Wal-Mart Mandates 
Radio Frequency Identification (RFID) 
by 2005 

DEMIR BARLAS / Line56 4jun03

[Background]

Radio frequency identification goes mainstream as world's largest company directs top 100 suppliers to use RFID by January 1, 2005

Radio frequency identification (RFID) technology will be receiving an enormous boost from retail giant Wal-Mart at next week's Retail Systems event in Chicago. According to Pete Abell, a research director at AMR research, Wal-Mart's session (entitled, "Forecast How RFID Will Impact Retail," and co-presented with the Uniform Code Council) will see the world's largest company direct its top 100 retailers to have all their cases and pallets "chipped" by January 1, 2005.

Debra Faragher, VP of marketing and communications, says that UCC EVP and COO Mike DiYeso and Wal-Mart SVP and CIO Linda Dillman "plan on a presentation that reflects an industry initiative, not just a Wal-Mart or a UCC initiative." As such, the two organizations are definitely taking a leadership role.

Wal-Mart's mandate, along with the adoption of an RFID standard led by EAN-UCC, means the mainstreaming of RFID. "The top 100 Wal-Mart suppliers will use something like 8 billion tags a year," Abell says, indirectly highlighting the vendor opportunity. Indeed, two vendors -- Manhattan Associates, a supply chain execution (SCE) specialist and Alien Technologies, best known for its deal with Gillette -- have already decided to announce a packaged RFID solution targeted at Wal-Mart suppliers, among others.

Abell explains how the mandate will impact the operations of Wal-Mart suppliers. "If I'm Smucker's and I put 16 jars of jam into a case, I have to have a reader-writer that writes to the tag, saying it's Smucker's, and adds a serial number. I have to integrate that into my software and material handling." Another aspect of the RFID initiative -- tags for cases -- will largely be taken care of "By corrugated guys like Georgia-Pacific and Weyerhauser," Abell says.

Abell adds that Wal-Mart is already working with several suppliers in the context of the Auto-ID Center, and that this will make the transition easier. He concludes that Wal-Mart is deeply committed to the initiative. "They're doing this the way they did barcodes."

Analyst Gene Alvarez of META Group is careful to explain that Wal-Mart's mandate will require suppliers to overcome some challenges. "Liquid can have an effect on RFID, or if the packaging is metallic, or if the product comes in large sacks," he says. "Some of my clients, who are already feeling the pressure from Wal-Mart, are finding that the same tag or reader doesn't work for all types of products. The challenge is to become compliant without breaking the bank."

Alvarez believes that no e-business software, services, or hardware vendor can step in and be a one-stop RFID shop. "It's a collaborative approach," he says. Wireless system vendors, RFID reader and chip manufacturers, packing vendors, enterprise resource planning (ERP) vendors, warehouse management software providers, and logistics companies, among others, are all involved.

Alvarez concludes by cautioning that, because of the novelty of RFID in certain business contexts, "We haven't yet determined the impact on software applications -- it could be minimal, or it could have a significant impact."

source: http://www.line56.com/articles/default.asp?ArticleID=4710 5jun03

RFID Store Goes Live 

DEMIR BARLAS / Line56 28apr03

European retail giant Metro opens so-called "Future Store" underpinned by smart chips; improving inventory control, supply chain execution, product availability

European retailer Metro has opened what it calls a "Future Store" in Rheinberg, Germany, showcasing the benefits of radio frequency identification technology (RFID) to consumers, suppliers, and Metro itself.

RFID—microchip technology that can be attached to just about anything, including humans, and tracked by readers in a certain proximity—is, in fact, the foundation of the Future Store. Metro will chip and scan products at the distribution center, enabling the Rheinberg store to track what's in the shipments, and when they're scheduled to arrive, in real time and with a degree of precision previously unavailable.

When items arrive at the Future Store, Metro can do another scan to see if cases are missing, doing in seconds what once might have taken hours: the checking of individual pallets and manual recounting. After such a scan, items go straight to the selves, where Metro's RFID system will interact with the company's SAP back-office system to trigger automatic restocking when stocks hit a certain low.

By doing so, Metro hopes to avoid the retail bane of empty shelves and also to learn quickly about which of its stocked items are popular and not popular, thereby having a basis to make future stocking decisions.

RFID extends beyond delivery and stocking uses at the Future Store. Since shopping carts themselves are chipped, the Future Store can "tell" how busy it is and trigger the activation of additional checkout counters as needed. There's theft protection. There are also non-RFID technologies aimed at consumers—for example, mobile personal shopping assistants that guide shoppers through the store. And consumers also have the choice of checking out their own items via kiosks, which—in an interesting function—can also play clips from CDs and DVDs after a quick scan initiated by the shopper. These features can also be accessed through the mobile assistant, a particularly attractive option.

The Future Store's first customer was German model Claudia Schiffer, a Rheinberg native, who stated, "I am happy to fire the starting shot for a real novelty. Shopping will become really exciting!"

For shopping to become this exciting, however, a lot of work has gone on behind the scenes. Metro has been considering RFID for a while—it became a sponsor of the Auto-ID Center in mid-2002—and released plans about the Future Store earlier this year. The retailer has worked with SAP (enterprise applications), IBM (RFID middleware via MQSeries, systems integration, and automated kiosks), Intel (readers, infrastructure), and others in order to make the Future Store a reality.

Analyst Gene Alvarez of META Group says that, for any deployment of RFID, it will be typical to have many technology providers working together. "It's a coordinated symphony rather than a simple technology buy," he says, explaining that there can be different vendors to provide tags, readers, application capabilities, and in-store networks. That said, Alvarez thinks that the "primary" RFID technology provider in this particular engagement is Intel.

RFID only works at an item level for some products at the Future Store—for example, Gillette, Procter & Gamble, Kraft, and some other companies are providing item tagging for their goods, but other Metro suppliers are not. However, Metro is scanning cases and pallets: a recourse which, while perhaps not as granular and desirable as item-level, still allows improved tracking and inventory management processes. What Metro might not be able to do, for now, is to locate individual items on so-called mixed pallets, which contain both tagged and non-tagged items.

META's Alvarez says that we might not see universal item-level RFID tagging for a long time, but that this lag has no implications for the technology's adoption and benefits. "Item-level is of value when the price tag is significant, like with high-end apparel, or when there are mandates—for example, in pharmaceuticals, there are DEA requirements for controlled substances." Thus, pallet- and rack-level RFID complemented by selective item-level RFID is good enough for the time being, and there are no reasons to push until the technology matures, counsels Alvarez. "It's still not at a price point where it's worth [chipping] candy bars," he says. Passive RFID chips sell for less than 50 cents each whereas the more functional and powerful active kind are still not below a dollar, he adds.

The RFID game may soon become a basic matter of survival for retailers. "This is a competitive pressure situation," concludes Alvarez. "Wal-Mart has been collaborating on RFID. Margins are so thin that inventory control, supply chain execution, fulfillment, and keeping products on shelves will contribute to success or failure."

Christian Koch, marketing director for SAP's consumer industries practice, is project manager for the Future Store. From his perspective, the evolution of RFID will create new opportunities for enterprise applications providers like SAP. "You have to add a business process level, and this is where SAP comes in." While Koch is proud of SAP's role in the Future Store—"We connect the reader interfaces to applications, do inventory management on the smart shelves, and are involved whenever logistics come into play"—he acknowledges that RFID in practice is in its early days. For example, he says that there are only three smart shelves in the store to date; but he says that each shelf demonstrates an interesting use of RFID. "Gillette is interested in theft protection, Procter & Gamble wants visibility into fast-moving products, and Kraft is interested in shelf life."

Koch agrees with Alvarez that many technology vendors need to work under the same roof to make RFID a reality. He reveals that 35 partner companies and 100 dedicated employees worked on the Future Store, for example. The end result of all that labor has been not just a coup for Metro but also an opportunity to bring RFID into the limelight, he concludes. "There has been a laboratory phase for RFID. It's now ready for reality."

source: http://www.line56.com/articles/default.asp?NewsID=4612 5jun03

RFID Complications at Gillette JIM ERICSON / Line56 4apr02

Alien Technology-made passive tags not fit for Europe, company reveals Philips tag testing under way in pilot with Tesco

It's widely known there are regional standardization and protocol issues that come with the use of radio frequency identification (RFID) tags, many of which are being hammered out at MIT's Auto-ID Center in Massachusetts. It now appears that observes need to keep a closer eye on such issues.

At a recent ID TechEx conference, Gillette revealed that this year's purchase of 500 million RFID tags from Alien Technology for the tracking and security of small, expensive retail products are not European compliant, and that the company is testing tags from Philips in a European Tesco-store pilot. (The tags are applied to retail shelves and cases and pallets of high-shrinkage goods like razor blades and batteries.)

The original deal was a publicity coup for Alien, and though the revelation may not be a surprise to Gillette, it was news to many observers who either assumed or were led to believe the Alien technology would be used in a global rollout. The tidbit arose in conference Q&A with a Gillette spokesman who apparently deflected the question to a technical person in attendance, which revealed the relationship with Philips.

Today, a Gillette spokesman confirmed that the Philips testing is underway, but that the purpose of this is the creation of a business case, not product tire-kicking. "You have to remember this is a field trial running in one Tesco store," says Paul Fox, director of global external relations at Gillette. "While the Tesco trial uses a different flavor tag that conforms to European standards, it's really being used to test the case for communication in the store and tracking out-of-stocks and replenishment rates." As for resolving global compliance, Fox says the Auto-ID Center is "all over this issue."

The conclusion reached by AMR Research analyst Pete Abell is that U.S. based companies relying on RFID tag technology developed by Auto-ID Center member companies might find themselves stranded overseas. "It's growing clearer that multiple systems will be involved will be required to meet regional frequency and power requirements, and likely involve electronic readers which can monitor multiple formats," Abell says. At the same time, breaking the cost barrier for passive tags that might one day be applied to items at the unique level will require the adoption of trillions of tags, so the fewer formats involved, the better.

The news does not appear to upset the Gillette contract with Alien, given that Gillette touches 1.5 billion customers a day according to Fox, though the company appears willing to invest in multiple technlogies. "Gillette could use four billion tags a year in the U.S.," Abell agrees. "It's just that I was a little surprised to hear that they were using other tags." Calls to Alien Technology were not immediately returned.

"What the Alien deal said to the world was that the quest for tags costing 10 cents or less is being reached," says Gillette's Fox. "I hope that was the takeaway."

source: http://www.line56.com/articles/default.asp?NewsID=4554