Beyond the Basics

By Tatsuya Inaba

May 18, 2009—An RFID system is often described as an infrastructure of a company's information systems. Yet many RFID applications have two primary objectives: to improve both the accuracy and the efficiency of business processes. While these are worthwhile goals, if an RFID system really is an infrastructure, it shouldn't be limited to these specific objectives. At the Auto-ID Lab Japan, we believe that if an RFID system is designed to accommodate more innovative RFID applications, a company will realize more benefits from the system and a faster return on investment—and that, in turn, will accelerate RFID adoption.

To evaluate our proposal, we developed an RFID application to integrate supply-chain management (SCM) and customer-relationship management (CRM) information. The challenge that retailers face is not only to improve efficiency in inventory management through SCM, but also to gain loyal customers through CRM. To have a good relationship with loyal customers, retailers need to send them direct mailings and coupons, which, of course, costs money. At the same time, retailers must manage store inventory and sales by removing unpopular items and displaying discounted items, which also costs money.


These costs could be merged—and reduced—if retailers implemented an RFID system in both inventory management and store floor operation, which could include smart shelf technology. The SCM-CRM application would afford real-time visibility of inventory levels and identify customers who agreed to participate in loyalty programs. That would enable retailers to compute discount prices to adjust inventory levels and provide the discounted prices selectively to customers based on their loyalty status.

Several issues still need to be worked out, such as how to identify loyal customers while they're shopping, and whether it's legal to charge customers different prices for the same goods. But using a simulation of a hypothetical scenario, we evaluated the benefits of the SCM-CRM application and showed that it has several merits, including increased sales and better inventory control. That's because this is what we call a high-controllability application in that it enables retailers to take appropriate actions, such as adjusting unit sale prices, based on improved supply-chain visibility.

We are continuing to research innovative RFID applications—in particular, one that would enable fine-granularity management. With an RFID infrastructure, fine granularity can operate simultaneously on four levels: what, when, where and who. For "what," we can manage goods at the item level, instead of at the SKU or lot level. For "when," we can get information in real time, rather than monthly, weekly or daily. "Where" would entail more precise locating. And "who" would track and identify which individuals touch or move items more efficiently than with, say, a bar-code system. We believe this holistic approach could have an enormous impact on businesses in many industries.

Tatsuya Inaba is a researcher at the Auto-ID Lab Japan at Keio University and a research associate in the university's Graduate School of Media and Governance.