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RFID Update: Back on growth track

Seven years after the Wal-Mart RFID mandate, the technology is alive and growing in logistics and supply chain operations. While most companies are not attempting to track cases and pallets through an open supply chain—which was the idea back in 2003—a new vision for RFID is taking hold and driving real value for early adopters.

WEBCAST: Learn how Sumitomo Electric has implemented RFID technology to help monitor movement and levels of raw materials from designated warehouse areas.

By Bob Trebilcock, Editor at Large
March 01, 2011

Rethinking retail
Perhaps the biggest example of the change in perception is in the retail supply chain, where the hoopla began.

The starting point in 2003 was to tag cases and pallets at the point of manufacture with inexpensive passive RFID tags to track cases and pallets flowing through retail distribution centers and transportation networks. That would allow retailers to know just what inventory they had and where they had it.

The retail supply chain, however, is an open loop. There are any number of participants that are out of the retailer’s control and are only going to handle the merchandise once, including manufacturers, distributors, third-party logistics providers, and transportation providers. Unless every one of those players agreed to read and share data, there were still dark holes along the way.

Today, the starting point is the individual items on the retail shelf, especially apparel. That’s because the retailer’s store is a closed loop that begins at the retailer’s distribution center, with stops at the back room of the store, the shelf, and the point of sale. The retailer controls each of those stops and can ensure compliance. What’s more, it’s not just Wal-Mart following this script.

“We are seeing department stores and we are seeing closed loop brands—apparel makers that own their own stores—doing item-level tagging in their stores,” says Prasad Putta, general manager of merchandise visibility for Checkpoint Systems. “Their value proposition is the reduction of out of stocks to increase sales.”

Without RFID, a retailer may know what inventory it has in the store, but it doesn’t know whether the size, style, and color it needs to make a sale is on the shelf or in the back room.

“Retailers we talk to will tell you that their inventory in the store is only about 60 percent accurate,” says Zebra’s Ricci. “The labor it takes to go out and count all the merchandise in a store is expensive.”

By tagging the merchandise and then reading it in the stock room, when it leaves the stock room and through daily or weekly audits at the shelf, a retailer can fill in that gap. “Many of the retailers we work with are putting an RFID read point at the door between the back room and the sales floor,” says Putta. “When the product leaves the back room, they can automatically update their inventory levels.” Likewise, they may audit the shelves with a handheld reader to see what needs replenished, or use information from a point-of-sale system to drive replenishment.

In these cases, the RFID tag isn’t just a replacement for a bar code; it can also provide information that isn’t contained on a bar code. “With apparel, you have all the different permutations of style, size, and color that can’t be captured by a bar code,” says Impinj’s Krause. “You know you’ve sold a pair of jeans, but you don’t know if you need to replenish the 32-inch by 32-inch jeans, or the 32-inch by 30-inch jeans. With RFID, you can grab a handheld reader, walk up to a wall of jeans, and know what you’ve sold through.” 

The next step is to integrate those in-store systems with the back-end systems in the warehouse to automate the replenishment system.
“We’re clearly at an early adopter phase,” says Krause, “but the growth is explosive.”

RFID gets active
The retail supply chain uses passive RFID tags. Some of the most exciting applications and solutions today use more expensive active RFID technology. These are tags that incorporate a battery in the tag as a power source. This allows them to broadcast information at scheduled times.

Most of these solutions are in closed loop applications that are controlled by an organization, especially manufacturers. “Once people began thinking about RFID, they began to look at other ways to get involved with the technology,” says Motorola’s Schaefer. “The starting point was inside the four walls of their plants, their distribution centers, or in the transportation nodes that they control.”

Manufacturers, for instance, are applying RFID technology to keep track of the manufacturing process. “The No. 1 application is fault and process step tracking,” says Hornis of Pepperl + Fuchs. “You may have 100 small but different steps in a process and you want to be sure that it passed each step. That information can be written to a tag.” Likewise, Hornis adds, a manufacturer may use the tag as a mobile database that is read when a product like an automobile assembly, reaches a workstation. The tag tells the equipment, or an operator, what work needs to be performed or what component needs to be added to that particular vehicle.

Generically, the industry groups theses solutions under the asset management umbrella. They want to know what assets they have, where they are, and whether they can get them to the place where they’re needed at the right time. The pay off is better utilization of the asset.

And while RFID is part of the conversation around asset management, it’s not the sole conversation, says David Shannon, senior vice president of strategy and corporate development for Savi Technology. Increasingly, technologists are combining RFID technology with other data collection technologies and application systems for a richer experience.

“RFID now touches bar codes, it touches sensors, it touches WiFi, and it touches GPS,” says Shannon. “It may be associated with data collected directly by a sensor or it may be connected to data that’s found in a database.”

What Shannon is getting at is a notion called convergence. The idea is that many automatic data capture technologies work best when they’re used in conjunction with other complementary technologies. The Department of Defense, for instance, is not only interested in the location of an asset, but also in the condition of the products, or their readiness for use.

“The solutions we’re developing now can monitor the location of an asset in the supply depot,” says Shannon. “But we can also track the progress of a repair during the maintenance processes and then track the asset as it flows into the theater of operations.”

While Savi is focused on military applications, the private sector is applying similar solutions to critical assets. Aircraft maintenance organizations, for instance, are using RFID to track the location of critical tools required for repair operations and to associate that information about whether the tool has been inspected or calibrated and is ready for use. Other organizations are using active RFID as a resource management tool to keep track of people working in hazardous environments to make sure they’re safe.

“There are so many interesting things going on,” says Liard of ABI Research. “They’re far reaching. They’re broad. And, they’re real.” Seven years after the Wal-Mart mandate that may be the most important message of all.

About the Author

Bob Trebilcock
Editor at Large

Bob Trebilcock, executive editor, has covered materials handling, technology and supply chain topics for Modern Materials Handling since 1984. A graduate of Bowling Green State University, Trebilcock lives in Keene, NH. He can be reached at 603-357-0484 and .(JavaScript must be enabled to view this email address)

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