RFID Strategy -- Santa's Little Radio-Frequency Helpers

Recent news releases, along with my own Christmas-shopping experiences, illustrate ways that the retail industry could exploit RFID technology this holiday season. The next few months will see significant new developments that will take RFID to the next level of functionality. But first we must get through this year's holiday, which brings me to my shopping example.

I was interested in buying an item from a major on-line supplier of musical instruments and other musician supplies. When I checked their website on Black Friday, they indicated that the item I wanted was out of stock, with more on the way by November 30. I checked back on that day, and found a new expected in-stock date of 12/1. The date continued to slip for each of the five subsequent days until I gave up checking the website. The result for that retailer was a lost sale. In fact, their inability to predict an accurate in-stock date made me nervous that the item would not arrive in time for Christmas delivery.

As a logistics professional, I can guess the problem that this on-line retailer faced. I know that the item I was looking to purchase is an Asian import. I would further assume that the expected delivery date listed on the website was generated by the item's vendor. Delays in their logistics chain could be caused by events at one or all transportation elements of ocean freighter, customs clearance, distribution center, or ground transportation. The inability to get real-time data from the logistics chain then drives uncertainty in predicting the arrival of merchandise at the retailer.

RFID developments during the next few months have the potential to fix this problem.

EPCglobal's Plans For 2006

EPCglobal is the non-profit group which is spearheading the development of RFID standards and technology. They recently announced that they expect two significant events to occur in the first part of 2006. One event is the launch of the Electronic Product Code Information Services. The other event is the adoption of the Gen 2 protocol by the International Organization for Standardization.

The Electronic Product Code Information Service (EPCIS) will be an information service that aggregates electronic product-code data from RFID tags scanned (or encoded) at multiple places in the supply chain. For example, a manufacturer could upload EPC data from all tags applied in the factory. A distributor could upload EPC data for RFID tags scanned into their warehouse management system. The EPCIS is built around a web-services model that will allow companies to implement and access Internet-based data exchange services for RFID tags.

While this service is being rolled out, the International Organization for Standardization is expected to adopt the EPCglobal Gen 2 protocol as ISO 18000-6C. This approval by the prestigious ISO is an important milestone for international manufacturers of RFID tags, readers and other components.

These two developments enable a new level of information-sharing between multiple players in the supply chain, including supply-chain links located in widely different countries. The EPCIS will act as an independent clearinghouse of RFID information, so that companies do not need to specifically link their own information systems together in order to get supply-chain visibility. The ISO adoption of the Gen 2 standard will spur the adoption of RFID technology outside the currently dominant USA market.

Consumer Scenarios

How might my Christmas shopping scenario play out in 2006? At the outset, the initial out-of-stock situation might be avoided by smarter demand planning aided by the use of RFID in the stockroom, as is currently being done at Wal-Mart.

If an out-of-stock situation occurs anyway, the progress of the item's shipment could be tracked through each step of the inbound process. The real-time information captured from the RFID tag and shared via the EPCIS system would lead to more accurate projected delivery dates. An accurate in-stock date, in turn, would result in improved consumer confidence that an order placed in anticipation of item delivery would in fact result in an on-time arrival.

Conclusion

In the past year, RFID technology has already achieved some of its potential within the context of a single supply-chain system (for example, Wal-Mart reports verifiable reductions in out-of-stock events at RFID-enabled stores). The year 2006 will provide RFID technology with an opportunity to fulfill its potential to provide supply-chain visibility to a vastly expanded set of players.

The key will be how well the information clearinghouse of EPCIS is accepted by the industry and how many new markets adopt RFID technology as a result of the ISO standardization of Gen 2. Stay tuned and happy holidays!