RFID technology hit the treadmill after the economy went south and other priorities fell into place. In addition, RFID ran into a wall when retailers became concerned about consumer perceptions with regards to how it will be used.

I totally agree with Simon and Dan. Working with CPG companies during the Walmart mandate, everyone kept saying where’s the ROI? The only reason many started investigating RFID was because of the Walmart mandate. RFID has an application for item level tracking for expensive items, electronics, pharma, asset management like beer kegs, satellites, etc. Unfortunately, for a box of soap it doesn’t add much value. A barcode gives you all the info you need on that item.

As for some trials that wanted to go to an automatic check out where everything was tagged in the basket and it went through a reader tunnel, and voila, all was checked out, it was a good concept. But as Simon said, the cost of the tag and less than 100% accuracy of the technology are hold backs.

We have clearly moved past the hype phase and “trough of disillusionment” (Gartner term). With a little help from a tough economy, the industry has refocused the vision and activity around incremental value areas. The most notable example is the apparel activity. Look for renewed investment and momentum building on success in these areas and also related technology evolution (i.e interactive NFC).

I remember even during the height of RFID mania in the mid-2000s there were a lot of significant technical problems, such as RFID-tagging containers of liquid and dealing with metal packaging, that as far as I know were never resolved. It’s too soon to count RFID out, but I think it’s safe to say we are at least a decade away from seeing the kind of 100% transparent RFID-enabled supply chain everyone was dreaming of in 2005.

Mostly I think Dan has it right, but I think the sequence of events was a bit different. I saw this article last week, so I challenged myself to explain the situation in 100 words or less. I ended up with 127: 1) After the dot com bust, VCs were really looking for the next big thing to put their money into2) Along came RFID and a lot of UK/MIT academic enthusiasm (and many analysts were complicit … because THEY needed something to talk about after the bust–it was the only game in town).3) Walmart’s CIO bought into the notion that they could remove one body from every store using an RFID portal. It was a logical move for “the supply chain” company. No other retailer bought into the concept. 4) The law of physics and the untidiness of Walmart’s own systems got in the way.5) Walmart’s CIO was sent away, and the VC and analysts had to wait for mobility and social networking to come along. That’s my summation. In follow-on comments I’ll say… Read more »

RFID may not be moving in CPG, but nearly every apparel company has had a successful pilot. IT is now waiting for the business units to connect the dots and realize RFID’s potential to improve out of stocks and facilitate Web-to-store commerce. Don’t count it out yet.

The author stated, “CPG companies and Walmart did not do enough “hard math” to really understand the returns before making substantial investments in RFID.” I disagree. First of all, this isn’t “hard math.” With just one simple fact in this very article, “tags are now 5-7 cents,” I could tell you there isn’t an ROI business case for 95% of FMCG products. The other challenges are technology and true industry collaboration. If different types of packaging are difficult for the RFID readers to read the tags, there is a significant problem with real-world application. Further, as long as a typical supermarket carries items from hundreds of suppliers, if more than one method of accounting for the product is required (RFID and UPC, etc.), then the whole flow of goods, and supply chain visibility goal is compromised. It’s just like having a small supplier that doesn’t have UPCs on their products. That simply is unacceptable today. Well, until RFID is embraced by the far majority of suppliers, the idea is only that…an idea.

In order to make item level RFID work in CG, the ROI is dependent on both trading partners utilizing the technology and the applications. It does not work unless all your suppliers (for retailers) or all of your distribution chain (for manufacturers) play.

RFID was over promised, pure and simple. The concept and principles are sound. The cost never approached payback for low-cost food items. Technology problems are still available to be solved. Basically, all or nothing works best in physical distribution. Having some items with RFID and others without does not work well or solve the problem. What will work is when a complete department, meaning all suppliers, uses something. For example if every HBC vendor put RFID tags on, retailers could work with it. Unless every item in the store has an RFID tag, the system only works through store receiving. In reality, RFID is in competition with existing security approaches for higher value merchandise. The problem is RFID needs food volume to get the cost down.

As this article intimates, there are a lot of reasons for the delayed results of RFID in CPG. In some sense, they parallel the challenges of electronic shelf tags. In both instances, the concept seems pretty straight forward and the benefits intuitive. Unfortunately, in both cases a great idea has been shot down by the reality of costs and technical capability. Effective implementation of RFID requires not only purchasing the technology (tags and readers) but also requires changes in business processes at both manufacturers and retailers. I think these were especially underestimated for the transition phase while products had to be handled by both traditional and RFID based processes. There were not enough benefits identified for the initial investments required by manufacturers. (A very big one that I feel was underestimated is the ability to “own” the distribution channels by tracking serialized containers.) The manufacturer had the initial costs without corresponding benefits. Retailers do not have large R&D budgets, so they need quick paybacks. The classic “chicken and egg” situation evolved as they waited for… Read more »

As is usual when one of our pieces is used here, I feel inclined to make a few responses to some of these comments: 1. No one is “counting RFID out.” As stated, it is in fact apparently thriving in apparel–and soon shoes–right now, with a much clearer value prop, a more logical deployment plan, and importantly much better technology and cost based on the hundreds of millions invested for the original CPG focus. Many have said, and I agree, that apparel would not be doing what it is without that technology investment for the CPG/Walmart applications. 2. Don’t think the recession really had anything to do with the collapse of the CPG program, it was nearly dead before that, other than perhaps the recession putting the final nail in the coffin. 3. I have debated whether Walmart actually set the industry back, and have generally argued Yes, as does Paula. But that is with two maybes: (1) Yes compared to if Walmart had used a more rational approach (say starting with promotional execution and… Read more »

It’s time to dispel the myth, once and for all, that item-level RFID makes sense for moderately priced and expensive items but not for cheap merchandise.

These days, in the apparel category, millions and millions of items with retail price points in the $5-7 range are receiving disposable RFID tags.

Responding to Marshall’s comment on low value items, this is correct, which was implied in our full article, but I believe results from:

1. High turn as a substitute if you will for high value. Could be high margin as well.

2. The benefits of tagging the full category in the store, versus trying to mix RFID and traditional products in one category. There is research showing the extra benefit from full category tagging. Naturally then, if the category contains lower priced products, they would be tagged.

I was working for a supplier as a computer programmer-analyst when Walmart first laid out its RFID mandate. From the get-go, I thought Walmart was rushing things. But I thought to myself that if anyone could push through an RFID mandate at this speed, it would be Walmart. Now, however, it looks like their initiative has foundered, and I think rightly so. It was a case of too much too soon, in my opinion. My original thought back then had been that Walmart should have started with only the pallet level, simply to introduce the concept to its suppliers and to only incrementally add to the suppliers’ costs and investments in new hardware and software (and training and procedures). Once Walmart had the concept of RFID at the pallet level firmly established in the industry, and its suppliers very comfortable and accepting of pallet-level RFID, then it would be time to take the next incremental step, which would be at the case level. Once everyone was on board at the case level, and beginning to… Read more »

“jmstone” you are quite wise.

The VERY BIG THING you have to give Walmart credit for in the evolution of RFID is the requirement that the tag data include a class (item) identifier. The initial vision that came out of MIT had the data content being a random index to a central data base of object definitions. While everyone was dithering about how to accomplish this, Walmart said “no” and demanded that the item identification be part of the tag data. If this hadn’t been done we probably would probably still be waiting for the first implementation.