Analysis: RFID - Wal-Mart's Network Effect - ' Competitors, Suppliers Play Catch'
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Competitors and suppliers who are just beginning to look at this technology have a huge task in front of them if they want to be fast followers behind the leaders. RFID is not a simple plug-and-play technology. It has improved a great deal with the advent of UHF tags. But while UHF waves can pass through cardboard and paper packaging, they bounce off metal, creating false or failed reads, and they are absorbed by water.
A supplier can't simply slap a smart label—one with an RFID tag embedded in it—on 60 cases of coffee cans, stack the cases randomly on a pallet and read every tag as a forklift carries the pallet through a dock door at five miles per hour. Retailers are going to have to figure out sensible solutions for hundreds of products with high water content or that are made of metal. And suppliers may have to follow different compliance requirements for different retailers. Solutions might include using a specific type of tag, placing the tag in a precise location on the case and arranging the cases in a special configuration on a pallet.
The changes wrought by RFID systems will affect virtually everyone in the company—from the forklift operator to the head of logistics—but perhaps none more than those in the IT department. The whole point of using RFID is to enable companies to gather real-time data automatically. The challenge will be to figure out ways to filter, use and share that data.
EPC tags contain only a serial number. That means for the tags to be of any value, suppliers will have to create a database that contains information about what the item is, where it was made, what its expiration date is. Retailers will need to figure out exactly what information they need, what format it should be in and how it should be shared. Retailers and suppliers will have to work together to solve these issues.
And it's not clear how companies will transition from the universal product code incorporated in bar codes to EPC tags. The Uniform Code Council Inc., which manages the UPC and has taken responsibility for commercializing EPC technology, has not spelled out a clear migration path for retailers, suppliers and software vendors. Bernie Hogan, the UCC's chief technology officer, says the organization has a draft road map. But it wants to work through some actual deployments with companies, such as Wal-Mart, to fine-tune its road map before making it public.
Once a road map is published, software vendors will have to create new fields to cope with the data. Many companies, including Manhattan Associates Inc., Provia Software Inc., RedPrairie Corp. and SAP, are adding software modules or upgrading their products to cope with the serial numbers in RFID tags. But these solutions still require suppliers and retailers to deploy middleware that manages the huge amount of data coming from the readers. CIOs will have to devise ways to filter out false or redundant reads and pass on only useful information to enterprise applications. And they'll have to work with line managers more closely than ever to shape these systems. For instance, IT and business managers will have to figure out when inventory in the storeroom or warehouse needs to be replenished. Set the trigger too low and you'll run out of product; set it too high and you'll wind up with excess inventory.
Next page: New tasks for CIOs.
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