April 15, 2004

RFID Success

Steps to Ensure RFID Success

April 2004, Chain Store Age Magazine
By Dan Barthiaume

Internal support, clean data and strong communications are key

The industry is abuzz with information on the benefits and potential of RFID. But lost in all the hype is a simple yet crucial question: What must you do behind the scenes to make it work?

Even the largest retailers and CPG manufacturers, among them Wal-Mart, Target and Procter & Gamble, are still in pilot phase of RFID implementation at the pallet and case levels. Although RFID technology has existed in some form since the 1940s, it is new enough in the retail and supply chain arenas to still be considered experimental. Therefore, Retail Systems Alert Research Report presents the following guidelines to developing a workable RFID pilot that will lead to a full-fledged rollout with high ROI potential.

Obtain internal support: While this tidbit of advice may seem obvious, it is surprising how often IT personnel fail to perform any cross-departmental selling before recommending pilots of new, largely unproven systems and practices. When the new technology in question is as disruptive to the status quo as RFID, gaining advance acceptance is doubly important.

Consider how an RFID-enabled supply chain alters the process flow of an entire retail organization. Instead of being collected in batches at various data pools, data is now constantly streamed from every point in the supply chain. In stores, the potential exists to know exactly where every product is located at all times, whether on the shelves or in the back room.

For senior management, this means adapting to a "real-time" decision-making mode that relies on hard data rather than human intuition. For warehouse- and store-level employees, this means a more efficient workday as the supply chain moves faster and tolerance shrinks for out-of-stocks. For financial personnel, this means justifying the cost of the sophisticated databases and data-analysis tools that will be required to adequately handle the volume of incoming data, let alone RFID tags and readers.

Thus, before IT or supply chain managers propose any type of RFID pilot, they should first spend several months educating the entire organization about how RFID works, what kinds of changes it will create, and why the expense and effort are all worth it. And dont make the common mistake of limiting an internal RFID sales pitch to senior corporate management.

"If you put RFID technology in at the operational level, your own people will come up with different ways of using it," advises Pete Abell, senior partner/co-founder of the ePC Group, an RFID consultancy. "Tell users at lower levels about RFID and how it is used; this will generate ROI information that people at the top dont think about."

Define internal systems requirements: Naturally, few if any retailers or CPG companies will be looking to completely overhaul their current IT architectures to make way for RFID. So prudent IT and supply chain managers will research integration and networking tools that will link new RFID applications to previously installed enterprise systems.

However, replacement of some internal systems will be almost inevitable. RFID creates a new informational paradigm where data flows in on a continual basis. Retail industry players typically collect data in batches, at most a few times a day, and often only analyze data on an exception basis. They are simply not prepared for the quantity and quality of data that an RFID-enabled supply chain will produce.

Mark Palmer, RFID technical evangelist of systems vendor ObjectStore, estimates that once Wal-Mart attains in-store RFID deployment, the retailer will generate more than seven terabytes of operational RFID data every day. While this is an extreme example, clearly retailers and CPG providers must seriously consider overhauling their data-processing environments before launching any wide-scale RFID rollouts.

Select vendor partners: Virtually every significant retail/CPG systems provider is now offering some kind of RFID solution, and many RFID boutique shops are springing up. However, homework is necessary to move past the marketing hype and find a vendor that can really deliver the goods. Retail industry consulting group LakeWest Group, LLC advises choosing an IT supplier with experience and sound alliances.

In a LakeWest Group white paper, Ronnie Hise, intelligent systems general manager of MeadWestvaco Intelligent Systems, says, "Ideally, the solution provider also will be able to provide a holistic approach that includes the hardware, software, middleware, and the integration and implementation services required to implement effectively and efficiently."

Identify merchandise: LakeWest Group recommends that item-level RFID pilots focus on products where RFID can provide "significant benefit with minimal risk." These include CDs, DVDs and books, as well as high-ticket, high-shrink goods such as disposable razor blades. Most current RFID pilots are being conducted at the case and pallet level, but retailers and CPG companies should familiarize themselves with physical issues, such as the difficulty in reading tags placed near liquids or metal foil, before choosing merchandise to include in an RFID pilot.

Test, test, test: An increasing number of IT vendors and consultants are opening RFID testing labs where retailers and CPG manufacturers can simulate how RFID will operate in real-life supply chain conditions and situations. This type of lab testing, whether conducted at a hosted third-party site or in-house, is highly valuable. However, observes BearingPoint senior manager and director of global RFID solutions Brian Higgins, testing also needs to occur in the actual supply chain environment.

"Conduct a field test as part of your proof-of-concept," he says. "Take equipment out and set it up, cordon off a section of your operational environment to observe how noise factors affect RFID. Build your testing strategy around a program of spelling out a clean business case."

Communicate: During the pilot itself, active and accurate communication among all supply chain partners is critical to effectively evaluating RFID performance. Supply chain data must be synchronized, which requires advance preparation. "Zero human intervention, totally automatic supply chain operation requires clean data to start," says the ePC Groups Abell. "On average, 30% of a retailers master file is different from a suppliers master file for the same products."

Thus, retailers and CPG providers should try following EAN.UCCs Global Data Synchronization (GDS) Services, which incorporate UCCnets GLOBALregistry service, a global registry or index of product and company information.

Take an active role in developing RFID standards: Hopefully, by following the first six recommended steps, retailers and CPG companies will enjoy enough success with their RFID pilots to receive the green light for further rollout. However, long-term adoption of RFID requires obtaining a whole range of new hardware and software devices, including tags, readers, object name service (ONS) and Savant server.

To effectively use RFID as a supply chain accelerator, retailers and CPG companies also must be able to exchange data in a common format with universal product descriptions. Without standards governing these systems and data exchanges, RFID will never achieve its full potential.

Fortunately, organizations such as the EAN.UCC-sponsored EPCglobal are developing international standards that will allow RFID to become a truly worldwide supply chain enabler. Standards development is still in an early enough stage that participation is gladly welcomed, and companies that take the initiative can help steer standards in a direction that will suit them best.

Abell further recommends that retailers get involved in efforts to develop smaller-scale standards that affect their particular verticals. "Certain retail types dont care about other retail types," he says, "but [RFID] standards will evolve faster if they provide use requirements for their type."

Chain Store Age - Magazine Story

Posted by Craig at April 15, 2004 05:47 PM