RFID and the SMB

Published: September 25th, 2006

Small and medium-sized businesses have so far remained mostly on the outside when it comes to exploring and installing radio frequency identification (RFID) technology solutions, but everyone knows this will one day change.

Nobody agrees when, however. Educated guesses collected for this article ranged from around six months to several years. But remember, nobody could predict when the groundswell usage of the Internet would make having a Web site essential to all business marketing plans. Today, if you don’t have a Web site that at least provides your contact information, you better be very small or remarkably well-known locally. If not, your only hope of getting customers through your doors will be through positive word-of-mouth or repeat customers.

The first company to mandate that its vendors put RFID chips on their products before shipping them was Wal-Mart. By January 2007, a total of 1,000 Canadian and American companies will have complied with the Wal-Mart mandate, according to Sam Falsafi, director of business development and RFID strategy at Ship2Save Inc., in Montreal, which has 10 customers (four SMBs) using RFID technology.

But non-Wal-Mart suppliers can’t just follow suit because it sounds like a good idea. They need a solid business case. The issue today is mainly the cost of the labels, says Tom Berend, founder and director of technical services at Toronto-based Radio Beacon. “If 10 per cent of my business is going to Wal-Mart, then it doesn’t make sense for me to label 100 per cent of my boxes if 90 per cent is going to a customer that doesn’ require that kind of compliance,” says Berend.

Wal-Mart has made it clear that vendors in this open-loop system will not be allowed to pass on the costs of RFID to Wal-Mart; they must find benefits and save money by streamlining their internal processes. They must find a way to make RFID tags pay for themselves.

To most, it seems unfair. While Wal-Mart happily checks its new goods through no-touch scanning portals using RFID, vendors have to buy the labels and add the step of putting them on their items before shipping them to Wal-Mart.

However, Berend says this model will change once there’s enough critical mass that a vendor can RFID-enable his own inbound goods en route from Asia (if thatís where they’re coming from). Then he can do RFID-based receiving, cycle counting and internal transfers in the warehouse, “grabbing a bunch of boxes and just firing them out through a portal.” The benefits are very exciting, but there’s a critical mass involved, says Berend.

Retail is not the only area where RFID can be used. In fact, according to Bob Moroz, president of R. Moroz Ltd., there are a lot of other applications that seem to fly under the radar that nevertheless make sense today.

Still, today the majority of RFID installs are closed-loop applications. R. Moroz has deployed it in hospitals, libraries and automotive applications and at trucking companies. It has enabled document tracking, animal identification, electronic payment — it has even RFID-enabled a video rental system. A lot of the applications are with small to medium-sized companies, some are with startups.

“Our approach basically is to develop the solution based around the right technology for the application,” says Moroz, “and we’ve deployed it under ice, underground, underwater. For us, environment is a challenge, but we don’t see it as one that cannot be overcome.”

Falsafi says companies in his home province are slow to adopt new technologies. They want them to have been tested elsewhere first. “That’s a mentality that Quebec companies have for sure, but for [other] Canadian firms I have a feeling it is also like this,” Falsafi says.

One group that has charged ahead to adopt RFID more quickly is third-party logistics (3PL) firms. These can often be small businesses — perhaps with one warehouse and 40 employees — but they may handle logistics for larger companies.

“So, for example we have a small business that handles the Wal-Mart logistics for another big company in the States,” says Radio Beacon’s Berend. “As a result, these guys have to do the full Wal-Mart RFID compliance even though they’re a fly speck.

“So we’re finding a couple of small businesses that are rolling into early adopter requirements that you’d normally associate with the big guys, but I think we’re just at the transition time, where everybody’s going to have to start doing it. Over the next six to 12 months, everyone will have to do it, but we’ve said that before and we’ve been wrong.”

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