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RFID in the Grocery Supply Chain

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RFID in the Grocery Supply Chain

RFID is now a real issue in future supply-chain development. There is a change of focus, with practical and commercial issues coming more to the forefront. Suppliers need to make sure they are prepared: they need to do trials, make sure their master files are in order, and be ready to move fairly soon.

The last 6 months have seen RFID become a real issue in future supply-chain development. Numerous trials are now applying the technology in real-life situations. There is a change of focus, with practical and commercial issues coming more to the forefront.

“I think finally it’s becoming a bit real, so some people are actually trying to make it a practical solution rather than just selling the hype of it … They’re actually trying to make it work … They’ve forgotten all about the item level hype, and they’re trying to find a practical solution” (New Product Development Director, logistics provider)

The problems of tag availability, lack of standards, huge start-up costs, and integrating the tags into production schedules have long been known. But now new difficulties have begun to emerge. Graphite dust produced by pallets and packaging has been found to settle in RFID readers and cause errors, meaning equipment will need to be kept very clean. Nylon conveyor belts cangenerate static electricity, which affects read accuracy. The planned UHF tags will not be suitable for some situations involving item level tagging. And RFID implementation will mean company supply chain processes needed to change dramatically.

"Let’s say I’ve got fifteen warehouses. Each warehouse has got, say, six loading bays and one way in, so that’s seven. That’s seven times fifteen, that’s a hundred. So it’s at least a hundred-and-something points where I’ve got to have RFID readers, and then I need some control mechanisms to make sure I can manage them all, and then I need to link them back to something else.” (IT Director, supplier)

With tag costs reducing more slowly than expected, the first wave of suppliers are now finding it more difficult to prove a business case for RFID. But they need to make sure they are prepared: they need to do trials, make sure their master files are in order, and be ready to move fairly soon. Other suppliers should make sure that they understand the technology and keep abreast of developments, learning enough to be able to separate the hype from the reality.

“People will say it’s a very difficult problem. But two years ago they couldn’t even get the tag and the reader to work together. The technology will get there, they will understand what they have to do about placement ... there’ll be different ways to solve the issues ... I’m not actually worried that the technology will keep moving forward.” (General Director, European global retailer)

There is no doubt that in the longer term RFID usage confers huge advantages for supply chains, reducing shrinkage, dealing with on-shelf availability issues, and bringing the vision of end-to-end supply chain visibility much closer. But there are big practical problems. So will Wal-Mart, Metro, and Tesco be able to achieve their ambitious deadlines? RFID presents a global collaborative challenge to both major retailers and their major suppliers: it cannot work on the international scale without support from both sides.

This report is an updated and greatly expanded version of Insight’s 2003 report, “Countdown to RFID”. It is based on interviews at senior level with retailers, manufacturers, technology providers, and RFID experts, in the UK, Europe, the USA, and Japan. It explains the current state of RFID development and rollout in major UK and European grocery retailers, against a background of developments worldwide. The report concludes with a likely international timescale for RFID rollout between 2004 and 2023, from supply chain and high value items through to universal item tagging and barcode replacement, the ultimate goal of RFID.

Published: March 2004

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