RFID Report
RFID Report examines the key developments taking place in radio-frequency identification.
By Robert Spiegel -- Supply Chain Management Review, 11/1/2005
Analysts: Even retailers aren't getting ROI from RFID
In a finding not without irony, it seems that even the big retailers that mandated RFID pallet and case tagging are finding the return on investment (ROI) to be elusive. It's well-documented that the suppliers in the consumer products industry are having difficulty squeezing an ROI from their mandated adoption of RFID. But the conventional wisdom all along has been that at least the retailers were getting some benefits from their own mandates. According to an analysis from AMR Research, however, those benefits have yet to include a financial ROI for the retailers.
AMR Research created a research model based on a $5 billion consumer goods retailer. Researchers projected a three-year companywide rollout of pallet and case RFID tagging. The results showed that the retailer did not generate enough profits in a reasonable multi-year time frame to cover the cost of the investment. "We looked at all of the cost to get the presumed benefit, and we find it's difficult to get a definitive ROI in fast-moving goods," says Scott Langdoc, vice president of research at AMR. Langdoc acknowledges, however, that that these companies may see some competitive advantage from RFID that may not be reflected in a tangible ROI.
Langdoc notes that researchers were "thrown off" by the Wal-Mart model. Wal-Mart and the Department of Defense were the two first organizations to push their suppliers into adopting RFID programs. Dozens of other chain retailers followed. The widely held assumption was that the retailers were gaining a real benefit from RFID. "Everybody was watching the message from Wal-Mart, but as the world's largest retailer, their model is different," notes Langdoc. "Not everyone is Wal-Mart." Wal-Mart executives have hinted that the company adopted RFID to solve specific supply chain difficulties. Without those specific problems to solve, the thinking goes, the company might not have taken the RFID path.
The smaller chain retailers that followed Wal-Mart's lead may be left holding an RFID bill in excess of potential benefits, much like their suppliers. Meanwhile, those suppliers that were compelled to adopt RFID are scrambling to find targeted alternative uses for their RFID technology, AMR says, as tagging pallets and cases just to please retail customers comes with little or no return. Langdoc notes that some of these retailers are gaining benefits from tagging fast-moving, high-ticket items such as consumer electronics. In such cases, a stock outage would cost far more than an RFID tag.
Intermec-Symbol settlement seen good for industry
The legal settlement of the patent suit between Symbol Technologies and Intermec Technologies is good news for the RFID industry, according to research and analysis firm Venture Development Corp. (VDC). "On the whole the industry should be cautiously optimistic," said VDC in a statement. Intermec holds roughly 145 RFID-related patents, while Symbol holds 50 patents. The settlement removes a dark cloud over RFID adoption, VDC says, especially for open-loop supply chain deployments.
Price war speeds RFID adoption
Nothing accelerates technology adoption like low costs. Recent announcements by Alien Technology and Avery Dennison clearly indicate that the price of RFID tags is dropping significantly. Alien cut the price of its straps to 12.9 cents, while Avery Dennison countered by pricing its inlays at 7.9 cents. "These new low prices may represent loss-leaders," notes Erik Michielsen, ABI Research's director of RFID and ubiquitous networks. "But when you tie them to the new products and services offered by software companies to help end-users make sense of their RFID data and to the recent spate of EPC Gen-2 announcements, we may have a three-headed benevolent monster that will promote demand."
BEA buys middleware company ConnecTerra
BEA Systems has acquired the privately held RFID middleware company, ConnecTerra. The acquisition is designed to extend BEA's ability to integrate RFID and other device data. It will help BEA customers deal with the growing amount of RFID-captured data across their supply chains. Founded in 2001, ConnecTerra carved out a place in RFID middleware just before the market exploded as a result of the retailer mandates.
Best PracticesRedPrairie RFID enables CHEP Innovation Center
Supply chain technology vendor, RedPrairie has deployed its RFID warehouse system at the CHEP Innovation Center in Orlando, Fla. CHEP, which provides pallet and container pooling services, is using its Innovation Center to demonstrate the usage and benefits of RFID for customers, prospects, and other interested parties. RedPrairie provides warehousing management and RFID visibility solutions for the project.
Printronix and Manhattan partner on produce pilot
Printronix has contributed its SmartLine 5000e RFID printer to an RFID-pilot project at Ballantine Produce, a California-based grower and marketer of fresh produce. The project is part of an alliance with supply chain vendor Manhattan Associates. Although Ballantine is not required to place RFID tags on cases or pallets of fruits and vegetables shipped to its retail customers, the company has decided to adopt RFID in advance of Wal-Mart's 2007 deadline for perishables to be tagged with RFID.
TechnologySouth Korean researchers develop low-cost RFID technology
South Korean scientists claim that they have succeeded in developing a cost-effective method to manufacture RFID products using technology from ink-jet printers. Researcher Cho Kyu-jin and his team have developed a chip that can produce RFID tags using a 100-percent organic conductive material. The technology could potentially drive RFID tags costs down significantly. The team of researchers plans to commercialize the technology.
Intermec Gen-2 readers certified for use with SAP
SAP has given the nod for the IF5 RFID readers from Intermec Technologies to be used with the SAP Auto-ID Infrastructure (SAP AII). The Intermec IF5 lets SAP users employ RFID-powered data collection without integration services or middleware, making RFID adoption easier for small- to medium-size companies. The IF5 RFID reader architecture ties into SAP AII, guaranteeing easy, low-cost RFID integration, according to Intermec.
Zebra Technologies adds smart RFID labels
Zebra Technologies has expanded its RFID tag production to include smart labels. A smart label is created by embedding an RFID chip and antenna within the label material. Zebra is working with chip providers such as Alien Technology to ensure the quality and performance of the smart labels. Zebra has also been qualified by Alien as a supplier of Alien Class 1 smart labels.
SoftBrands partners with GlobeRanger on RFID development
SoftBrands, a software company focusing on the manufacturing and hospitality industries, has teamed up with GlobeRanger to enhance both companies' existing RFID capabilities. GlobeRanger is a provider of RFID and sensor-based software. One product they have jointly developed—an RFID compliance solution based on the SoftBrands-GlobeRanger platform—has been adopted by NordicWare, a U.S. manufacturer of kitchenware. NordicWare installed the RFID platform at its Minneapolis distribution center to meet compliance deadlines for Target Corp. In addition to meeting Target's compliance mandate, NordicWare is looking to use the RFID system to improve its product-delivery accuracy and develop new automated shipping processes.
ResourcesRFID Sourcebook
IBM Press, 2006,
$39.99, 276 pages
(ISBN-0-13-1851373)
Authored by Sandip Lahiri, an RFID solution architect at Global Services, the RFID Sourcebook covers the basics of RFID. Topics include assessing potential ROI, choosing between RFID and barcodes, dealing with standards and aligning RFID strategy with business strategy. The book is available at major booksellers and through online vendors.
RFID Conferences
Active RFID Summit USA
San Antonio, Nov. 15–16, 2005
Forum for users and developers
Smart Labels USA 2006
Boston, March 28–29, 2006
Covers implementing RFID programs
Robert Spiegel covers the supply chain technology space for a number of Reed Business Information publications.
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