Canadian retailers and manufacturers are preparing to use Radio Frequency Identification (RFID), but cost concerns are keeping them from going all the way with the technology.
That’s the finding of Deloitte’s 2004 RFID Study, released Nov. 11. The Toronto-based business consultancy surveyed CEOs and CIOs at 30 retailers and manufacturers to get a sense of corporate Canada’s thoughts on the technology.
RFID refers to wireless scanners and product labels with miniature antennas. As RFID-tagged goods make their way through supply chains, scanners in distribution centres, warehouses and stores document the products’ passage, providing information to retailers and manufacturers about inventory and the supply chain itself.
RFID is an emerging technology. Just 14 per cent of respondents to Deloitte’s survey use it today. But 71 per cent “have…taken active steps with consideration to implementing RFID,” Deloitte said in a statement. Forty-seven per cent “indicated a strong likelihood of implementing an RFID system.”
Half of the respondents said cost is RFID’s biggest problem. The time and effort required to set up RFID was another issue (according to 17 per cent); 13 per cent said technical support was a concern. Privacy and transition costs also coloured executives’ opinions of the technology.
According to Christian Stephan, a partner in Deloitte’s Consumer Business Group, retailers and manufacturers would do well to take the slow road to RFID. “Companies contemplating a move into RFID deployment need to take a long-term strategic view….RFID has the potential to change the way businesses interact, (but) rather than creating an overnight revolution, it will do so relatively slowly.”
“Companies have time and opportunity to study RFID carefully before making choices,” Stephan concluded.
His comments echoed those made by presenters at the Global Supply Chain, RFID & GTIN (Global Trade Item Number) Standards Conference II, held in Toronto on Oct. 14.
There, industry experts outlined some of RFID’s problems, including technical standards (not rock solid), costs (RFID product tags are expensive) and consumer acceptance (it doesn’t exist yet). The presenters said companies should begin to investigate RFID, but it’s too soon to buy into the technology completely.
“We’re starting the phase of reality,” said Pierre Deschamps, executive vice-president of Cactus Commerce Inc., an IT services firm in Gatineau, Que. He explained that RFID was coming out of the “hype” phase, wherein the technology is consider the next Big Thing, and entering a period wherein companies might start to scrutinize the technology’s potential impact on their operations.
The conference presenters said it’s no good to buy RFID simply because a trading partner mandates it. Retailers and manufacturers must justify the technology internally to benefit from it.
It’s a different story for Deloitte’s respondents. Twenty per cent said they would implement RFID in response to a client request, while just 10 per cent said they would use RFID to reduce operational costs.
According to Deloitte, 43 per cent of respondents were only “somewhat familiar” with RFID. Ninety-three per cent said RFID would have some impact on their businesses. Half of them said they would implement an RFID system within two years. Companies see improved inventory control as the biggest benefit of the technology.
Experts debate RFID benefits, challenges, (Oct. 8, 2004)
New Canadian RFID council formed, (July 23, 2004)