If your company is considering radio-frequency identification (RFID) solely because a trading partner mandates the technology, perhaps your firm should expand its mindset on the matter, according to industry watchers.
It’s not enough for enterprises to install RFID simply because a trading partner insists, said Scott Burroughs of IBM Corp.’s pervasive computing practice.
“Compliance is not where the value’s at,” Burroughs said, speaking at the Global Supply Chain, RFID & GTIN (Global Trade Item Number) Standards Conference II, held in Toronto on Oct. 14.
He explained that RFID might help manufacturers get a better view of their supply-chain processes, and it could give retailers an improved stockroom-to-showroom workflow; either way, it’s just as important to meet internal business needs as it is to meet trading partner requirements.
The conference was scheduled at a time when trading-partner compliance might be top of mind for some manufacturers. On Jan. 1, 2005 Bentonville, Ark. department store operator Wal-Mart requires its top-100 suppliers to use RFID — electronic tags that provide supply-chain information about the products they’re stuck to.
Despite being generally optimistic about RFID, event speakers outlined some of the pitfalls.
For instance, there are many radio frequencies that RFID systems could use — anywhere from 30KHz to more than 1GHz, said David Wertheimer, Oracle Corp.’s warehouse management and inventory applications designer.
RFID is a wireless technology, and as such it’s susceptible to interference from nearby RF devices, Wertheimer said. Test the system to make sure interference isn’t a problem.
RFID is expensive, said Sandi Jones, director, business development at MTS Allstream Inc., a Winnipeg-headquartered communication service provider. She said RFID requires not only tags, but also readers and software to connect RFID info with the enterprise ERP and CRM systems.
“You need to be clear on your ROI,” Jones said, adding that RFID is such a new technology that it’s difficult to develop a business case for it. “You can’t always tell up front.”
The tags are not cheap. Tom Berend of Radio Beacon Inc., a warehouse-management systems provider in Toronto, said the tags should eventually cost approximately five cents, but prices are not falling as quickly as expected. These days the tags cost closer to 30 cents. The tags Wal-Mart wants its suppliers to use are 80 cents.
“It’s a problem when the roll of labels costs more than the printer,” Berend said.
RFID is considered a technology that would aid retailers more than manufacturers, speakers said. Ajay Ramachandran, vice-president of Raining Data Corp., an Irvine, Calif. data management provider, said manufacturers see RFID as something they’ll have to investigate, whether or not they think it will help their supply chain endeavours, because their customers want them to use it. Wertheimer from Oracle said it’s incumbent on manufacturers to “look at how to get some value from RFID.”
How should companies manage that? Wertheimer suggested asking RFID suppliers some tough questions: do their wares integrate with data synchronization systems already in place on the prospective customer’s premises? Does the vendor’s system offer both “source” and “slap-and-ship” tagging? Source tagging means RFID tags are applied early in the manufacturing process. Slap-and-ship means tags are put on later, perhaps at the distribution centre. Source tagging could become popular as more companies sign onto RFID, Wertheimer said.
Jones from MTS Allstream said companies should try RFID on only one aspect of their businesses — a single product line, for example. This small scope should help enterprises see clearly the benefits and the problems.
The advice seemed to go over well with one conference goer. Ritesh Shah, senior manager, business information solutions at AstraZeneca Canada Inc., a pharmaceutical company in Mississauga, Ont., said his company would take the slow road to RFID.
“Being a leading adopter on the manufacturing side might not be the best idea at this point,” he said, adding that AstraZeneca “knew it was just a matter of time” before RFID became important.
According to Greg Doyle, logistics manager at Home Depot Canada, the company he works for is keeping an eye on RFID, but the building supplies store is also keeping its distance. “We’re standing back,” waiting for suppliers to buy before jumping into it, he said.
At the same time, Home Depot conducted an RFID trial at one of its U.S. locations. Doyle said the technology lends itself to Home Depot’s peculiar supply chain setup: no distribution centres. Suppliers ship most products directly to the stores. The simplified process makes it easier to evaluate RFID than would a complicated supply chain, Doyle said.
Stuart Pothan of MTS Allstream co-chaired the conference. He said RFID is “in its developing stage now….There are many advantages to adopting it,” advocating an ahead-of-the-curve mindset for corporations. “The simple fact is there is no choice. You will be affected by this change.”
The next Global Supply Chain, RFID & GTIN Standards Conference is scheduled for April 14, 2005. For more information visit www.softmatch.com.