Among the more interesting of the numerous analysts’ and consultants’ reports on RFID clogging my email box in recent weeks is a slim tome from Gartner G2 reviewing the impact of the current spate of high-profile projects.
It highlights some of the benefits so far experienced by Wal-Mart, which now has three Texas distribution centres shipping tagged cartons to more than 100 stores. The scheme, despite teething troubles, seems to be going well with quantifiable improvements in on-shelf availability and better stock management. But, as John Davison vp and research director for retail at Gartner G2 and co-author of the report, points out, the greatest benefit has been in process redesign: ‘We’re learning that if companies think RFID will solve a business problem, by reexamining the processes they may well find there is a faster and easier way of identifying the solution,’ he says.
At Wal-Mart one of the most significant causes for ‘losing’ stock in the back room – or in those parking lots full of containers that in the US frequently serve as stock rooms – was a lack of communication between day and night replenishment teams. The night shift would carefully put the goods away but would then fail to tell the incoming team where the goods were. The result was the product never hit the shelves and would simply be reordered by the day shift, which believed it was out of stock.
With RFID readers it is, of course, easy to pick up the presence of particular SKUs within a given location so the old excuse of being unable to find the merchandise in the back room no longer holds.
AMR Research makes a similar point: ‘RFID is leading to back room re-engineering,’ says Scott Langdoc, vp research for retail. ‘Wal-Mart has already made changes to its ordering system as it can now detect back office stocks with RFID and prevent store managers reordering merchandise that is already there.’
Davison believes early RFID pioneers who have been able to improve processes in this way have an effective two-year lead over their competitors when it comes to adopting innovative processes that will drive future efficiency and profitability.
Seeing RFID as a driver for process change leads to a chicken and egg debate over whether the weak process would have been identified without RFID or if RFID is essential to highlight the problem. Others prefer to talk in terms of the Hawthorne Effect whereby workers improve productivity whatever new management technique is tested, simply because focussing attention on an activity brings about change.
Whatever the reason, RFID is starting to show benefits in unexpected areas which – perhaps rather like SMS text messaging – will lead to new and unexpected uses in future. And RFID is just the start. AMR already prefers to talk of ‘sensor technologies’ as a generic term for a raft of related, rather mind-blowing concepts. Into this category comes ‘smart dust’ – tiny wireless micro-electromechanical sensors (MEMS) that can detect everything from light to vibrations. These tiny grains can gather data, run computations and communicate information using RF technology across distances of around 300m. Like RFID, smart dust has been expensive but prices are falling and commercial applications, argue enthusiasts, are coming close to reality.
Sprinkling a little smart dust on supermarket shelves could monitor when goods are removed to improve replenishment or monitor footfall in stores to identify traffic flows in real time and trigger promotional and signage changes to bring shoppers into dead areas. Or perhaps we could scatter smart dust on our household valuables – or ageing relatives – so that any movement would trigger a call.
Certainly smart dust starts to make the privacy concerns of bodies like Caspian (Consumers Against Supermarket Privacy Invasion and Numbering) appear slightly less irrational, even if the idea of such intelligent dust seems to belong more in the novels of Philip Pullman than the pages of Logistics Europe.
RFID, however, is a reality – as is process change. Some 50 per cent of retailers surveyed by Gartner in the US, Canada, UK, Germany and France identified process change in the supply chain as either a ‘large’ or ‘very large’ motivator for investing in RFID over the next few years.