Marc Osofsky, Vice President of Marketing and Product Management, OATSystems, a leading supplier of RFID framework operating systems
The RFID supply chain market, for the most part, has moved past the science-experiment stage, and many companies are in active discovery mode of the business benefits of applying RFID to their supply chains. We're in a healthy period, focused on identifying the best applications of RFID technology and proving ROI.
The hype in the marketplace and the mandates by Wal-Mart, the Department of Defense and others have succeeded in reducing the cost of radio frequency tags and readers and in pushing through the Gen 2 standard very rapidly. Those have been important developments.
RFID adoption rates have been accelerated due to the mandates. Many companies that normally would be laggards in adopting a new technology are now being forced to be early adopters. Some of those would-be laggards continue to take a wait-and-see approach and implement only what they have to. But our experience is that the top 20-40 percent of RFID early adopters are moving aggressively to make use of the new data to fundamentally change the performance of key processes, and, by extension, the efficiency of their supply chains.
Consumer product companies, for example, are clearly leading, and we see a lot of interest in using RFID to enhance promotion execution and new product introduction. These are two areas that always attract a lot of investment by consumer product companies, and before RFID, there was no way to efficiently measure their execution. But now, the RFID technology and the systems that use the data provide an excellent foundation for applications that many thought were unreachable for years into the future.
We are also seeing a lot of supplier-retailer collaboration around RFID in these areas of promotion execution and new product introduction, as well as for automated receiving. Some of our consumer electronics customers are already having their suppliers tag component parts in consumer electronics and are tracking the movement of products from Asia to the United States now that many shipping and transportation companies are starting to offer RFID-enabled services. It's clear that the cross-enterprise, multi-echelon RFID supply chain market is emerging today where the business case for it is clear. Over the next several years it should grow dramatically.
Simon Langford
The largest benefit of RFID at Wal-Mart remains improving the in-stock availability of products and the efficiency with which we move the merchandise to the shelf.
A recent study from the University of Arkansas documented in great detail how our RFID systems and the electronic product code (EPC) data they use improved our in-stocks. Overall, total out-of-stocks in the 12 RFID test stores were reduced by 16 percent. And the items tagged with EPCs were replenished three times faster than comparable items using standard bar-code technology. That's an undeniable advantage.
We achieved these impressive results with our initial system enhancements that took advantage of the new data RFID readers collect, and we have many more refinements planned that will significantly improve our business.
We're planning software enhancements that will improve our ability to move and manage merchandise; and we'll see increased efficiencies from greater use of RFID readers. That means installing readers in more stores, and adding new processes or enhancing existing ones for using EPC data. For example, later this year we will be deploying hand-held RFID readers to help our associates locate products in the back rooms of our stores. We will also be enhancing software to better manage promotional merchandise.
Eventually, we believe RFID will improve all parts of our supply chain. Today, our suppliers have visibility into all RFID-read data for their products. We show suppliers every read as a case passes a read point. This happens with-in 30 minutes. Through our online communications system, suppliers have visibility not only into RFID data but also into many other data points and information—such as sales and inventory data at each store—about their products. Many are using the data, but in different ways, depending on the business problem they are trying to solve or the visibility they desire.
Over time, we believe the avail-ability of these data and the visibility across the supply chain will yield significant benefits for our suppliers, ourselves and, more importantly, our customers. That's why Wal-Mart remains firmly committed to the continued roll-out and enhancement of our RFID systems and the supply chain management decision processes they enable. We recognize, however, that to achieve improvements in some areas, we'll need to reach a critical mass of tagged product flowing though the system. That will take time.
John Cummings, Chief Marketing Officer, i2 Technologies, Inc.
What RFID will do, and is doing in certain sectors, is create the data-rich supply chain (see cover story, page 10). Today we're operating at the SKU-quantity level—we have 100 of an item on a pallet. That's how software views the world. But with RFID, we can see and capture data on each individual item, and even the components of that item.
So the richness of the data is important for tracking and documenting the history and movement of a specific component. That's how aerospace and defense companies operate—they have to know everything about every part in their products. Today, no other industries need to do that in their supply chains, but that is changing.
In Europe, for example, we're seeing legislation that will mandate the "field-to-plate" standard for the food supply chain. Companies will have to be able to trace every piece of food people eat to the factory, farm, and even the specific animal that it came from. In the high-tech industry, environmental regulations will have a similar impact for companies that will need to trace and document the source and ultimate destination of all of the components of their products. RFID is the perfect vehicle to handle those mandates.
Right now, the biggest investment in RFID is in the consumer products industry. It has been a labor play, because with RFID, as opposed to barcode scanning, you don't have to actually touch or see each case or pallet of merchandise. So it's saving labor costs. And of course Wal-Mart is seeing significant gains in reducing out-of-stocks by using RFID readers in their stores and their distribution centers to manage inventory.
Other retailers are following that lead. Instead of relying on point-of-sale data, RFID gives these companies visibility from the shelf to their distribution center, even back to some suppliers, so they can better manage their inventory and their in-transit merchandise.
At i2 we see the opportunity to develop applications that help companies aggregate that data and improve their supply chains. That's an area we're working on today. The future aspects of RFID extend further, across companies, back through the tiers of suppliers, giving everyone full visibility into the entire chain.
Opinion interviews were conducted by Michael Cohen, a contributing writer to Supply Chain Leader. If you would like to add your comments to this discussion, please send them to supply_chain_leader@i2.com.
