RFID expectations vary

CHICAGO – Retailers expressed divergent views of the revenue-generating potential of radio frequency identification technology at last week’s Retail Systems conference. Executives from Wal-Mart, Marks & Spencer and Target said it’s possible to make a business case for using RFID in the supply chain today, while others expressed less optimistic assessments of payback potential given the technology’s current level of maturity.

“One of the greatest benefits will be increased sales,” said Michael Duke, an executive vice president at Wal-Mart, in his keynote address at Retail Systems. The Bentonville, Ark., retail giant is about four weeks into its first live RFID pilot, which covers 21 products from eight suppliers passing through Wal-Mart’s Sanger, Texas, distribution center and into seven of its retail stores.

An RFID-enabled supply chain will help companies be more productive, better manage expenses and improve inventory turns, but the technology’s potential to reduce out-of-stock items and feed sales is most compelling, Duke said.

Minneapolis-based Target also championed RFID’s potential to improve merchandise availability.

“It’s still alarming the amount of times we’re out of stock,” said Paul Singer, CIO at Target, which in February announced plans to require its top suppliers to begin shipping RFID-tagged pallets and cases next year. Industry experts estimate retail out-of-stock conditions hover between 5% and 10%, and cost retailers billions of dollars in lost sales each year.

Singer sat beside Linda Dillman, his CIO counterpart at Target’s arch-competitor Wal-Mart, in an RFID roundtable at the Retail Systems show and quipped about the two holding hands as a sign of solidarity in promoting global RFID standards. “If we don’t do this in one, standards-based way, the chances of this being successful go way down,” Singer said.

At a retail RFID symposium held in conjunction with the show, Marks & Spencer outlined its use of RFID in its food operations. The U.K. retailer has tagged 3.5 million trays used for transporting perishable items among suppliers and stores, said James Stafford, head of RFID at Marks & Spencer. The rationale for using RFID tags as opposed to traditional bar codes – which must be visible to scanners and read individually – is simple, Stafford said. Marks & Spencer can read RFID tags faster, which saves time and money.

Stafford acknowledged the complexity of RFID is off-putting to many companies. “It’s difficult and risky,” he said. “People like to talk about innovation, but very few like to do it.”

That needs to change, Wal-Mart and Target executives say. Retailers and suppliers need to become familiar with RFID. “If you haven’t started, get going,” Singer said.

Not all retailers agree. Chico’s isn’t doing anything with RFID right now, said Ajit Patel, CIO of the Fort Myers, Fla., apparel chain. Patel is watching the technology, but so far sees no compelling reason to replace bar codes with RFID tags, particularly on individual items. Down the road Chico’s will consider tagging merchandise cases, but not before the technology matures, he said.

Wilsons Leather is also hesitant. “I still think it’s too early,” said Jeff Orton, CIO of the Minneapolis retailer. He expects Wilsons to adopt RFID, but not now, given its elusive ROI.

RFID veterans offered advice for retailers considering an RFID pilot or deployment.

Focus narrowly, said Dick Lampman, senior vice president at HP, which uses RFID in some of its manufacturing facilities and is among the eight suppliers involved in Wal-Mart’s ongoing pilot.

Make it a multidisciplinary project from the start, Target’s Singer said. RFID is not just an issue for supply-chain personnel. Network managers need to be involved in decisions about how the data generated by RFID gear is going to be communicated among systems.