In the first move of its kind, Metro, the world's fifth largest retailer, plans to take RFID (radio frequency identification) technology beyond the pilot stage by requiring around 100 suppliers to affix smart tags to their pallets and transport packages.
The program, set to begin in November, will use RFID across the entire distribution chain, the Düsseldorf, Germany, company announced Monday at the annual National Retail Federation (NRF) conference in New York. The retailer said it had successfully tested the new tracking and information technology at the company's Extra Future Store in Rheinberg, Germany.
Several IT companies, including IBM, Intel and SAP, and more than 40 additional consumer goods and technology suppliers are working closely with Metro as part of its Future Store Initiative, which is also examining other new wireless and self-service technologies in the retail sector, in addition to RFID. Microsoft also announced its participation at the NRF conference.
Metro owns and operates more than 2,300 wholesale stores, supermarkets, department stores and specialty retailers, such as consumer electronics stores, mainly in Germany and the rest of Europe.
Essentially, RFID tags are computer chips equipped with miniature antennae. The technology enables non-contact transmission of product information like price, manufacturer, expiration date and weight via a radio frequency. Many retail experts believe the tags will replace bar codes over the next decade.
Retailers such as Metro view RFID as a way to manage the huge flow of merchandise in and out of stores more effectively, while at the same time reducing both inventory losses and labor costs. The technology, for instance, will allow employees to instantly read an entire pallet of goods with an RFID chip reading device.
Adding momentum to the retail industry's embrace of the technology, Wal-Mart Stores and the U.S. Department of Defense will require key suppliers to use the tags on pallets and boxes next year.
The U.S. Department of Agriculture is also considering using RFID tags to track livestock in the U.S. to speed up responses to emergencies such as mad cow disease, which was discovered recently in Washington state.
Concerns over privacy, however, have kept most retailers, including Metro and Wal-Mart, focused on using RFID only in warehouses and stores' backrooms, where employees can remove tags before products reach consumers. The relatively high cost of the chips has been another deterrent.