Technology and business, the two have become inseparable. In this age of instant communications and 24/7 connectivity, no business can survive without a good dose of technology. It's no longer PCs but cell phones, inter and intranets, e-mail, computer viruses, databases, and information. The question we must ask: Is technology our trusty assistant or have we become its slave?

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Biography of Leona Seufert

Tag It - RFID, a New Way to Track Inventory

In today's economic climate and highly competitive markets, as a retailer you must search for new ways to cut costs and increase margins by keeping better track of inventory and enhancing services to your customers. RFID (Radio frequency identification) is a promising technology that could help you meet those goals.

RFID is not a new technology. It's been around since WWII where it was first used to identify ships as either friend or enemy. Over the decades its applications expanded as both miniaturization and computerization created smaller tags and a way to track data. Smaller tags and powerful database applications means that tagging ever smaller objects becomes a cost effective possibility.  As prices for the RFID tags themselves fall, more and more computer applications are also becoming available.

Retailing and RFID

With the ability to tag any inventory item and capture data about the location of pallets, cases, cartons, totes and individual products, RFID can be seen as an ideal way to manage the supply chain headache. Information uploaded in real-time and shared with your warehouse management, inventory management, financial and other computer systems can tell you where and when your merchandise is manufactured, picked, packed, and shipped.

Once in your warehouse, readers placed throughout the facility can pick up signals from the tags without the need for a human to use a scanner as is currently the case with barcodes. And as prices for the tags fall even further, it will become cost effective to tag on the item level allowing you to track directly at the customer and shelf level. You will never be overstocked or out of stock for any inventory item!

The challenges to make it work

RFID might seem like a retailer's dream come true. However, there are a number of challenges that must be overcome before this technology can replace our current barcode system. The challenges are both technical and attitudinal.

The first challenge is to your computer systems. They were not built with the capacity to handle the huge amount of data an RFID system can generate along with capturing and processing that data in real-time. Those mountains of data will also put a strain on current data storage capacities.

The second challenge is also a technical one. The radio waves by which the tags communicate are absorbed by liquids, and distorted by metals. That means certain items like soda cans can't be tagged. There is also a distance limitation for readers, currently at around 3 feet.

The fourth challenge is the cost of the tags. The dream of tagging every item can not become a reality until the price of tags drop down to around a nickel. Currently item level tagging is only viable for high-margin items such as expensive jewelry and electronics. It wouldn't be cost effective for, say, a pack of gum.

The fifth challenge is another technical one. Today most of your retail systems were written to hold the 11-digit UPC barcode information. The serial numbers encoded on RFID tags are composed of 13 digits. You will have to modify your computer systems to accommodate those 2 extra digits. If you are using a vendor's software package, you will have to either work with the vendor to create this "patch," wait until they release an upgraded version, or change vendors.

The last challenge is buying in to this new way of tracking. Your company will have to be able to see the benefits verses the hurdles, and your customers will have to be assured that this is not a "Big Brother" technology used by you to track their lives.

Privacy questions

Unlike barcodes, which are passive, RFID tags can transmit their data. A recent article in CIO magazine 12/1/03, The RFID Imperative, (sidebar Customers to Retailers: Take Us Seriously) addresses some of the privacy concerns that implementing this technology raises. In this article Katherine Albrecht, founder and director of Caspian (Consumers Against Supermarket Privacy Invasion and Numbering) states that since readers can be hidden and personal objects can be detected on a person without their knowledge, this would constitute an infringement on privacy. The article goes on to relate that 78 percent of the people polled by the Auto-ID Center at MIT agreed with Albrecht.

These concerns must be taken into account when considering implementing RFID. At present, item level tagging of personal items might not be cost effective plus read-range is still too limited. However, if you do not assure your customers that you will not invade their privacy, if these 78 percent gather together and lobby, you might have to deal with legislation in the future. The message Albrecht says is tread with caution. (Do not attempt what Metro AG undertook to do: tag razor blades then have a TV camera on the shelves that would snap a photo of a consumer and store it in a database each time he picked a pack of blades of the shelf. Germans might have accepted this practice, but the American consumer protest vehemently!)

Just another tool

Yes, RFID can improve supply chain efficiency and allow for just-in-time inventory. It can help you keep your shelves restocked and alert you to when you need to reorder. It can cut down on the labor intensive scanning that barcodes require. However, it is just a tool. It won't transform your company overnight.  

How much ROI you realize implementing RFID not only depends upon how you cope with the challenges but how your company integrates this new technology with its other business processes. If you train staff, encourage your people to experiment and find new ways to benefit from the technology, it can help you transform your company. It will take time and, like the PC, the advantages to using this tool will not be obvious immediately. RFID has the potential to provide intelligence to run your business in new ways. And if you do it right you'll be able to gain an advantage on your competitors who don't understand how this technology can revolutionize the retailing industry.

                (c)2004 Leona M Seufert

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