Retailer RFID use sends signal along supply chain

By Ahmed ElAmin

- Last updated on GMT

Related tags Rfid Supply chain Electronic product code

Retailers around the world are stepping up plans to use RFID
according to a new report by Frost & Sullivan, which sends
another signal to food processors they might soon have to make the
costly transformation in their supply chains.

RFID has long been touted as the future of logistics for all companies by allowing retailers and suppliers to track goods throughout the supply chain.

However high prices for tags and systems hasheld enthusiasm at bay despite mandates from retailers like Wal-Mart, which last year announced it would require its top suppliers to implement the tracking technology.

New analysis from Frost & Sullivan reveals that retailers worldwide spent $400.2 million on RFID in 2004. The analyst projects spending to reach $4,169.7 million in 2011.

"Better marketing of the technology has certainly been an effective driver for this market and is likely to be one in the years to come as well, as more retailers move towards equipping theirstores and distribution centers with RFID,"​ Frost & Sullivan research analyst Shyam K.

Despite all the positive signs pointing to an increased uptake of RFID, the capital investment associated with setting up an RFID system in terms of hardware, software and numerous systemsintegration expenses is likely to pose a significant challenge, Shyam noted.

"The key to success in the retail RFID market depends on optimizing hardware, software and middleware roles and providing one-stop complete suites or solutions, which facilitate easyintegration across the three domains,"​ he said.

The high level of investment allows only the biggest retailers to implement the technology. The biggest retailers are defined as having revenues of $5 billion and above annually.

Retail chains such as Wal-Mart, Tesco, Metro, Target and Albertson's are among those testing the technology.

The pilot projects are already starting to show tangible benefits in Wal-Mart outlets in terms of reduced inventory and out-of-stock conditions and are encouraging other retailers to move forwardwith RFID plans, Frost & Sullivan stated.

As another sign of the technology's coming of age, Alien Technology last month announced it would cut the price of its on pitch labels to 12.9 US cents, while Avery Dennison cut the cost of itsinlays to 7.9 cents. Previously the best tag price was at about 15 cents each and required a large order.

EPCglobal, a non-profit organisation for industry users, last month certified new software and hardware standards for companies using Electronic Product Code (EPC) to track their productsthroughout their global supply chains.

The royalty-free standards developed by EPCglobal, which includes a new Generation 2 RFID standard, are the foundations in the continuing construction of a global supply chain information networkthat uses RFID.

"These new low prices may represent loss-leaders,"​ Michielsen stated. "But when you tie them to the new products and services offered by software companies to helpend-users make sense of their RFID data, and to the recent spate of EPC Gen 2 announcements, we may have a three-headed 'benevolent monster' that will promote demand."

The unified data system being developed by EPCglobal would allow changes in information about product sizes, weight, name, price, classification, transport requirements and volumes to beimmediately transmitted along the supply chain. For example it would allow shippers to immediately know if the amount of product stacked on a pallet had changed, or give a retailer time to adjustdisplay space.

Related topics Processing & packaging

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