shows that RFID is a transformative technology for the retail and supplier industries with the capacity to synchronize business processes and efficiencies across the supply chain,"​ said Ed Carey, global managing director, consumer business, Deloitte Touche Tohmatsu.

"Though the general industry expectation of increased revenues in the first five years of RFID implementation is low, it is only a matter of time before all industry participants realize its overarching benefit of supply chain visibility and improved business processes, which ultimately leads to an enhanced customer experience.

"Widespread interest in RFID shows its potential as catalyst for change in the retail industry. However, members of the retail and CPG industries have only begun to get their feet wet - and they don't want to jump into the pool too quickly."

The study revealed that 25 percent of companies with $5 billion in revenue will spend between $500,000 and $10 million on RFID adoption in 2004. Some 70 per cent of these large companies ($5 billion plus sales) will embark on RFID timelines and initiatives within the next 18 months.

But it also showed that RFID spending among smaller companies will be significantly less. In addition, some 30 per cent of the respondents had very low expectations of increased revenue from RFID in the first five years of implementation. However, larger retailers expect a more significant return on investment from RFID adoption.

In the end, the study conducted by Deloitte Touche Tohmatsu​ and global research and events company Retail Systems Alert Group​ suggests that the corporate culture and organisational structure of a company has a sizable impact on active RFID-enabled innovation and future implementation of electronic product codes.

And ultimately, companies cannot get away from retailer RFID mandates. In Europe, German retail group Metro has begun rolling out its radio frequency identification (RFID) programme.

Some 20 of its suppliers have equipped goods pallets with what are known as smart chips, and selected warehouses as well as outlets of the Metro Cash & Carry, Real and Kaufhof sales divisions are participating. Another 80 suppliers are scheduled to follow next year, and by January 2006, Metro Group plans to have 300 suppliers sending RFID-tagged pallets and cases to its distribution centres.

The roll-out follows UK supermarket Tesco's recent RFID project, which is designed to track shipments from its central distribution centre to all 98 of its Tesco Extra superstores. Completion of the scheme has been set for Christmas this year.

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