In the retail world of the future, the race will go to the swiftest—those who get to the marketplace first with the latest and greatest innovations. And RFID technology is likely to power many of those innovations. That was the message delivered by Dr. Gerd Wolfram last month at the ERI eXchange, a trade show for the retail industry held at the Boston Convention Center.
"The retailers who survive in the future will be those that are successful serving the customer," Wolfram said. "We need to service the customer better, and to do that we need to innovate and to bring new things to the marketplace. RFID is one of the key technologies [retailers will use to do that]."
Wolfram is the managing director for information technology at Metro, the world's third-largest retailer. In 2003, Metro opened its first Future Store in Germany in an attempt to demonstrate what the retail shopping experience might look like in the future. Now, it's taking its initiative to the next level. Metro, which is accelerating its RFID rollout in Europe, plans to open a bigger and better Future Store in November. Interactive smart shelves, powered by RFID technology, will not only direct consumers to products, but will also provide nutrition information, pricing data, and even recipes.
At the same time, Metro is moving forward with plans to integrate RFID more deeply into its backroom operations. "We are now preparing for a bigger rollout in Germany on the case and pallet level," said Wolfram. As for itemlevel tagging, Wolfram predicted that it will be at least another five years before item-level tagging becomes ubiquitous, although he said it may happen sooner in the apparel industry. "Item-level tagging is a vision and will come once the customer has accepted it. But consumers don't understand it today," he said. "Today, the benefits on the logistics side are there and we are moving forward."
Right now, the retailer is in the midst of a campaign to outfit 180 of its Cash & Carry stores and its distribution centers with RFID technology. It hopes to finish the rollout by the end of September. In addition, the company met with suppliers in May to outline its RFID strategy. At that meeting, the retailer told suppliers that they will be required to tag all pallets sent to Metro's DCs by the beginning of October. Wolfram said those who don't get on board with RFID will have to pay additional handling charges.
In addition, Metro has started to place RFID tags on the pallets of goods it ships from its DCs to its retail outlets.Wolfram said that will help the retailer make process improvements while improving product visibility through the supply chain.
As for ways in which consumers could someday benefit from item-level RFID tags, Wolfram cited the example of an RFID-equipped refrigerator that keeps track of what's inside the unit as well as the items' expiration dates.Wolfram also described a futuristic application where consumers could check their cell phones to see what's inside the fridge on their way home from work so they'll know whether they have to stop off at the store on the way.
After much debate, China has authorized the use of the UHF frequency bands for RFID applications, a move that is expected to jumpstart RFID adoption worldwide. Among other things, the decision opens the door for American manufacturers producing goods in China to start applying RFID tags at the source of manufacture. Until now, most companies have had to settle for a more costly alternative—applying tags at the first point of distribution—while they waited for China to come around on standards. UHF is the preferred frequency for RFID applications that involve the tagging of cartons, cases, pallets, and containers.
"This is pretty big news," says Andrew Nathanson, director of the AIDC/RFID practice at the market research firm Venture Development Corp. "Most of the great benefits from this ratification are years of growing pains away. But for those that began early, they are off to a running start. Today, all tagging for products manufactured in China occurs in the supply chain, outside the source of manufacture. Most experts agree that this is not ideal."
Nathanson predicts that it will take U.S. companies some time to digest the news. But he believes that early-adopters could have RFIDtagged product flowing from the point of manufacture in China to the United States within 12 months.