Wal-Mart leading RFID charge

Wal-Mart last week got serious about radio frequency identification, airing plans to roll out the technology internally and coming out in support of a retail industry effort to create a global standard for radio-based product identifiers.

CHICAGO – Wal-Mart last week got serious about radio frequency identification , airing plans to roll out the technology internally and coming out in support of a retail industry effort to create a global standard for radio-based product identifiers.

In a joint presentation with the Uniform Code Council  at the Retail Systems 2003 show in Chicago, Wal-Mart CIO Linda Dillman backed the council’s new initiative to coordinate and speed up work on a standard data structure to be used with RFID technology. The data structure, dubbed Electronic Product Code, is envisioned by proponents as a bar code successor that retailers could use to more effectively track items they stock and sell.

“We believe very strongly in the future of [RFID],” Dillman said, adding that Wal-Mart plans to go live with a limited RFID rollout by January 2005.

“We’re still defining what ‘being live in January’ means,” she said. Wal-Mart officials aren’t sure when they will make RFID support a mandate for its suppliers, but she said: “It will be a requirement.”

The basics of fixed RFID

RFID consists of a tiny microchip and an antenna, often like a small, thin ribbon. These components can be put into almost any form: pressed between cardboard layers in a carton, or layered on a piece of tape or a label. The RFID tag stores a unique identification, which if Wal-Mart and others have their way will be the proposed Electronic Product Code. RFID scanners, from handheld units to stationary tunnel-like devices, transmit a radio signal to turn on the tag, which sends back its number. The code can be linked via lookup databases to servers with detailed data about the item, such as manufacturer, lot number and expiration date, if applicable.

Unlike bar codes, multiple RFID tags can be read simultaneously, without the need for line of sight. RFID tags also can identify individual items – a single pair of pants as opposed to a style of pants, for example. And tags can be designed to store additional data, which can be updated.

The Uniform Code Council last week urged retailers to make creating an RFID-based Electronic Product Code a top priority. Already, the council’s intellectual property lawyers have reviewed 4,500 patents “to ensure we could bring this technology forward in an open standard,” said Michael Di Yeso, the council’s COO.

But creating an RFID infrastructure will be a long and complex process, based on field tests by Wal-Mart and a host of other retailers in the U.S. and elsewhere. Some hurdles mentioned include:

•  Interference from 802.11 wireless LANs (WLAN ). Clunky and pricey scanners/readers, which activate the tiny chips. Costly RFID tags, now priced at about 20 to 30 cents each. Consumer privacy fears being raised by some advocacy groups.

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The impact on enterprise networks is uncertain. For her part, Dillman says worries about that are unfounded.

“One thing we [in the industry] get all hung up about is this idea of ‘all that extra data,'” she said. “But we’re going to start by [only] identifying the item [with the Electronic Product Code number] and passing that on to the network. Then, we’ll add more: discrete pieces of data as those make sense and as they’re cost-effective.”

Dillman expects RFID to speed shipping and receiving; make inventory much easier, faster and more accurate; and cut the huge costs associated with product recalls. The RFID tags make it possible for retailers and suppliers to know, automatically, what goods they have and where they are.

Variety of benefits seen

“With the [Electronic Product Code], we can distinguish between Carton A and Carton B, knowing that one is on the store floor and the other is in the backroom,” said Simon Langford, Wal-Mart’s manager of RFID strategy. “It gives us visibility as to where that product is. Smart applications will be able to direct our associates to where the product is, so we can replenish shelves sooner.”

“We’re very interested,” said Ken Watt, CIO for American Eagle Outfitters, based in Warrendale, Pa., with 750 stores. “With RFID, we’ll be able to do in-store scans quickly, do spot inventory checks quickly, and do loss prevention quickly.” For retailers, speed means dollars. “Reduced labor hours is something near and dear to our hearts,” he said.

Sears Logistics Services, a Sears Roebuck subsidiary, has been following RFID closely with its main technology partners, IBM, Symbol Technologies and Zebra Technologies . “We like the idea,” said John Atkins, director of strategic planning and support for direct delivery systems. “It’s the way to go.”

But he’s got plenty of questions. What will be the technical standards for tag readability? What frequencies will be used? How will radio interference caused by WLANs be handled? How many tag readers, especially the big units for reading entire pallets, are needed to ensure redundancy? At what point in the supply chain do you incur the costs of actually applying the tag to a box or pallet or a specific item?

Much work remains

“We’re still working through most of the issues,” Wal-Mart’s Langford said. “There’s technology available now that’s deployable in some areas. But the readers, for example, are an issue.” Wal-Mart needs readers in different sizes and shapes for different locations, and they have to be designed so that antennas can’t be knocked off when a forklift backs up or lifts a pallet load. “We’re asking our [RFID technology] suppliers to accelerate their development,” he said.

But there is the cost of the RFID tags. Right now, the price of the basic tag is about 25 to 30 cents. Wal-Mart estimates that just tagging the pallets of its top 100 suppliers could require about 1 billion tags. That doesn’t take into account creating the network of scanners, the servers for the look-up databases and for product data, and specialized software.

That’s why American Eagle Outfitters’ Watt right now is studying and thinking, but not buying. “The price per unit is still out of our ballpark,” he said.