Wal-Mart trial could push radio-frequency technology into mainstream
The Gillette Co. has ordered 500 million radio-frequency identification tags from Alien Technology Corp. to use in a number of trial programs, including one with retailer Wal-Mart Stores Inc. The purchase is the first major order of RFID chips based on technology developed by the Auto-ID Center at MIT that lets manufacturers produce these tags in quantity for as little as 5 cents each. The size of the deal could help propel the tags to mainstream commercial use.
Starting this month, Gillette will attach RFID tags to Mach 3 Turbo razor blades that ship to two Wal-Mart stores equipped with "smart shelves" capable of reading signals from the chips and tracking the merchandise's location. When supplies on store shelves run low, stock clerks are alerted to refill them; when stockroom shelves run low, the system orders more. The trial will run throughout the year.
"We want to make sure the shelf is always full," says Dick Cantwell, VP of global business management for Gillette. Cantwell also serves as chairman of the Auto-ID Center's board of overseers, of which Gillette is a founding sponsor. The Auto-ID Center helped invent the smart shelves and software used in the trial and is helping coordinate its execution.
RFID is one of the company's highest priorities, Cantwell says. "2003 will be a year of learning, testing, and piloting," he says. In another test, Gillette is planning to equip its two major packaging and distribution centers with RFID technology to internally track Venus women's razor blades as they move from packing to inventory, are assembled on pallets and verified, and then are put on trucks.
By year's end, Gillette aims to connect these warehouses and goods to all its retail partners, which it hopes will have RFID-enabled their receiving docks and distribution centers.
The company won't disclose how much it's spending in total on these efforts. Cantwell figures that by 2006, if the tests go well, Gillette will have installed RFID systems in most of its warehouses and more of its products and will be sharing data with suppliers. "In 10 years, RFID will be as ubiquitous as the bar code," he says.
But there are obstacles in the near term. Some analysts and vendors don't expect RFID tags to take off this year, partly because of the tough economic climate.
"Retailers are playing around with RFID in more of a pilot mind-set," says Duncan Angove, chief strategy officer at retail technology vendor Retek Inc. "RFID is a very niche area, and I can't see anyone in this economic climate putting RFID at the top of the IT list. We're in a very, very early market for RFID." Retek, for one, is focused on technologies that customers believe will offer a quicker return on investment, such as inventory management.
Still, Gillette's efforts will help make more widespread use of the technology a reality -- eventually. "RFID needed a break like this," says Deepak Shetty, a Frost and Sullivan analyst. Many businesses have been waiting for innovators such as Gillette and Wal-Mart to prove the technology works before adopting it themselves. "They're going to drag RFID to the mainstream," he says.
Still, companies will need to do their own research and not rely on Gillette's results. "What works for Gillette may not work for you," Shetty cautions. "You have to work out your own specific requirements."
Executives at Gillette remain confident. "We're just trying to learn," Cantwell says. "But we're optimistic enough that we feel it's only a matter of time. The technology will succeed."
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