Wal-Mart put a date on RFID implementation: January 2005. Will suppliers and the technology be ready?
It's time to stop thinking of radio-frequency identification technology as an experiment.
Wal-Mart Stores Inc. last week circled a date for when RFID, an emerging technology with great promise to improve supply-chain efficiency, needs to be ready for its real-world use. By January 2005, Wal-Mart will require 100 key suppliers to work with the retailer using RFID to track pallets of goods through its supply chain. But while there's now a deadline to work toward, shortcomings in the performance and cost of RFID chips and reader technology that Wal-Mart and its suppliers use still must be resolved.
Wal-Mart CIO Linda Dillman sketched out a time line for the project: Define the scope of the pallet initiative this quarter, have detailed specifications in the third or fourth quarter, test RFID through 2004, and go live with 100 suppliers in 2005. "At some point, like any other technology, like EDI, it'll be a requirement for doing business with Wal-Mart," Dillman told business-technology executives last week at the Retail Systems Conference in Chicago.
Dillman made it clear that Wal-Mart considers this much more than a company-specific effort and urged all retailers and suppliers to embrace RFID and related standards. Wal-Mart's CIO shared the stage with Mike DiYeso, chief operating officer of the Uniform Code Council Inc., which popularized the now-ubiquitous universal product code that's been used in bar codes for 30 years. UCC, with broad industry support, has settled on a numeric code, called the electronic product code, or EPC, as the standard to transmit retail data via RFID, much like UPC does with bar codes, DiYeso said.
The combination of clear data standards, improving technology, and industry support means companies need to develop road maps to research, test, and implement the technology in their supply chains--and soon. "A lot of companies have waited for the right time to be involved. Now is the time," DiYeso said. "It's not too late. A year from now is too late."
RFID involves a chip with an antenna that, when activated by a reader, can send or receive information. It has several advantages over bar codes, foremost that it can be read without a line of sight to an item, making it much easier to get automated reads and to do so in large quantities instead of one by one. Placing a reader at the entrance to a distribution center, a stockroom, or even a trash compactor will make tracking goods easier and more automated.
Procter & Gamble Co. has been experimenting for more than six months with RFID, running tests with Ahold USA, Target, Wal-Mart, and European retailer Metro. P&G CIO Steve David says Wal-Mart's deadline will speed adoption. "If we use bar coding as an example, it took 15 years from the time it was started before it was widely used," David says.
Technology suppliers must help make RFID deployable, Wal-Mart CIO Dillman said.
Will P&G make the deadline? Probably, David says. The biggest challenge is the cost of RFID tags. Dillman puts the cost at 30 cents each today, and David hopes that will fall to 5 cents or less in the next couple of years. UCC, European standards body EAN International, and the nonprofit AutoID Center are working together on standards and protocols around the electronic product code that should help drive the cost of the chips down, David says.
Investing in RFID tags and associated technology will only make sense if they let P&G get better information back from retail customers about product demand, allowing the company to lower inventories and ship the right products. "The ultimate [goal] is having better visibility of supply-chain demand that's coming from consumers," David says.
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