Through a special arrangement, what follows is an excerpt of a current article from Supply Chain Digest magazine, presented here for discussion.
In the last several weeks, the industry has seen a significant amount of discussion and controversy in both the general press and RetailWire around RFID, or more specifically the "Electronic Product Code" (EPC) version of RFID used in the consumer goods-to-retail supply chain (and by Wal-Mart and its suppliers).
The recent spike in debate was triggered by a Wall Street Journal article that painted a negative picture of Wal-Mart's RFID rollout. Wal-Mart and others responded, with a letter to the editor from CIO Rollin Ford, who basically said the program is on track, vendors see the value, and it's all about reduced out-of-stocks, not operational cost savings. Wal-Mart also mustered up support from a few CPG companies, such as a positive statement from Campbell Soup's CIO Doreen Wright, who said, "It's hard to dispute the value of this technology," referring specifically to RFID use to track store promotional displays.
Almost in parallel, however, Sara Lee's CIO said the timeframe for ROI for manufacturers was well off due to costs and technology performance, while an Information Week story also said ROI was not likely for manufacturers any time soon.
With all that, Supply Chain Digest took a fresh look at the list we compiled in 2005 of What is Necessary for ECP/RFID to Thrive in the retail supply chain. That list, with updated comments, still seems mostly right on target to us:
Clear identification must emerge of the incremental benefits of RFID over other auto ID technologies: The real economic benefits over bar coding are not clear.
Total supply chain costs must be reduced for manufacturers and retailers: If Wal-Mart saves money but it doesn't reduce total supply chain costs, it's a win-lose.
Reference to the "five-cent tag" should stop: This was positioned as the key price point needed to deliver value, but that was wrong, and we aren't going to get there any time soon in any case.
Tag and tag application costs must come down: As Sara Lee's CIO noted, ROI for manufacturers is just not possible at current price points.
Real global standards must emerge: The standards situation is still a little muddled, but probably not a big barrier today.
Technical performance must improve: It is still very difficult to read a full pallet of cartons reliably. Gartner group said the notion of "X-Raying" a pallet of cartons is not in the cards any time soon.
Rollouts should be pushed at a measured, ROI-driven pace: The timing of supplier mandates should be synched more specifically with the costs-benefit equation. This is actually the approach being taken by the UK's Tesco chain.
Thought leaders need to share more specifics about finding the ROI: If it's there, consumer goods manufacturers who think they have found it need to be more open. The lack of openness leads many to believe the ROI doesn't exist. Most of the discussion now is around promotional items/displays, but that is a limited application.
RFID-centric business applications must emerge: Few companies have software that can truly take advantage of RFID data and capabilities.
Ecosystems to enable upstream tagging by suppliers to consumer goods companies must develop: Many manufacturers don't even trust offshore suppliers to bar code correctly. Getting them to encode RFID tags correctly is a whole new challenge that will limit adoption for a while because the costs of hand tagging here are huge.
Discussion Questions: What would you add or subtract from this list? In which area(s) do you think the most progress is being made? How does the perspective differ from retailer to manufacturer?