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Frankly Speaking: Don't Pay Attention to Computerworld
5 CommentsThe radio frequency identification industry has not done a good job of explaining the Electronic Product Code (EPC) standards being adopted by some companies, such as Wal-Mart in the United States and Metro Group in Germany. But that doesn't really excuse the terrible misinformation put out today by Computerworld.
An article by Frank Hayes, entitled "Frankly Speaking: Why Wal-Mart's RFID push is failing," argues that most Sam's Club suppliers will pay the $2 per-pallet charge for non-compliance rather than adopt RFID because "RFID tags may be standardized, but that's not true of the software that supports using them for warehousing and inventory management. That software may nominally meet formal standards, but it won't interoperate with any competitor's software."
Hayes goes on to write: "So when a big customer like Wal-Mart goes with Vendor X's system, all of Wal-Mart's suppliers have to buy software from Vendor X too. They can't buy from another vendor or roll their own, because it must be certified by Vendor X before it can talk to Wal-Mart's software. The suppliers are a captive market. And when Target goes with Vendor Y, and Sears goes with Vendor Z, the number of RFID systems required for captive suppliers just keeps going up—at monopoly prices. No wonder $2 a pallet sounds like a bargain."
I'm going to ignore the erroneous assumption about Wal-Mart's efforts failing and get to the meat of his argument, which is completely wrong. If a retailer opts to become an EPCglobal subscriber and use EPC standards, then data is shared in a standardized XML format. If the supplier sets up an EPC Information Service (EPCIS) database, all EPC information related to that supplier's products sent back by Wal-Mart can go into the EPCIS and be used by promotions management, replenishment, electronic proof of delivery and other software applications from companies such as OATSystems and Retail Solutions.
Moreover, it's not that difficult to integrate EPCIS data into existing enterprise applications from SAP, Oracle and other major software companies because the data is in XML, which is already widely used. And middleware from such companies as Microsoft and GlobeRanger enables companies to take that XML data and distribute it to existing applications or new applications. SAP also has a middleware product called Auto ID Infrastructure (AII), that will distribute data to SAP enterprise applications.
In fact, the biggest argument in favor of using EPC technology is not the standardization of the tags, but rather the standardization of the data. Today, retailers share point-of-sale (POS) data with suppliers in proprietary formats and over a variety of networks (EDI, AS2 and so forth). So suppliers getting POS data back from partners have a difficult time analyzing the information across all of their customers, and most don't bother because it's too much work.
EPC enables retailers to share far more than just POS data—Wal-Mart already shares information with partners regarding where tagged goods are in its supply chain—and promises to provide it in a standardized format for all retailers that adopt EPC standards. That means a supplier to Wal-Mart, Target, Albertson's and Sears can put all of the information into one EPCIS database or linked databases, analyze it and produce what's needed based on a holistic view of demand across all their retail customers.
Data standardization will make adoption of EPC technologies attractive to suppliers if more retailers jump on board. It's also worth pointing out that Sam's Club is charging $2 per pallet, but is quickly moving to case-level adoption. The company has not yet indicated how much it might charge if companies don't tag cases, but even if it's 25 cents, that would make it highly uneconomical to resist tagging.
An article by Frank Hayes, entitled "Frankly Speaking: Why Wal-Mart's RFID push is failing," argues that most Sam's Club suppliers will pay the $2 per-pallet charge for non-compliance rather than adopt RFID because "RFID tags may be standardized, but that's not true of the software that supports using them for warehousing and inventory management. That software may nominally meet formal standards, but it won't interoperate with any competitor's software."
Hayes goes on to write: "So when a big customer like Wal-Mart goes with Vendor X's system, all of Wal-Mart's suppliers have to buy software from Vendor X too. They can't buy from another vendor or roll their own, because it must be certified by Vendor X before it can talk to Wal-Mart's software. The suppliers are a captive market. And when Target goes with Vendor Y, and Sears goes with Vendor Z, the number of RFID systems required for captive suppliers just keeps going up—at monopoly prices. No wonder $2 a pallet sounds like a bargain."
I'm going to ignore the erroneous assumption about Wal-Mart's efforts failing and get to the meat of his argument, which is completely wrong. If a retailer opts to become an EPCglobal subscriber and use EPC standards, then data is shared in a standardized XML format. If the supplier sets up an EPC Information Service (EPCIS) database, all EPC information related to that supplier's products sent back by Wal-Mart can go into the EPCIS and be used by promotions management, replenishment, electronic proof of delivery and other software applications from companies such as OATSystems and Retail Solutions.
Moreover, it's not that difficult to integrate EPCIS data into existing enterprise applications from SAP, Oracle and other major software companies because the data is in XML, which is already widely used. And middleware from such companies as Microsoft and GlobeRanger enables companies to take that XML data and distribute it to existing applications or new applications. SAP also has a middleware product called Auto ID Infrastructure (AII), that will distribute data to SAP enterprise applications.
In fact, the biggest argument in favor of using EPC technology is not the standardization of the tags, but rather the standardization of the data. Today, retailers share point-of-sale (POS) data with suppliers in proprietary formats and over a variety of networks (EDI, AS2 and so forth). So suppliers getting POS data back from partners have a difficult time analyzing the information across all of their customers, and most don't bother because it's too much work.
Data standardization will make adoption of EPC technologies attractive to suppliers if more retailers jump on board. It's also worth pointing out that Sam's Club is charging $2 per pallet, but is quickly moving to case-level adoption. The company has not yet indicated how much it might charge if companies don't tag cases, but even if it's 25 cents, that would make it highly uneconomical to resist tagging.
READERS' COMMENTS
yes .. almost
I was right with you until your POS/EDI paragraph. Just as Frank was wrong, not only about RFID, but about standards based EDI, yes even 20 years ago, when he mentioned lack of interoperability, you are misleading in your "biggest argument" for EPC. Most retailers are exchanging POS data in EDI standard format, not proprietary, and what network or communications method they use is irrelevant as long as the data gets there (neither EDI nor AS2 is a network). For both of you, your points would be made even stronger if you stuck to what you know.
Posted By: Ken 6/3/08 at 4:28 PM
What is the role of ISO and EPCGlobal
If International bodies are there to monitor the system then why should there be problem within vendors. They are supposed to make a similar platform to support within different vendors. So what is actually the role of ISO and EPC?
Posted By: Arif 6/3/08 at 10:01 PM
Thinking twice
Ken, Thanks for your post. I based my comment on an AMR study done a couple of years ago which said that only 4% of CPG manufacturers were using POS data to forecast demand because data was being provided in a variety of proprietary formats and through different delivery mechanisms -- ie., AS2, EDI and extranets such as Retail Link and partners online. Perhaps my recall is bad or I misunderstood the original study. Either way, I apologize for the misleading info. The real benefit of the EPC standard is that it provides context around the tag reads done in the supply chain. So software from any vendor that can use XML data could let you know that your product has arrived at the back of a retail store or has been moved to the sales floor and so on. This visibility allows CPG companies to know, for instance, that promotional displays have not been put out on the floor on time. They have a level of visibility that has never been possible before. And that can increase their sales.
Posted By: Mark Roberti 6/5/08 at 1:07 PM
yes .. and then some
Data *exchange* isn't even the issue. EDI is a standard designed for exchange between two previously defined partners. What Roberti is talking about is universal data *access*. We're looking at a future, for example, in which your company could invite any of a range of approved suppliers to *bid* on replenishing your shelves *in real-time*. Try that with EDI. (We recently abandoned EDI with our biggest suppliers, in favor of a home-brewed solution that didn't involve the additional expense of a third-party EDI provider.)
Posted By: Jason 6/5/08 at 1:45 PM
Ahh but it's all about the data...
To the utilization of POS point, if you were to contact 100% of the manufacturer's that are selling to large retailers like Target, Wal*Mart, Best Buy, Sears and others most (over 90% according to published reports) will tell you they do not rely on POS data to actually run the business. They utilize their own in-house data marts and historical forecasting systems coupled with rear view mirror analysis (what happened a year ago, quarter ago, month ago etc..) to actually drive the business. The reason they don't rely on POS data is because it is inherently fraught with errors, latency and inaccuracy. So while many retailers provide POS data to the manufacturer's very few actually do anything with it of substance. Wal*Mart has probably the most sophisticated POS system in the world with Retail Link and it is good and reasonably timely. But there are still huge improvements to be gained through better access to information. What manufacturer's and retailers need is real time access to data to drive the business. RFID sensing technology can help facilitate that process but it's the integration of real-time data coming off the store shelf for item level tagged product feeding a consumer driven demand planning system that is the Holy Grail. When manufacturers and a retailers begin to work collaboratively together to share mutual data sets on what is transpiring then and only then will they realize the huge economical ROI's they are all seeking from RFID. The ROI money is in the data coming out of the store and the companies that partner and work towards getting at that rich gold mine of information to take Actionable Intelligence will win handsomely.
Posted By: Bill 6/5/08 at 1:56 PM