Companies find a business case for RFID

It’s no longer necessary for retailers such as Wal-Mart to force radio frequency identification technology on their partners – suppliers and other companies are finally beginning to see and reap the benefits

When Wal-Mart first introduced RFID technology to its supply chain in the U.S. in 2004, it did so with a heavy hand, mandating the technology for its top 100 suppliers. Those who wanted to continue doing business with the retail giant had to install RFID tags at the case or pallet level on goods shipped to the behemoth. Those who weren’t interested in participating were welcome to bow out – but they would no longer be able to place their wares in the hundreds of Wal-Mart outlets across the country.

Just two years later, however, such Draconian tactics no longer seem necessary to encourage the adoption of RFID technology in the supply chain. When Wal-Mart Canada announced its RFID initiative earlier this year, it said the program will be voluntary for suppliers.

It invited about 15 suppliers to participate in a pilot scheduled to start either later this year or early next year involving 20 retail outlets and one distribution centre in southern Ontario. All of the participating suppliers were already using RFID technology in some fashion, Wal-Mart Canada said – either to do business with its U.S. counterpart or for some other internal purpose. Companies in the supply chain and elsewhere, it seems, were already beginning to see the benefits of RFID.

Better visibility
And convincing suppliers of those benefits is just what the Canadian RFID Centre (CRC) is trying to do with its grocery chain pilot project. The centre, along with grocery retailer Loblaw Companies Ltd., and suppliers Maple Leaf Foods, General Mills Canada, Scott Paper and Unilever, recently began a pilot project this summer to evaluate and showcase advantages of adopting RFID.

Though it’s too early to draw any final conclusions, David Wilkes, the Markham, Ont.-based CRC chair and the senior vice-president of the Canadian Council of Grocery Distributors, said both suppliers and retailers can reap the rewards of implementing RFID into the supply chain to track goods. Better visibility of products will allow both grocers and suppliers to reduce out of stock items, increasing sales because if customers can’t find what they’re looking for, they may either go to another retailer or buy a product from another manufacturer.

The more detailed information available on tags should also allow for more targeted recalls, he said.

And with the ability to tie temperature sensors to RFID tags, the grocery industry might be able to reduce the number of recalls needed, said Shai Verma, RFID practice leader for IBM Canada in Markham, Ont. Certain produce must be maintained at a steady temperature. It’s possible to set have sensors on tags take readings at regular intervals. Whenever a tag is read along the supply chain, the temperature information can also be downloaded, alerting staff to any unacceptable drops or highs. Today, such information can be read from bar codes, but it’s sent back to a host system, and partners may not have access to it, Verma said.

The information from tags can be tied to other systems, such as financial systems so invoices can be generated automatically as products are scanned in and out.

The CRC hopes to make a strong business case for RFID tags.

“The concern used to be, ‘Does this work effectively?’ And that we’ve been able to answer,” Wilkes said. Once less-than-reliable read rates have been vastly improved. By working together, the grocery industry hopes to create the critical mass necessary for RFID to make sense, he said.

Inventory control
But critical mass wasn’t necessary for Ontario’s Ministry of Finance to benefit from RFID. The Financial Services Commission of Ontario put RFID tags on constantly misplaced Motor Vehicle Accident Claims Fund file folders, said the fund’s senior manager, John Avgeris. Staff no longer had to spend entire afternoons trying to find missing files, which makes for a more satisfying workplace, Avgeris said. The Ministry’s 6,000 active files are kept in a room that only filing clerks have access to. Staff can check folders in and out of the room and they are scanned as they enter and leave. If a file is out already, and another person needs it, they can get it directly from the person who has it checked out. But before they can find the file, they must search for it on the computer system, creating a record that they were looking for the file.

Tags were placed randomly on files to make it easier to read through a stack or rows of files. And if a file is lost, someone can walk through the office with a scanner interfaced with a tablet PC looking for the file. The RFID tags are passive, meaning they don’t send a signal out until awakened by the reader, lowering the distance at which a reader can find the files – about three feet.

The project cost the ministry about $100,000 and was much more feasible than making the entire system electronic.

“It was cost-prohibitive. We needed an inventory control system to deal with the paper we already have,” Avgeris said.

A no-brainer
Better inventory control was also what Action Trailer Sales was looking for, said IT manager Paul Sadler. The utility trailer dealership was able to reduce inventory time from four hours of work to 45 minutes by placing active RFID tags on its trucks. Instead of walking through its yard to take inventory, staff can drive through the lot at 40 km/hr and read rows of trailers as they pass by. If trailers are parked a few rows deep, it might be necessary to get out and walk through a row of trailers with the reader. The company looked into barcodes, but in poor weather conditions it would be necessary to get out of the car and stand just a few feet from the trailer to get a read.

“It’s easier to just write it down,” Sadler said.

The tags, because they are active, cost anywhere from $21 to $41, but the price has been worth it, Sadler said, as Action Trailer has reduced the number of points at which errors could enter its system. Previously, workers would write down the inventory information and then enter it into the computer system, creating two points of errors. “To us, it was a no-brainer. Where there had been an error in the past, those errors won’t occur anymore.”

Companies that rent the trailers can also take advantage of the tags – further proving that RFID technology is no longer the sole domain of retail giants such as Wal-Mart.

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Jim Love, Chief Content Officer, IT World Canada

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