Put it to the test

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Open any publication involved in the supply chain and it quickly becomes clear that the interest and excitement around RFID continues apace. Wal-Mart, Tesco and UPS for example are extending their RFID technology trials, EPC Global has announced the ratification of second generation RFID standards and leading exponents such as Oracle are certain that “RFID is set to replace traditional barcode technology”.

Scratch below the surface, however, and in terms of technology development, the establishment of universally accepted standards and, not least, the contentious debate over who will pay, speed of implementation has fallen well behind the aspirations of its leading proponents.

As a result, for major retailers originally looking at mandatory implementation among their leading suppliers as early as Spring 2005, timescales have slipped and implementation encouraged rather than forced.

Having said all that, successful implementations are already underway – a leading example being Marks & Spencer (M&S) food trays. Critically, this is a ‘closed loop’ system where one company controls the complete supply chain and so drawn-out arguments over standards and cost allocation are circumvented.

And it is clearly working: having established the business case, M&S is now trialling RFID technology and implementation in its broader garment business.

When adopting an RFID strategy there are a number of key issues which need to be considered. These issues are all underpinned by a common, simple principle – companies must establish a set of clear objectives in the first place.

Work with suppliers on any RFID implementation as any attempt to undertake this unilaterally will almost certainly be doomed to failure. A collaborative approach is needed to ensure that all parts of the solution work together, and adhere to common standards. Without effective interoperability, the project will simply fail to get off the ground.

As indicated earlier, companies should not assume from all the media ‘noise’ that RFID must be right for all businesses in all environments. It is likely to work best, for example, where products of high unit value or volume throughput are involved. Similarly, it may offer significant gains where there are multiple steps within a ‘closed loop’ distribution system where the product is always under the control of a single business, such as in retail.

Careful choice of technology partner is critical. In taking the à la carte route – buying individual components from different suppliers – a retailer will have to solve all the problems of integrating and interfacing components (including scanners and tags), systems and processes. A better option therefore may be to work with a single third party who can provide a complete package, and so assume responsibility for all integration issues.

Cost reduction

Make sure the proposed RFID solution is right for your company. This means running a test or pilot to ensure the technology is robust, reliable and suitable for your needs. Further, it should take place real-time in a live environment, running in parallel with existing systems. A full assessment should then be made prior to roll-out.

If the primary goal is cost reduction, make sure that the costs to be targeted are clearly identified. This may, for example, centre on cutting expenditure scanning, as the time taken to scan with barcodes is much longer than using RFID technology. Savings will be significant if products have to be scanned four or five times throughout the distribution process, but far less so if scanning only takes place once.

At the same time, consider the full logistics costs associated with any RFID implementation. In addition to the direct cost of the tag, for example, include the actual processing cost of moving the item through your supply chain.

If shrinkage is the target however, customers and staff alike may well see ‘Big Brother’ here, with consequent concerns over invasion of privacy and civil liberties. Public perception is critical. Companies should not hide or disguise the project but be very open and highly visible about what it is doing. Marks & Spencer has provided a good example of how to overcome any potential PR problems by making the tags highly visible and publicising the trial as a test of its stock management systems.

Again, it is essential to be clear as to what needs to be achieved. Tracking electrical products at unit level, for example, may be important for potential warranty claims, batch control or quality control and RFID is well suited to this. Yet without such a specific driver, using RFID as a tracking technology may not in itself provide any measurable benefits over barcoding.

It will depend on the nature of the product as to whether a company chooses to track at pallet, carton or item level. For high volume, low value items such as tins of baked beans, tracking at pallet level is likely to be sufficient; for single, high value products such as DVD players tracking at item level may be more appropriate.

Companies should take a scientific approach to the testing procedures – they should be clear what they are testing for and understand what outcomes will indicate a positive or negative result. The test should be done in a way which does not disrupt the day-to-day running of the core business. This may well work best using a third party.

If a market-leading competitor is already underway with RFID, it may be advantageous to adopt similar or identical technologies. This has the related benefits that your suppliers will already be using it and you can leverage the market leader’s involvement to advantage. And there is a sting in the tail: if you do not, you may get left behind just as if you did nothing.

RFID may become almost as ubiquitous as the barcode. All of this points to the need to check out the concept before making a full-blown investment.

At Amethyst, we have been working with Hitachi on the development of just such a test bed.

There are several competing issues around the establishment of common standards, the cost of tagging, scanners and so on. Unless a company has significant in-house expertise, it should consider partnering with a specialist third party in order to avoid what could be very costly mistakes. n

Peter Hughes is business development manager with the Amethyst Group.
Tel: 01892 512609.

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