Companies test RFID waters but remain in shallow end

Executives from several large companies last week outlined their plans to move ahead with RFID technology as a replacement for bar codes. But there are formidable obstacles to the technology's widespread adoption, they said.

At the inaugural Electronic Product Code (EPC) Executive Symposium held in Chicago, users said it will take five to 10 years for radio frequency identification (RFID) technology to be fully deployed at the individual item level.

Consumer products giant Johnson & Johnson is piloting the technology at some of its warehouses, according to Pat Rizotto, vice president of global consumer initiatives at the New Brunswick, N.J.-based company.

"We'd find huge savings if all we did was better understand what comes in through the front doors, where it is in the distribution center and what was shipped out the back door," Rizotto said during a panel discussion at the conference.

The next step is to determine whether retail partners would be interested in working directly with Johnson & Johnson to implement RFID tagging, he said. The company is also looking at using the tags to track some of the more expensive products in its medical devices and diagnostics business, Rizotto said.

But he didn't give a timetable for implementing the technology, saying that a formal business case has to be made for it first. "We have a good warehouse management system. EPC will enhance what we have," Rizotto said.

Tesco PLC, a Cheshunt, England-based grocery store chain, is testing RFID in its supply chain and at the item level by placing RFID tags on DVDs. The "instant visibility" the technology provides is helping Tesco better understand customer needs, improve customer service and decrease thefts, said John Clarke, Tesco's director of group technology and architecture.

Challenges ahead

But there are several major challenges that need to be addressed before it will be possible for companies to take full advantage of RFID's potential, said Gerd Wolfram, project manager at the Extra Future Store, a supermarket in Rheinberg, Germany, owned by the $54 billion Metro AG group.

Metro is using the store as a laboratory of sorts to test RFID and other new technologies. RFID tags are being used at the pallet, case and item level to keep track of inventory, replenish shelves, track product expiration, enable real-time stock-taking and better utilize storage space.

But there have been problems with the quality of RFID labels, readers and the software for capturing RFID data, Wolfram said. The technologies have required quite a bit of customization to work in Metro's environment. The lack of standards for implementing RFID has also been problematic, he said.

The costs associated with RFID tags have been falling, but they're still too high compared with the cost of bar codes, users said. And the scalability of the technologies is also relatively untested, they added.

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