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News and views: RFID ROI Conference Report - Conferences and exhibitions Article
The article entitled: "News and views: RFID ROI Conference Report" is in the Conferences and exhibitions Articles section of Operations Management Papers area...
ARTICLE DESCRIPTION: This event was a showcase for the technology and early adopters of this technology. With the agreement of the second generation (2G) Standards in November 2004 (these are the industry standards that will control the RFID devices) one of the major hurdles has been overcome.AMR research predict that the market for RFID products and services will grow from ‘pilot projects’ valued at $1,000 Million in 2005, with RFID infrastructure being developed until 2008 when item level tagging will be enabled and will contribute to an investment of over $20,000 Million by 2013 - a 20 fold growth in less than 8 years. This market will split 50:50 between products and services.
MORE INFO: News and views: RFID ROI Conference Report This event was a showcase for the technology and early adopters of this technology. With the agreement of the second generation (2G) Standards in November 2004 (these are the industry standards that will control the RFID devices) one of the major hurdles has been overcome.AMR research predict that the market for RFID products and services will grow from ‘pilot projects’ valued at $1,000 Million in 2005, with RFID infrastructure being developed until 2008 when item level tagging will be enabled and will contribute to an investment of over $20,000 Million by 2013 - a 20 fold growth in less than 8 years. This market will split 50:50 between products and services. The scope of RFID is not just for the fast moving supply chains: there is also a lot of interest in the aerospace, automotive and pharmaceutical industries where parts authentication, safety, tracking and traceability is key. Jens Heitmann talked about the use of RFID in Airbus GmbH and their co-operation with Boeing to agree industry standards. An interesting aside was that RFID tags are being used to confirm the authenticity of ‘quality products’ like Mont Blanc pens. The programme was split between the supply chain companies relating the progress they have made in implementing the technology and the product and service suppliers explaining the technology (and promoting their own wares). Talking to the delegates in retail there is a clear vision for the ‘checkout’ less store: you walk in, pick up your goods and walk out; the RFID tag on the goods tells the store what has been taken; the RFID tag in your Credit Card know you have taken the goods and charges your account! Simple! In fact, today, few supply chains are doing more than piloting pallet level tag tracking. The dream of the walk through checkout will have to wait between 10 and 15 years. The presentation from Tesco’s John Clarke was well grounded and showed that any ‘early adopter’ will need to see through the hype and focus on the implementation issues. These are not centred on the technology, but more on how to get from non RFID to pervasive RFID and maintain control. This type of technology and implementation is too big for a big bang approach, so it will always be an evolution. As the title of the event suggests, the focus is on return on investment (ROI). John warns that lessons should be learnt when looking at conventional business cases. The big lesson learnt from Bar-Coding was that the ROI, which was often shaky and could have killed Bar-Code projects when delivered, always significantly exceeded expectations. Not only that, but most of the change management issues that were cited as significant often evaporated soon after the implementation began. Gerd Wolfram, Project Manager for retailers Metro Group, described how his work had been approved on ‘gut feel’ – justification of the initial projects is rarely possible. They started with the vision of the “RFID enabled supply chain” from the supplier through to the intelligent refrigerator. They are now focused on the touch points where the technology can deliver clear business benefits (if not a full ROI). Their internal pilot project is now live and demonstrating 99% read rates for pallets transferred from a RDC to selected stores. This has enabled him to gain approval for a wider roll-out and development of the processes and systems needed to pilot case level tagging by end 2005 and display container tracking by late 2006. Otto Group distributes and retails a broad range of consumer products through multiple channels. Their Project Manager, Roland Nickerl, announced that their pilot had been live for three months with reliabilities ranging from 87% up to 99.6%. Work was in-hand to improve this, but he suggested that the tag cost had to come down to 2 cents before their use could be justified on the high volume, low cost items in their range. However they now felt they could justify the benefits of the current generation of tags for higher priced, pilferable items which constitute about 10% of their shipments. Amongst the suppliers, there was a general belief that the technology was now good enough to justify specific applications. This does not yet extend to reading tagged items in close proximity to metal, liquids or other tags, but they were confident that improvements over the next couple of years will enable the volume use that will bring down tag costs and further justify projects. Many said that the difficulties and cost of a project are also in the middleware and interfaces to customer ERP systems. They advocated the use of an experienced system integrator to overcome these problems in the least painful manner. Plenary speaker, Dr Patrick King, focused on evangelising about the standards that will drive the industry forward, informing us that ISO 18000-6c will be the all encompassing standard. He warned those who think it will be a good idea to be a follower that they will find that they have to accept whatever the industry has decided is best for them. It will be the early adopter that will determine the standards, products and practices that suit their businesses and process. Patrick was clear that there are some fundamental issues with the technology that are bounded ‘in the physics’ that limit the way RFID can be used. To deliver the vision of the ‘check-out’ less shop, the infrastructure will have to be able to ‘know’ what you have in your shopping trolley and what the shopper next to you has in his! As always, the devil is in the detail, not the vision. DHL are now part of the Deutsche Post World Net. Trevor Pierce, DHL Programme Director, explained that each division was now finding uses for RFID. In the Logistics company, they are focusing on using RFID to provide extra service to customers. Several pilots are in progress with air and road distribution. One example is in clothing shipments, where they are scanning the tagged garments within a box to enable them to provide an accurate advanced shipment notification as part of their track and trace service. Reducing the box size to no more than 40 garments per box is achieving close to 100% read reliability. Chris Hopper of Printronix presented two case studies of projects in which they had participated. The two anonymous companies approached their projects with different objectives. One successfully aimed to ‘slap & ship’ to meet the Walmart mandate. The other took the slower, but more productive route of re-engineering their processes to maximise the benefits from tagging. Both found that to achieve the reliability required they not only had to use the Printronix ‘test, print and retest’ functionality, but also to check the packs before despatch. As a sideline, the conference demonstrated that “Speed Dating” (not for a life-partner, but to help suppliers meet with customers for short, timetabled meetings) is an interesting innovation that the organisers used to bring together the frontiersman of this emerging technology. Geoff Relph, FIOM Bill Seldon, FIOM
PUBLISHER: Institute of Operations Management
Page number: 11 Word count: 1170
Vol 31 - No 03 - May 2005
The article can be downloaded in full from the publisher's site i.e. the Institute of Operations Management.
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