John Johnson joined the DC Velocity team in March 2004. A veteran business journalist, John has over a dozen years of experience covering the supply chain field, including time as chief editor of Warehousing Management. In addition, he has covered the venture capital community and previously was a sports reporter covering professional and collegiate sports in the Boston area. John served as senior editor and chief editor of DC Velocity until April 2008.
Maybe it just sounds too good to be true—something like those e-mails claiming Microsoft will pay you $100 just for forwarding the message to your network of friends. Despite well-documented gains by Wal-Mart and other early adopters of RFID technology, U.S. retailers have been slow to get into the game. With the exception of a few giant chains like Target, Wal-Mart and Best Buy, the byword in the retail world has been watch and wait.
"Outside of those few companies, there isn't a lot of movement," says David Hogan, chief information officer for the National Retail Federation. Hogan says he hasn't seen any signs that the rush will be getting under way anytime soon. "The word we keep hearing is '[We'll] take a look at it in 2010 and see if the price is down and the reliability is up.'"
Retailers themselves offer a variety of reasons for their hesitation. Some feel they have little to gain from RFID because their operations are already running at maximum efficiency. Others say they're worried about getting caught in the crossfire in the battle over privacy. But Hogan thinks it's more a matter of simple economics. Many retailers are reluctant to invest in RFID, he says, because they're dubious about the prospects for payback.
Billions in benefits
A new study may chase away those doubts. A report released late last year suggests that RFID's economic benefits may be far higher than previously estimated. Even at today's relatively low adoption levels (9 percent of retail sales at the pallet level and 2 percent of sales at the item level), the study says, retailers currently derive an astonishing $12.05 billion in benefits from RFID applications.
The gains, according to the researchers, are coming from reductions in labor costs, decreases in "shrinkage" from theft, and reductions in inventory write-offs as well as better product availability and faster time to market. And the savings promise to be ongoing. If, as predicted, adoption rates reach 45 percent of sales at the pallet level and 20 percent at the item level, RFID could be worth a whopping $68.55 billion in benefits to retailers by 2011.
Even the RFID chip-maker that commissioned the study found the results to be an eye-opener. "We were quite [surprised] by the sheer [size of the] returns the study shows," says Jan-Willem Reynaerts, general manager for the RFID market sector team at NXP Semiconductors, which was spun off from Philips last year. The company, which is based in Eindhoven, the Netherlands, commissioned the study, which was conducted by researchers from the University of Texas at Austin.
The study also calls into question the claim that retailers aren't seeing much of a payback on their RFID investments. Anitesh Barua, one of the study's authors, puts the cumulative retail sector spending on RFID technologies (from 2003 through 2006) at $2.37 billion. Based on that, the $12.05 billion payback figure represents a nearly fivefold aggregate return.
No more black bananas?
There's more to the RFID story than dazzling returns, analysts say. RFID also shows great promise for solving some long-standing business problems. "RFID is a very significant business opportunity that is there to be understood and embraced, and that's what separates the companies that get it from those that don't," says Marshall Kay, North American practice leader for RFID at Kurt Salmon Associates. "Wal-Mart, Best Buy and [German retailer] Metro clearly get it and understand exactly what RFID has the ability to do. They are investing time and money to determine how best it can help them."
One way in which RFID may help retailers is by cutting down on waste and spoilage. That would be an economic boon to both the grocery and the pharmaceutical sectors. Suppliers of perishable goods—from bananas to oncology drugs—typically experience $35 billion worth of waste each year, according to the RFID Research Center at the University of Arkansas.
Much of the damage occurs while products are in transit. "Loss and damage of perishable goods during storage and transportation is a substantial global issue," says Doug Standley, co-leader of Deloitte Consulting's wireless and sensor solutions group, "with some industry sources estimating that losses of up to 33 percent on perishable freight are common. The good news is that emerging technologies are now ready to address this issue."
RFID is one of those emerging technologies. In tests recently conducted by Deloitte and the RFID Research Center in collaboration with Chiquita Brands, researchers successfully used a combination of wireless, sensor, RFID and Internet technologies to monitor temperatures of perishables while in transit. Among other findings, the tests revealed that temperatures varied widely within a single refrigerated trailer, fluctuating as much as 35 percent from pallet to pallet. By using RFID tags with temperature sensors, the researchers were able to collect a temperature history for each pallet. That type of monitoring system would make it possible for retailers to identify which pallets have been exposed to the highest temperatures (and thus have the shortest expected shelf life), so they could unload and use them first.
"The preliminary data from the experiment are already beginning to provide insight into a real-world environment that until now had been prohibitively expensive to track," says Bill Hardgrave, founder and director of the RFID Research Center. "Overall, this project—even at this early stage—is rapidly bringing into focus the vision of a truly intelligent cold chain."
Let the revolution begin!
The cold chain benefits notwithstanding, most analysts say RFID's full potential has yet to be unleashed. That won't happen until item-level tagging becomes common practice among retailers. Though that day may still be some years off, say Barua and Reynaerts, it will irrevocably change the industry when it arrives. They believe the combined benefits of item-level tagging to retailers could exceed $150 billion upon full deployment.
In the meantime, Hardgrave says interest in item-level tagging is picking up. Some of the retailers that are working with the RFID Research Center have begun moving down that path, he reports, though most of them have barred the center from revealing their identities for competitive reasons.
One retailer known to be pushing ahead with item-level tagging is the UK-based retail chain Marks & Spencer. M&S, whose item-level tagging pilots date back to 2002, plans to extend its apparel-tagging program to 120 stores this spring, concentrating initially on lines of clothing that come in a wide variety of sizes—like men's suits and women's jackets and bras. M&S hopes the tags—which are Gen 2 HF tags applied at the point of manufacture—will improve inventory visibility and help reduce stock-outs.
Japanese retailer Mitsukoshi is said to be expanding its item-level tagging program as well. According to published reports, the retailer credits item-level RFID tags with helping boost sales by 13 percent in the women's shoe department at its flagship store in Tokyo. Mitsukoshi is currently using the technology at seven stores across Japan and may introduce it at its U.S. stores in Orlando, Fla., and Honolulu later this year.
Does that mean the RFID revolution is finally under way? Bill Colleran, CEO of tag and reader maker Impinj, thinks it is. "In a few short years, every object in our world will have an electronically accessible number on it," Colleran told attendees at an educational forum hosted by AIM Global in November. "In the near future, all manufacturers and retailers worldwide will adopt RFID, and it will change our lives in profound ways."
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.