Monday 28th Sep 2020 - Logistics & Supply Chain

RFID can be more than skin deep

‘I’ve got you under my skin,’ goes the lyric, but one young Canadian couple have given the idea abizarre reality by embedding radio frequency identification chips into their hands. The tags contain password data that enables the high tech lovers to open each others’ front doors and log on to each others’ PCs. All they have to do is swipe their wrists over a reader which picks up the information.

The chips are small enough to be embedded in a piece of glass and slipped under the skin with the help of a needle. The couple say the tags are an alternative to tattoos as a way of telling the world about their feelings for one another.

But their devotion to RFID technology is not shared by the more hard-headed business folk on this side of the Atlantic. Despite concerted efforts by suppliers and industry groups to persuade companies of the business benefits, many remain in need of further convincing.

A research study published by the advisory firm IDC at the beginning of this year reveals that that only around five per cent of western European manufacturers, distributors and retailers have either implemented or plan to implement RFID. Only a further 12 per cent of organisations that might be expected to deploy RFID have even reviewed the technology.

Counting the costs
Their biggest objection? Little prospect of a return on investment, say a third of the executives IDC polled. Suppliers are most likely to question the value of slapping tags on cases before shipping them out of the door. The sums do not add up for them, they say. The cost of tags has tumbled in recent years but other expenses now loom large.

The IT infrastructure to support RFID can be particularly costly. The volume of data that is generated, the complexity of device management, lack of standards, limited methods of interpreting the data and expensive integration with existing applications are all cited as stumbling blocks that make it difficult to realise the benefits.

To make matters worse there is a worldwide shortage of expertise. Pilot projects have come unstuck because consultants have oversold their ability to get to grips with the technology, with its  demands for knowledge of radio technology, data processing and integration techniques.

At first sight these difficulties are surprising given the enthusiasm with which RFID has been promoted as an alternative to bar coding and considering the clout of companies such as Walmart who have acted as cheer leaders for the technology.

But we should be careful about concluding that industry is turning its back on RFID just because the number of companies involved is low. At this stage it is not surprising that only the largest firms have the pockets deep enough to try tagging.

Manufacturing industry, which leads investment in RFID technology with a worldwide spend last year of some e950m according to Datamonitor, has made the most progress. Ford, for example, has taken the step of coordinating RFID trials at facilities around the world. In Europe, Cologne is typical of Ford plants that are using RFID. Tags are fixed to vehicles and gates at the end of the assembly line to monitor the progress of production.

Walmart, whose mandate to its largest suppliers pushed RFID into the limelight in 2005, has recently been extending its use of tags. The supermarket chain has insisted that a second group of 100 suppliers tag their goods and is beginning to move to second-generation technology.

The retailer’s 300 largest suppliers will all take part in the trial by January 2007 and the number of supermarkets receiving tagged goods will double during 2006 from 500 to 1,000. Walmart is deploying mobile RFID readers at the first 500 stores involved in the trial. Using a proprietary application, the devices will direct staff to boxes of products that need to be replenished.

So far, Walmart claims that it has cut the number of stockouts in stores with RFID by 16 per cent. The company is now pushing ahead with a system to automate the production of advance shipping notices by having them generated by tags on merchandise as it leaves warehouses.

RFID may not have got under the skin of European companies yet but it has certainly got many of them scratching. In the long run, most observers still believe, they will learn to love the technology.

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