RFID Chips Put To The Test

Procter & Gamble Co. and a large clothing retailer are testing radio-frequency identification devices to replace bar codes for tracking goods through the supply chain and onto the store shelf. P&G plans to put RFID chips on one product category in a couple of stores to assess the technology and return on investment, says director of business-to-business supply-chain innovation Larry Kellam.

The sound waves on the chips can be scanned through a carton, so the entire box can be inventoried in the same 40 seconds it takes to scan a single bar-coded item. Kellam is bullish on the technology: "It's only a matter of time and cheap devices," he says. Then he must figure out what to do with all the information generated from an RFID supply chain.

A well-known clothing retailer that wishes to remain anonymous because it views its RFID test as a competitive advantage calls RFID one of the three top technologies it's assessing for next year. The chain "believes RFID delivers the ability to bring the right product at the right time to the right location and will increase our revenue," says a company IT executive.

The retailer started testing RFID devices in the first quarter by wiring its supply chain with antennae that "hear" the emissions from the clothes passing through receiving, shipping, and the stores. RFID tracked goods at 99.8% accuracy--better than other technologies for real-time inventory and pinpointing where shrinkage occurs in the chain, the executive says. RFID also can automatically find an item in the back of the store when it's not on the shelf. The retailer's flagship store will have a half-million goods piled up in boxes during the holiday shopping season, making it difficult to find a specific item in inventory.

The retailer hopes to push RFID device prices down to 10 cents (from 25 cents to 75 cents) by ordering as many as 3 billion a year. But "we're not going to wait for the price to come down," the IT exec says. He's building a business case to present to the board of directors in August. "My vision is to put an RFID device into every garment, every single unit, from production to the point of sale."