IT World Canada Gets It Wrong

An article suggesting that Wal-Mart will pull the plug on its RFID effort—and that food suppliers and retailers will never achieve a return on investment—is highly misleading.
Published: November 2, 2009

I received an e-mail the other day from someone who had read an article entitled “RFID’s Uncertain Future” in IT World Canada, which bills itself as “the online information resource of choice for Canadian IT professionals.” Based on this article, I’d say IT pros in Canada should look elsewhere for information.

The article reports the results of a pilot run by a coalition of Canadian food manufacturers and grocery associations in a negative way. It also claims Simon Ellis, the practice director for supply chain strategies at research firm Manufacturing Insights, a division of IDC, “believes that though not yet announced, it’s almost inevitable Wal-Mart will wind its RFID project down.”

While I hate having to respond to every misinformed article published about RFID, I think it’s important to put the record straight. I speak to Wal-Mart representatives occasionally, and to its suppliers and technology providers frequently, and I’m not aware of any signs that Wal-Mart is about to pull the plug on its RFID efforts, even if it has been less vocal about its efforts of late.

In fact, just last week, during the retailer’s annual meeting for the investment community, Deborah Weinswig, an analyst for Citigroup, asked Wal-Mart’s senior executives which technologies would have the biggest impact on the company over the next five years. Wal-Mart’s CIO, Rollin Ford, answered: “As far as technology is concerned, we still like the EPC. We’re still bullish on EPC, but in the past what we’ve done is, we’ve tried to make it about the technology, versus making it about the business strategy. And so, that’s what we’re doing at this time [making it about the business strategy].”

EPC, of course, is the Electronic Product Code, an RFID standard created by EPCglobal.

I called Simon Ellis, whom I’ve known since he was in charge of Unilever‘s RFID effort, to determine if he had some inside knowledge that Wal-Mart wasn’t sharing. He said he did not, and that what he was trying to convey to IT World Canada was that some reevaluation of the technology is taking place within Wal-Mart, and that it might deemphasize RFID in favor of other initiatives.

Ellis is quoted in the article as saying: “I just don’t think [RFID] is appropriate for item tracking. It is overkill.” I asked him about this, because it’s pretty clear that tracking apparel and other high-value items at the item level can deliver a return on investment. He agreed that this was true, and said he was referring specifically to low-cost consumer packaged goods. Fair enough—but when discussing the benefits of new technology, subtle details like that can mean a lot. If an apparel retailer reads the original article and concludes RFID is overkill, then IT World Canada has done a grave disservice to its readers.

As for the food-tracking pilot, the author writes: “According to a report filed after the pilot, the results … showed that for many product categories and packaging types, further RFID read-rate improvements are still required before there is rationale for adoption.”

The reporter neglects to point out, however, that the pilot was concluded two years ago, and that there has been a great deal of improvement in performance of ultrahigh-frequency (UHF) RFID systems since then. He also does not report that the pilot showed retailers and suppliers could achieve a return on investment from reducing out-of-stocks and improving promotions management (see Canadian Grocery Pilot Finds ROI in RFID).

I would agree with Ellis that tagging low-value items is unlikely to deliver an ROI today, and might never do so. And it might well be true that Wal-Mart is reevaluating how and where to employ EPC RFID technologies. But the dire picture of RFID’s future painted by IT World Canada bears little resemblance to the actual facts.

Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark’s opinions, visit the RFID Journal Blog or click here.