Australia's Woolworths Supermarket Chain Studies RFID

According to Ellison, the retailer constantly evaluates the viability and cost of utilizing radio frequency identification. "We have seen a number of benefits, but there are also several challenges to using RFID in the food retail business," he says. "We operate in a harsh environment, with high levels of water and metal—which can interfere with RFID—and temperature-sensitive areas. The current economic viability is also a challenge, with the overall cost of the solution—including tags, casings and infrastructure—still quite high. The overall cost for a company the size of Woolworths is still too high, and the return on investment for track and trace is just not enough for us to race ahead."

The Australian market in RFID systems and integration is also in its infancy, Ellison notes. "When the market does mature and provides a more robust solution to meets our business need," he states, "then we will see if track and trace can fit into the business. For now, we are keeping a watching brief on the technology, and will see if the costs come down."

Ellison is more upbeat about the potential for RFID in temperature control to reduce spoilage and stock wastage, stating, "We are looking to take RFID for temperature control to the next stage, and test it across a larger supply chain to see if we can produce the same benefits. We hope to expand on the pilot in the next quarter. We will also look at other areas where RFID could have an application, but these are in their infancy."

If Woolworths does roll out RFID across its business, it will be the first major Australian retailer to do so, despite the success of trials at such international retailers as Wal-Mart in the United States, Tesco in the United Kingdom and Metro in Germany. The overall cost of RFID infrastructure has been a significant factor in the slow take-up of RFID in Australian retail stores, according to Chris Kelley, director of RFID at Intermec.

"The price of tags is coming down, but for a retailer, it is the overall cost of the RFID infrastructure that is proving a problem," Kelley explains. "The best chance of achieving a good return on investment is from a closed-loop application, where the project is under their complete control. Many companies have hyped RFID tracking involving the entire supply chain, but this involves too many players. Closed-loop RFID, such as the movement of pallets, bins and containers from distribution centers to the stores, has more immediate benefits."

Once a retailer experiences the benefits of RFID tracking, Kelley says, it will be easier to expand the technology to its partners in the supply chain.