RFID: moving beyond the pilot stage

RFID has the potential to transform supply chains and offer significant business advantage, but there have been more pilots and trials than full-scale implementations that have been made public.

Marks & Spencer, Tesco, Wal-Mart, Metro Group, Airbus, Hong Kong Airport, Schiphol Airport, Milan Airport, Center Parcs, Flora Holland and logistics firm Alpha Group are all piloting or implementing radio frequency identification (RFID) systems.

They are doing so because the item tracking technology offers the tantalising prospect of revolutionising the management of retail supply chains, delivering effective asset tracking, cutting lost and misplaced baggage at airports, and fighting drug counterfeiting.

RFID has the potential to transform supply chains and offer significant business advantage, but there have been more pilots and trials than full-scale implementations that have been made public. It is important to make this distinction, because a number of organisations have kept their RFID work quiet to give themselves a competitive edge.

From pilot to full roll-out

So what does this say about the overall progress from RFID pilots to full roll-out?

Perhaps, it suggests that some organisations have failed to make a clear business case for RFID, or that RFID has yet to make it on to executives' radar screens as a means of process improvement, better tracking of corporate assets, or a more visible, effective supply chain.

A full-scale RFID roll-out requires significant change management within the organisation, so top-level executive support is needed to give the project clout. This is only possible if the board believes in the project and can see the value of RFID.

"It would cost perhaps £2.5m for a company to invest in RFID for a major implementation. However, if managers can spend £50,000 to make the business case for using RFID, it is much more likely that they can eventually get the £2.5m from the company to deliver a full-scale roll-out," says Jan Poulsen, business development manager at Lyngsoe Systems, which is helping Alpha Group run the logistics infrastructure for the supply of McDonald's restaurants in Europe, and is helping airports install RFID for baggage handling.

David Lyon, EPC global business manager at the UK arm of the GS1 global standards organisation, says pilots should by now have gone beyond the stage of simply trialling the technology.

"Tesco has proved that the technology works with EPC global Class 1, Gen Two tags and readers. The real idea behind pilots should be to see whether RFID can fix what is broken in the supply chain," he says.

GS1 UK wants to get participants on board for a UK pilot of the EPC Information Service (EPCIS), which allows trading partners to manage and exchange RFID-sourced data, such as what, when, where and why, through the supply chain in real-time.

GS1 Germany's RFID Test Centre has played a vital role in Metro Group's comprehensive roll-out plans. Although Metro has been in full roll-out mode at pallet level in its Cash and Carry and Real hypermarkets since the start of the year, the company's Galeria Kaufhof outlet in Essen has only been using RFID in a trial for item tagging since September.

About 30,000 menswear items in Galeria Kaufhof have been RFID tagged, and the store has become a showcase for EPC global standards, including an application-level events standard to pass formatted RFID data to the application layer and EPCIS middleware.

"At Metro Group, we started the introduction of RFID in our process chain in late 2004. Since then we have gained considerable experience with changes in the technology as well as the necessary adaptation of processes," says Gerd Wolfram, managing director of MGI Metro Group IT.

"However, based on our experience with the use of RFID in our supply chain and in front-store applications, we have been able to confirm what we supposed from the very beginning: the matching of user requirements with technology development is pivotal.

"Thus, close collaboration between RFID users and RFID technology providers is the basis upon which one can build a capable RFID system."

RFID at Marks & Spencer

Alongside Metro's implementation, another project that is universally regarded as a business success is Marks & Spencer's development, pilot, and extensive roll out of its Intelligent Label (RFID) project, tagging clothes in its stores.

Intended to guarantee product availability for customers, M&S is rolling out RFID in 120 of its 300 stores. In its spring 2006 pilot - big enough to give M&S management a clear idea of what RFID offered - the company piloted 42 stores in 20 countries, using 15 suppliers.

"You do have to do big pilots to prove big business cases and produce numbers that will impress your board," James Stafford, head of RFID and general merchandise at M&S, told the IDTechEx RFID Europe conference.

M&S is getting its suppliers in Sri Lanka and Turkey to not only attach the tags at the point of manufacture, but to scan the clothes at the start of the supply chain. So, as well as helping to ensure shop-floor availability of products, the company is getting more accurate supply chain matching data.

Andy McBain, Motorola's EMEA senior product marketing manager, who has worked on RFID implementations at airports including Hong Kong, and with the Spanish postal service Correos, says organisations must understand the extra work needed to deliver an RFID roll-out.

"You have to plan your system looking at the wider picture, otherwise you will not know if you will get scalability across 40 distribution centres. You will have to have an open mind on your business case too, because it may not come from what you originally thought.

"You also have to remember to ask your network gurus whether your back-end infrastructure, database and network can cope with all the extra data traffic generated by RFID," he says.

"That is why a major roll-out has to have board-level buy-in, because generating all the extra data may impact your network and consequently your business. You will need a strategic planning team that includes networks and operations specialists, the unions, and a top executive with a business hat on."

The scalability issue is one that worried holiday resort chain Center Parcs, which is planning an RFID roll-out in France. The project, linked to a customer's visitor card, could be used for workforce management. For instance, the system could measure when a customer walked into a store and then track how quickly they were served and whether a sale was made.

Richard Verhoeff, Center Parcs' director of IT services and e-commerce, says, "We were afraid that with so much data, there would be no scalability for the RFID project."

To guarantee scalability, Center Parcs has adopted a Linux-based datawarehouse appliance from Netezza with the capacity for up to 1,000 blades.

Andrew Price, RFID project manager at the International Air Transport Association, has successfully driven the development of a standard for RFID in baggage handling and a business case that says the business could achieve savings of £350m a year from RFID implementation, benefiting airlines, airports and passengers. A string of airports, led by Hong Kong, are proving that the business case works.

Timing is everything

Price says organisations must see the overall benefits of conducting RFID pilots and subsequent implementation.

"One of the important things to understand when doing a pilot is that you want to know what you are going to be doing with the technology, not whether the technology works," says Price.

RFID can generate significant business benefits, but the timing has to be right, and there may be other routes the company can go down to cut costs or improve efficiency. For example, airlines can save themselves millions of pounds by changing aircraft flight paths into airports.

Even at Marks & Spencer, RFID had to wait for its chance, as the company's chief executive, Stuart Rose, said last November when the company announced its 120-store RFID roll-out plans.

"RFID had to sit slightly on the sidelines while other things took priority," he said.

That is perhaps the lesson that many RFID exponents promoting the technology within their organisations have had to learn: understand the right time to move from pilot to roll-out, and be ready to deliver it.

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