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It seems you can’t pick up a business magazine or technical journal these days without headlines screaming out news about the next technology revolution. More often than not, the revolutionary change either doesn’t happen at all, or eventually shows up as a costly evolutionary nuisance you weren’t prepared for, but wish you had been. But there’s a fresh wind blowing across the retail supply chain landscape, and its name is RFID, which is shorthand for Radio Frequency Identification.
Handled properly, a RFID systems solution can result in an evolutionary change incorporating legacy systems with the real-time supply chain management of tomorrow. Forestalled or worse yet, ignored, this inevitable upgrade in your retail supply chain system may mean years of lost sales
to your competitors. Today’s evolutionary technology can easily become tomorrow’s revolutionary,
disruptive change. And, like other disruptive technologies such as the printing press, television and the Internet, early adopters were the ones who realized the greatest ROI and resulting exponential profitability. According to a recent issue of Information Week, "the decision to act now, right now, versus late this year or sometime next year, will be a huge factor in determining whether a company can remain or perhaps even become an innovative and nimble leader in its field over the next several years."
Wal-Mart not only correctly identified the winds of change, but also has been a prime force behind it, with its decision requiring 100 key suppliers to be ready to implement RFID by January 2005, and all suppliers by 2006. Companies such as Coca-Cola, Gillette, Johnson & Johnson, Kraft, Pfizer, Procter & Gamble, Unilever, and others are all climbing on board. Just as the European marketplace led adoption of digital wireless cellphone technology, so too has been the case
with early adoption of RFID in retail supply chain systems. United Kingdom retailer Marks & Spencer last year started adding RFID tags to the 3.5 million reusable plastic containers used to deliver produce, calling it the largest supply chain application of RFID technology in the world.
IT experts must make and justify choices today, and determine how to integrate RFID with existing Supply Chain Management (SCM), Customer Relationship Management (CRM), and Enterprise Resource Planning (ERP) applications with the entire system. Whether it is bar code technology, RF tags, smart labels, real-time locating systems, embedded chip solutions, or other major types of RFID, smart choices will increase corporate ROI while at the same time improving retail supply chain communication. Smart IT managers are insisting on vendor solutions that are more open, flexible, less risky, are easier to integrate with existing systems, and have faster ROI with a lower total cost of ownership.
No longer will savvy clients accept proprietary closed systems from a single supplier that locks them in to long-term, and supposedly seamless solutions. The challenge is to bridge the gap between what’s working today and extending the role of Auto-ID technology into a fully integrated, open system that incorporates the most appropriate devices and IT architecture to suit customer applications. According to Accenture, a global management consulting, technology services and outsourcing company, an RFID open systems solution can increase inventory turns by 10 to 15 percent. Greater inventory turns facilitate capital resource optimization, increased margin procurement and significant reductions in obsolete inventory levels. Supply chain metrics postulate that every month inventory remains on the retail shelf 5%-10% of its resale value and 7%-20% of its revenue contribution is lost. Retailers must manage on-hand inventory as diligently as their constrained inventory to optimize profitability. Supply chain managers today must be better informed with accurate real-time data to stay competitive. While managing inventories to lower levels, care must be taken to avoid out of stock (OOS) situations. Consumer’s can’t buy what isn’t there, resulting in brand switching and store hopping both of which reflect negatively on the retailer. RFID is an enabling technology that promises to help minimize OOS by affording full and accurate visibility of inventory levels in all parts of the retail supply chain.
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