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Clearing RFID's Hurdles

Research firm IDC cautions there is no simple path to RFID adoption and suggests ways to map out deployment across the supply chain.
By Bob Violino
Nov 21, 2003As interest in RFID for the retail supply chain increases, potential buyers of the technology need to determine the ways RFID will change their business processes and be wary of the technology’s limitations, says Christopher Boone, program manager for U.S. vertical industry research at IDC, a research firm. Boone examines the current state of RFID technology for the retail supply chain in a new report, The RFID Ecosystem for the Retail Supply Chain.
IDC's Boone

“Today, RFID technology for the retail supply chain has technical limitations: interference, sub-100% read rates of cases on pallets, and tag placement problems,” says Boone. “The only way to know for sure if RFID will work on cases and pallets within an end user’s warehouse, plant or retail backroom is to test the technology in a specific warehouse, plant or retail backroom to uncover the limitations and design creative solutions,” he says. While vendor-sponsored testing centers might be good in theory, Boone says, they do not mimic the real-world environment where RFID will be deployed.

Although RFID promises to help companies reduce shrinkage, inventories and the risk of running out of stock on specific products, the technology is “far removed” from delivering on those benefits, the report says. For example, RFID deployers must first determine the best tag antenna type for each specific product and the optimal tag placement on or within a case, in addition to dealing with the costs of tags, readers, associated infrastructure, and the application integration work that needs to occur.

For now, much of the retail supply chain is focusing on what IDC says is the first of three layers within an RFID ecosystem: the RFID layer. That layer includes tags, readers, middleware and servers. End users are currently in the process of testing the RFID technology, establishing standards, analyzing deployment costs and identifying best practices for deployment. Once RFID data is made available from tagged pallets and cases, companies need to move to the enterprise application and system infrastructure layer of the equation. It is here that companies need to leverage existing application and infrastructure to access and use the RFID data. The third layer, the business process layer, is perhaps one of the most pertinent yet overlooked layers in the RFID ecosystem. That layer consists of things such as inventory management, sales and marketing, and customer service.

“Wal-Mart’s mandate notwithstanding, each end user—particularly Wal-Mart’s suppliers—needs to analyze its business processes to determine how access to real-time supply chain data would impact these processes,” says Boone. Changes to business processes to take advantage of data from RFID-tagged products should dictate which enterprise applications will need to be modified, and how the RFID layer will be designed and deployed. The real danger is that companies may become focused on deploying RFID technology without first looking at how the technology would fit in with and change existing business processes and what benefits it would actually provide.

“Today, it seems like the RFID layer is driving the business decisions, and this is backward,” says Boone.

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